Buying a property is one of the biggest decisions, as is taking a mortgage. To secure a mortgage at a fixed rate, you need to take care of certain steps. Certain factors affect the loan procedure. Therefore, working on them can help you win the best deal at a fixed rate.
Let us know about those methods through which you can borrow the funds through a fixed interest rate on the mortgage. If you choose a suitable deal today, in the future, you can use it to remortgage for debt consolidation. Sometimes, borrowers do this to manage the burden of other debts.
1)Â Â Â What is a fixed-rate mortgage?
A fixed-rate mortgage is one in which the interest rate remains the same throughout the mortgage tenure. It is usually for 2,3,5, or 10 years. The biggest benefit of a fixed-rate mortgage is that your instalments remain constant. In the case of variable interest rates, the rate of interest changes due to market fluctuations. Due to this, your monthly payment may increase or decrease.
However, in fixed-rate mortgages, the market conditions do not affect the installment. However, due to the constant rate of interest, you may get slightly higher interest. It is because of the stability factor that many people prefer it.
2)Â Â Â Decide the type of fixed rate mortgage you want
Let us understand the ways through which you can get a mortgage with a consistent interest rate for certainty in repayments.
First of all, it is important that you decide how long tenure of fixed rate loan you need. According to this, your monthly repayments and mortgage flexibility will be directly affected.
There are three types of fixed-rate mortgage tenure. First is a short-term fixed-rate mortgage, second is medium-term, and third is a long-term fixed-rate mortgage.
Short-term fixed rate mortgage (2 to 3 years)
The short-term fixed-rate mortgage is one in which your interest rate and instalments remain fixed for a short period of two to three years. Once this tenure is over, your mortgage automatically converts from a fixed rate to a variable interest rate.
However, this can have a huge impact on your monthly cost. Borrowers who are confident about their financial conditions in the coming years can get good funding through this type of loan. For this, one needs to have a strong repayment capacity.
Medium-term fixed rate mortgage (5 years)
On the other hand, there is the medium-term fixed-rate mortgage. It gives you stability in the rate of interest and monthly instalments for 5 years. But it comes with a slightly higher rate of interest. This is a good option for individuals who want to make stable payments without any long-term commitment.
Long-term fixed mortgage (10 years)
Then comes the long-term fixed-rate mortgage. This can be for 10 years or more. It is a great option for those who have planned to stay in the same property for a long time. However, one disadvantage of this type of mortgage is that it comes with a higher interest rate. As compared to short- and medium-fixed-rate mortgages, the rate of interest is quite high. Also, if you want to pay off this mortgage before the tenure, its prepayment penalties can be high.
3. Assess financial situation
Before applying for a fixed-rate mortgage, you need to assess your financial situation. The deals available to you are based on your financial circumstances. All the factors like your credit score, earnings, deposit, etc., are taken into consideration. Let’s know about them.
·      The first is the credit score. The decision of your mortgage approval to the rate of interest is made based on your credit score. The higher your credit score, the lower the interest rate you will get as a fixed rate. Whether you apply for a short-term, mid-term, or long-term fixed-rate mortgage, your credit score matters. In the UK, a score of more than 700 is considered a good credit score, and a score of more than 800 is an excellent credit score.
If your credit score is lower than 700, you may have to struggle to get the desired interest rate. If you have a poor credit score, either you should search for specialist lenders or improve your credit score before applying.
·      The deposit also has a direct impact on your fixed-rate mortgage. Lenders expect a minimum deposit of 5 to 10% of the property value. However, if you can pay a higher deposit, say 20% or more, you get a lower interest rate. The bigger the deposit, the easier the repayments and the lower the interest rate of your deal.
·      Next comes your income and employment status. Regularity of income is an essential factor in loan approval. Lenders need to verify whether you have a reliable and stable income source or not. Only through income can you make your monthly payments on time. Only after ensuring this are you given mortgage approval.
For this, you have to provide your bank statement, pay slips, and proof of employment. If you are self-employed, provide additional documents like details of business accounts and tax returns.
·      Debt to Income Ratio is another factor. Lenders assess your monthly commitments towards other debts. The higher your debt, the lesser the amount you will be able to get as a mortgage. Generally, a debt-to-income ratio of 40% to 45% is considered to be correct. It means that if up to 40 to 45% of your income is going into debt payment, this is a correct ratio. If there are more obligations than this, your mortgage amount and rate of interest can change.
Compare mortgage deals
Once you have assessed your financial situation, it is vital to compare mortgage lenders. There are multiple lenders available in the UK market, but you have to choose one that is right for you.
Choosing a good and relevant lender can be a big task. But if you compare factors, finding one is easier. Using comparison websites is a good idea. Compare different factors like fees, mortgage tenure, length, special offers, etc. These are some of the considerations that help you compare lenders and choose your mortgage correctly.
Always take sufficient time, as a decision taken in haste may force you to regret it later. You should do your own market research and choose the lender accordingly. Shinemortgages is a dependable name that provides relevant and affordable mortgage deals to millions of people every year. Due to its round-the-clock customer service, you can clarify any of your doubts instantly.
Submit the application
After comparing lenders, when you have finalized a mortgage provider, apply for the loan. For this, you have to consider some things. For example, the application process includes some steps.
Fill out the application form, provide documentation, go through a credit check and affordability assessment, and receive an approval decision. After following these steps, you get approval on the mortgage application.
Along with the approval, you get an offer, which you can also call the loan agreement. Sign this loan agreement only after carefully scrutinizing all the terms and conditions of this loan agreement. As soon as you give your acceptance, the mortgage service starts the process of transferring funds. After this, the mortgage amount of 24 to 48 hours is transferred to a bank account.
Conclusion
All methods of getting fixed-rate mortgages are effective in the UK. If you make timely repayments of your property loan, you can even use it to remortgage for debt consolidation. Lenders provide this option for borrowers who pay instalments on time.
Mortgage applicants across the country purchase property through mortgages using these methods. If you are planning to buy a property or home in the coming months, start preparing today.
After all, the mortgage is a big obligation that stays in your financial life for years. Using the tips above, easily get the best deal on fixed-rate mortgages available in the market. Start today, start now. Â
