Thought Fixed Rate Will Give You a Respite from the Perils of Variable Rates! Think Again

Slight increases in the interest rates raise your hackles. Tension grips your mind as to how you are going to make the extra payment. Preparations begin right then to provide for the repayment, though it requires a huge cut in the monthly expenses.

Cautious is what describes your state. A fixed rate mortgage will be the solution to the stress that they are facing as to the repayment.

A Fixed rate mortgage, as the name suggests limits the interest rate to a particular level. The borrower is protected against any increases in the interest rate. He keeps on making a lower repayment, when his contemporaries who did not have a fixed rate to protect them, pay a higher interest.

Apart from the savings that a fixed rate results into, it also has an added advantage. The borrower is not required to make regular calculations considering the newer rates. He keeps on paying the same monthly repayment that he paid at the beginning.

This however is not free from any disadvantages. We deal with the disadvantages of the fixed rate mortgages in the following paragraphs.

A borrower normally opts for a fixed rate mortgage to protect him/ her from hikes in interest rates. But they fail to consider a situation when the interest rates start falling. The entire statistics of the borrower fails and he feels cheated.

In such a scenario he is left with no options except to continue making the repayments, or look for refinancing the mortgage through remortgage. Continuing with the repayments will mean that the mortgagor pays higher than what he actually owes.

Even remortgaging will not produce the desired results. The lenders accept to remortgage the fixed rate mortgage only when they find it having some potential. Also the borrower will have to accept the remortgage at the lenders terms. This means that the borrower will have to face a loss in both the cases ? whether he chooses to continue repaying or he goes for a remortgage.

The second drawback of a fixed rate mortgage is that the rate of interest is not kept fixed for the entire period of repayment. The interest rate is fixed for the initial few years. After that the borrower has to pay a repayment according to the interest rate prevailing in the market.

Other alternative interest rates can be tried to get the optimum method of charging interest. The other methods commonly utilized are as follows:

? Variable interest rate
It is the vicissitudes presented by a variable rate that leads to people going for a fixed rate mortgage. These are desirable till the interest rates are falling. Once the interest rates start ascending they become a menace.

? Capped rate
A capped rate combines the good points of both fixed rate and variable rate mortgage. The interest rate is allowed to fall freely, but not allowed to rise above a particular level. This means that the borrower is assured that he will always pay a lower amount. But the period of capped rate is limited. The normal period for which the rate is capped ranges from 1 to 5 years.

? Discount rate
A discounted rate is a cut-off allowed by the lender during a small period. This is normally allowed in case of first time buyer mortgages. The first time buyer is not burdened with the excessive repayments from day one. The borrower can get the mortgage refinanced after the completion of the discount period to avoid paying higher rates.

? Tracker rate
While lenders assure that they will incorporate any changes in the interest rate right from the time it is effected, they seldom do. This means that till your lender incorporates the downfall in the interest rates, you have lost several pounds. A tracker rate is linked directly to the base rate and helps to save in case the interest rates fall.

Thus the next time you plan to take a mortgage, take stock of the various interest options available. You don't have to stick to the variable interest rate. Neither is fixed rate the only option available to you. Capped rate, discounted rates and tracker rates can also be taken to suit the situation one is in.

Andrew baker has done his masters in finance from CPIT. He is engaged in providing free, professional, and independent advice to the residents of the UK.He works for the personal loan web site ukfinanceworld for any type of Uk secured loans and unsecured loan please visit http://www.ukfinancworld.co.uk

---

Construction Loan Basics

It might not be too big of an exaggeration to... Read More

Money Smart Homeowners Use this Mortgage Strategy Every Time

There are currently more than 50 million home mortgages in... Read More

Finding the Best Homeowner Loans for Your Money

Looking for the best homeowner loans can be stressful, especially... Read More

Buying a House or a Home?

A house is just that, a house, until someone lives... Read More

Homeowner Loans ? Drawing Lessons of the Past

Loans are not of a recent origin. People used to... Read More

What is the PayOption ARM?

Imagine an adjustable rate mortgage that allows you to pick... Read More

Bad Credit Loans Authenticate What Is Positive About Bad Credit

This might not be the front page news but it... Read More

Mortgage Soup

Looking for home mortgage loans can get confusing with the... Read More

Mortgages - Which Loan is Right For You

When buying a home, you need to take a home... Read More

Debt Counseling ? Healing Touch for the Ailing Finances

The financial stories remain similar over the months and the... Read More

How to Avoid Paying Mortgage Insurance

In today's world, a borrower should not be paying mortgage... Read More

Mortgage Loans For People With Adverse Credit - How Much Should You Borrow

"How much should you borrow?" is a question people with... Read More

Should You Refinance?

There are several reasons that might make someone consider refinancing... Read More

Home Loans and Mortgages ? Tips to Avoid Foreclosure

Today's real estate market is a volatile one; prices are... Read More

Home Mortgages: How About Those 1.75% Loans?

You've undoubtedly heard or seen ads for mortgages with very... Read More

What is a Self-Certification Mortgage?

A Self-Certification mortgage is a mortgage designed for people who... Read More

5 Steps to Getting on Top of your Mortgage

Getting on top of your mortgage so you can pay... Read More

Private Mortgage Insurance (PMI)

If your down payment on a home is less than... Read More

What is a Self-Employed Mortgage?

Self-employed mortgages, as the term implies are mortgages designed for... Read More

Need a Mortgage, Refinance or Equity Loan? Learn What it Takes, Before Applying

Do you know what it takes to qualify for mortgage... Read More

How do I know what is the best Second Mortgage Home Loan for me?

The information in your credit history helps mortgage lenders decide... Read More

Repayment Remortgages is The Cure For Outdated Endowment Policy

If bulls and the bears of the stock market have... Read More

Home Loans and Mortgages ? Beware of Deed Theft Scam

The average home in the United States has a value... Read More

Home Equity Loans

A home equity loan allows you to cash-in on the... Read More

Using a Calculator to Assess Your Loan

Buying a house is a very important step in your... Read More

Tips for Finding the Best Agri Mortgage and the Best Agri Loan

The Research Rates of Agri MortgageFirst thing, when finding an... Read More

Some Mortgage Loans are Available with Absolutely no Money Needed From You

Today, FHA will loan up to 97 percent of the... Read More

Are You A Victim Of A Predatory Mortgage Foreclosure?

Help is available to borrowers who have claims against their... Read More

Private Mortgage Insurance Basics

Will you be asked to pay Private Mortgage Insurance, or... Read More

Flexible Mortgages - Offering Relief from the Fixed Mortgage

A pension mortgage may seem lucrative at the first sight.... Read More

Types Of Home Equity Loans

There are two broad types of home equity loans:Term loans:... Read More

Is It Time To Buy A House?

At some point as you're writing out your rent check,... Read More

Kingsland Georgia Mortgage Company Information For Homebuyers Transferring to Kings Bay

If you are transferring to the Kings Bay Georgia Naval... Read More