If you are a first time buyer in Leeds and would like to make sure that your mortgage payments remain consistent throughout, we would recommend a fixed-rate mortgage.
Fixed-rate mortgages are handy for applicants who want to know exactly what is going out each month.
Generally speaking, the longer you are able to fix your rate in for, the higher the interest rate will be, though this varies per case. The size of the deposit you put down and how the market is looking can affect this also.
Mortgage applicants who are looking to find themselves with the best and cheapest possible fixed-rate mortgage, may benefit more from having their mortgage on a two-year fixed deal.
Of course this type of practice will mean that your mortgage payments will be lower, which works in your favour, though you’ll also need to bear in mind that two years will come around quite quickly. As such, you’ll be on the hunt for a new deal again.
This can be a positive and a negative, as on one hand, interest rates may have dropped during this time, leaving you in a better position. On the other hand, they may have risen, which means you could be paying more than you otherwise would’ve, if you’d stayed fixed for a few more years.
A lot of mortgage applicants, including those who are looking to remortgage in Leeds, would much rather avoid the aforementioned scenario by fixing in for a few more years. For something like this, a 5-year fixed-rate would likely be a much more suitable option.
Doing so means you keep your consistent monthly payments for a longer term than you otherwise would’ve had, though because it is longer, it may have higher interest rates than you otherwise would’ve had for a two-year fixed-rate mortgage.
This generally will make it more costly overall, though can give you the comfort of sticking with consistent payments that you know will be the same throughout. The downside, is that if interest rates drop, you’ll be paying more than you could otherwise get.
While two and five-year fixed-rates tend to be the most popular options for mortgage applicants to take, it is entirely possible to take a mortgage out for a much longer fixed term. In some cases, mortgage lenders will offer customers a 7-10 year fixed-rate mortgage.
Longer term fixed-rate mortgages generally aren’t the most popular mortgage options for applicants across the country. A lot can change over the course of a decade, and it would be understandably frustrating to find yourself on a higher deal than other applicants.
If you do decide you need to leave your mortgage deal before it is due to finish, you could be faced with an Early Repayment Charge (ERC), which is calculated at a percentage of what you owe on your balance.
For example, if you choose to pay off a £100,000 mortgage early and the Early Repayment Charge is around 2%, you would receive £2,000 penalty for breaking your contract with the mortgage lender.
It’s always difficult to plan ahead when its comes to interest rates and a mortgage. Sometimes it may seem obvious what is going to happen, but it’s not always so simple when looking so far ahead into the future.
When choosing the length of which you would like to fix your mortgage rate for, focus more on how your situation is looking at this current moment in time;
We would always strongly advise that you try to avoid chasing after any “headline” deals. The lowest rates will typically come along with high arrangement fees, which a lot of customers may want to avoid if they can help it.