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Written by:
Alison Gibson
Ascot Mortgage Expert
Last Updated:
06.10.2023
Written by:
Alison Gibson
Ascot Mortgage Expert
Last Updated:
06.10.2023
What is a five-year fixed-rate mortgage?
A five-year fixed-rate mortgage is a mortgage type that offers borrowers a consistent interest rate for a period of five years, regardless of changes in the market rate. This means your monthly repayments remain the same for the specified period, providing financial stability and simplifying budgeting.
What are the pros and cons of a five-year fixed-rate mortgage?
The chief benefit of a 5-year fixed rate mortgage is the financial security it offers. No matter what happens with bank interest rates, your monthly payments stay the same. However, these mortgages often come with higher interest rates compared to shorter fixed-term deals, and they might lack the discount options found in variable rates. And if the market rate decreases, you won’t benefit from the reduction.
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When is a good time to get a five-year fixed-rate mortgage?
The best time to consider a five-year fixed-rate mortgage is when interest rates are low, or if you anticipate an increase in rates in the near future. It’s also a strong option if you require certainty in your monthly outgoings for medium-term financial planning.
How do I choose the best five-year fixed-rate mortgage for me?
To select the optimal five-year fixed-rate mortgage, consider your financial situation, future plans, and the current economic climate. Seek advice from a professional broker, we can guide you through the process and compare the best deals on the market for you.
How much deposit do I need for a five-year fixed-rate mortgage?
The amount of deposit required for a five-year fixed-rate mortgage can vary. However, most lenders offer the best rates to borrowers with a larger deposit, typically 25% to 40% of the property’s value.
Can I pay off a five-year fixed-rate mortgage in advance?
Generally, you can pay off a fixed-rate mortgage early. However, this can incur an early repayment fee. It’s important to review the terms of your mortgage agreement before making additional payments.
An experienced broker, such as Ascot Mortgages, can help you determine if a 5-year fixed rate mortgage is the best option for you. We assist in sourcing the best mortgage deals efficiently, ensuring your consideration is well-placed.
Five-year fixed-rate mortgage deals offer long-term stability, particularly beneficial in fluctuating economic climates. Whether a first-time buyer or looking to switch your existing mortgage, you can enjoy this peace of mind.
We’re experts in securing the right mortgage for all customers. Reach out for a free initial consultation. We will search across the market, ensuring you get the most cost-effective offer for your circumstances and budget.
After your fixed term ends, we can help you explore other options, such as the lender’s Standard Variable Rate (SVR), to ensure continuous optimal deals. Five-year terms are often the longest available, providing stability across a 60-month period.
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FAQ
Yes, you can pay off a fixed-rate mortgage before it ends, but it’s important to be aware that many lenders will charge an Early Repayment Charge (ERC) if you pay off all or part of your mortgage during the fixed-rate period. The amount of the ERC will typically be a percentage of the outstanding loan balance, and it can be quite significant. Always consult your mortgage agreement or speak with your lender or mortgage advisor to understand the implications of paying off your mortgage early.
Yes, most lenders will allow you to overpay on a fixed-rate mortgage, but there will typically be a limit to how much you can overpay each year without incurring an Early Repayment Charge (ERC). This limit is usually expressed as a percentage of the outstanding loan balance and is commonly set at 10% per year, but this can vary between lenders. Overpaying can reduce your overall term and the amount of interest you pay over the life of the mortgage.
When your five year fixed-rate period is nearing its end, it’s a good time to start exploring your options. If you do nothing, your mortgage will usually revert to your lender’s standard variable rate (SVR), which could be higher than your fixed rate. You can avoid this by remortgaging to a new deal with your current lender or a different one. You should start the process a 6 months before your fixed rate ends to allow enough time for the application and transition.
Your credit score is one of many factors that lenders will consider when deciding whether to approve your mortgage application and what interest rate to offer you. Having a good credit score can increase your chances of being approved and may help you to secure a lower interest rate. However, each lender has its own criteria, and it’s possible to get a mortgage even if your credit score isn’t perfect. It’s always best to speak with a mortgage advisor who can guide you based on your specific circumstances.
The amount you can borrow is typically determined by your income, outgoings, and the lender’s affordability criteria, rather than the type of interest rate on the mortgage. However, a fixed-rate mortgage can provide certainty about your monthly payments for a set period of time, which can make budgeting easier. It’s important to only borrow what you can comfortably afford to repay, taking into consideration potential future interest rate rises.
No, the interest rate on a fixed-rate mortgage is set at the start of the term and remains the same for that term, regardless of changes to the Bank of England base rate. This is one of the key benefits of a fixed-rate mortgage, as it provides certainty about your monthly payments for a set period of time. However, once your fixed-rate term ends, your mortgage will typically revert to the lender’s standard variable rate (SVR), which can change in response to changes in the Bank of England base rate.
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Ascot Mortgages authorised and regulated by the Financial Conduct Authority and can be found on the FCA register (www.fca.org.uk) under reference 776062. The FCA do not regulate some forms of mortgages. The guidance and advice contained in this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK. There may be a fee for mortgage advice. The precise amount will depend upon your circumstances but we estimate it will be £399 per mortgage account. Ascot Mortgages Ltd give you the option to pay a non-refundable fee of £879 payable with the application. If this option is taken, Ascot Mortgages Ltd will refund any procuration fee received by the lender.
Ascot Mortgages Limited is registered in England and Wales and have their registered office at 8 Webster Court, Westbrook, Warrington, WA5 8WD. The company’s registration number is 06764971.
We are a credit broker, not a lender. We work with the whole of the lending market. We may receive commissions that will vary depending on the lender, product, or other permissible factors. The nature any commissions model will be confirmed to you before you proceed.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
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