The Benefits of a Fixed Rate Remortgage

There are many types of remortgage products on the market today. The most popular however is the Fixed Rate mortgage. The success of the fixed rate mortgage is largely due to the need for many borrowers to know the absolute maximum monthly payment on their mortgage so that they can budget accordingly.

The benefits of a fixed rate remortgage are fairly obvious. In this day and age it is not practical for most people to have a variable payment coming out each month - particularly one as large as a mortgage repayment.

There is however an element of risk with fixed rate remortgage products. This risk element relates to the possibility that interest rates may fall during a borrower's fixed rate period at which time they would not be set to benefit from this reduction. On the flip side of course, any interest rate increases will not be passed onto any borrower who has a fixed rate mortgage. It is also this fact that appeals to many borrowers.

There are a number of considerations when shopping around for the most competitive fixed rate remortgage. It is common for lenders offering fixed rate remortgages to charge an arrangement fee. This may be calculated as a set charge or alternatively based on a percentage of the requested borrowing amount.

It is very common for a lender to impose an early repayment charge if a borrower looks to redeem the mortgage during the fixed rate period. The exception to this however is when the fixed rate remortgage product is portable and the borrower looks to move home and take the existing mortgage with them.

Early repayment charges differ of course from one mortgage lender to another. Often referred to as an ‘ERC', this may be calculated as a set fee of a percentage of the outstanding mortgage. Some lenders may charge as much as 7% of the outstanding mortgage balance! Of course these conditions will be stipulated from the outset of any mortgage application however it is always a good idea to sift through the terms and conditions of any reportage product with a fine tooth comb.

It is therefore not a good idea to arrange a fixed rate remortgage over a set period when you plan to move home - unless of course the mortgage is portable. This can lead to many expensive and unnecessary fees being charged by the lender.