Fixed Rate Mortgages
Fixed-rate mortgages are where the interest rate on the loan is fixed for an allotted period of time. Fixed-rate mortgages are usually for a period of two or three years but some can last for five years or more. With some fixed-rate mortgages you can only stay on the fixed rate if you keep up with your repayments. If you fall behind at anytime you may be liable to pay more in the future. You should check this with your lender before signing on the dotted line.
Normally, when a fixed-rate mortgage comes to the end of its initial term the interest rate you pay will go up. This of course means that your monthly repayments will also go up, in some cases this can be quite a large amount. When you first took out your fixed-rate mortgage you should have been given written confirmation as to the length of your loan. Check when your fixed-rate mortgage period comes to an end, and find out how your lender will work out your interest rate after that. There may be some months to go before your fixed rate period comes to an end, however we recommend that you check what your new payments will be if you were coming off the fixed rate now, and then you can plan ahead for payments at that new monthly level. By managing to make a few savings now to put towards your new, higher repayments when they take eventually take effect, you could avoid financial problems in the future. If unfortunately however it’s too late for this and your fixed rate period is coming to an end, then check if your lender offers any better deals than the normal rate you will otherwise be liable to pay. It pays to shop around to find out whether remortgaging at this stage would give you a better deal, although always bear in mind that some products incur high fees and there may be redemption penalties for paying off your existing mortgage before the end of its term.
After looking into what your new repayments might become be sure to contact your lender as soon as possible if you think you may have difficulties in meeting them. In some cases they might be able to re-arrange some of the terms of your loan to help keep your monthly payments at a manageable level for you, although bear in mind that these changes can make your mortgage more expensive in the long run, so it is better to try to keep up your payments if you can do so. If a solution cannot be found, you should seek independent financial advice immediately. This is very important as certain options such as selling your home may negatively affect your legal rights in relation to re-housing. It may also be worth checking whether you can claim tax credits or any extra benefits to help top up your household income. As always, we recommend that you seek independent and confidential advice for help with this.
A good start point would be to think about other areas of household spending that you could cut back on, you must make sure you are paying all your essential household bills first. Also, you must meet your mortgage payments before any unsecured credit debts. If you have unsecured credit debts the chances are you may be able to renegotiate with your lender to reduce your payments.
