Fixed for Term Mortgage
2022 has seen the introduction of the 40 year fixed rate Mortgage.
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What is a Fixed for Term Mortgage?
Your rate and therefore term will be fixed between 10 to 40 years. And what term you have your Mortgage over, will be dependent on what you want your monthly repayment to be.
As the Lender is able to measure exactly what your repayments are going to be throughout the whole term, they are able to offer you greater borrowing power on your income.
Traditionally, you are able to borrow between 4.5 and 5.5 times your income, depending on your deposit and income.
With whole term fixed Mortgages, you are able to borrow between 6 and 7 times your income, including for joint applicants.
If you never change your Mortgage and you keep up with Repayments for the whole term, your Mortgage is guaranteed to be repaid by the end of it.
How does it work?
You will chose a term of between 10 and 40 years fixed, depending on what you need your monthly repayment to be.
The fixed rate that you will be eligible for will be based on two things:
The Term – the longer the term, the greater your interest rate will be.
Loan to Value – the greater your deposit, the lower your fixed rate will be.
So those with a 5% deposit and a 40 year term, will be offered the highest fixed rate.
Those with a 40% deposit and a 10 year term, will be offered the lowest fixed rate.
Benefits of Fixed for Term Mortgages
Greater borrowing power – This is hands down the main reason borrowers are going to be taking out this Mortgage. You will be able to borrow up to 6 and 7 times your income, depending on the lender. Significantly more than traditional lenders, which permit borrowing of between 4.5 and 5.5 times your income usually.
Certainty – If you need certainty of what your repayment is going to be. And you like the idea of this never changing, this could be the Mortgage for you.
Low/No Early Repayment Charges – When it is affordable to do so, moving to a new lender is likely to be the cheapest option. One Lender will allow you to do this, but not all will. So this will be something to consider and discuss with your Mortgage Advisor.
Protected from rate hikes – Rates could go up over time, and surpass your fixed for term rate. If this does happen you will be protected.
Negatives of Fixed for Term Mortgages
Cost – Generally fixed for term mortgages will be quite a bit more expensive than traditional fixed rate Mortgages, such as 2 and 5 year fixed rates.
Unable to benefit from low rates – If rates stay low or continue to fall, over time you are going to resent paying a higher rate.
Change of circumstances – If you plan to Remortgage or move home in the future and the market or your circumstances change, you may end up unable to do so. You will then be stuck with an expensive Mortgage, unable to move.
Fixed for Term Mortgage Lenders
Kensington Mortgages – Flexi Fixed For Term Mortgage
Habito – One Mortgage
Both Mortgages have to be applied for via a Mortgage Advisor, as you need to be provided with advice.
You will be able to apply for the Habito Mortgage direct with them, if you’d prefer as they can provide advice.
If you would like independent advice on both lenders products, we can put you in touch with an experienced Mortgage Advisor who can provide you with advice and a non obligatory recommendation.
Fixed for Term Mortgages with Bad Credit
Each lender has a different view on this, and acceptability will be dependent on when the adverse credit occurred.
With Habito, they will consider applicants who have had no missed payments within the last 12 months and who haven’t had any defaults or CCJ’s within the last 4 years.
Kensington require no defaults within the last 3 years and no CCJ’s within the last 6. Missed payments are considered providing none has occured within the last 12 months.
More severe incidences such as a Repossession, Bankruptcy or an IVA will need to be satisfied for 6 years before you will be eligible to apply.
Mortgage Advisor Comments
Luke Spellman, a Specialist Mortgage Broker from Spellman Financial Services commented:
But borrowers shouldn’t rush into this. They need to understand exactly what they are signing up to and consider the cost in comparison to other Mortgages.
I will also be advising my clients to Remortgage to a cheaper deal as soon as they are able to do so.”
What alternative Mortgages will be available?
The main alternative Mortgage types are:
Fixed Rate Mortgage: The main alternatives would be a 2 or 5 year fixed rate Mortgage. They will no doubt be cheaper then the whole term fixed rate Mortgage, but with less borrowing power.
Variable Rate Mortgages: Where your interest rate can vary. You will usually have a set interest rate which can fluctuate throughout the term.
The interest rate will usually change in line with the Bank of England base rate, although it doesn’t have to.
Tracker Mortgages: Where your interest rate will track a certain index, usually the Bank of England Base rate.
When the Base rate changes, so will your Mortgage rate.
What documentation will I need to provide the Mortgage Lenders?
What documentation is required for the Mortgage, will vary between Lenders.
Mortgage Lenders will usually need to verify your identity, as well as your income and outgoings.
To do this they will require the following:
Payslips for Employed Applicants or Accounts/Tax Calculations and corresponding Tax Year Overviews for any Self Employed Earnings.
Up to 3 Months Bank Statements to evidence Deposit, Earnings and Outgoings.
Identification to prove your Name and Address.
What costs will I need to consider?
Lenders Arrangement/Product fees: A fee the lender will charge for arranging your Mortgage.
This will be anywhere from £0-£1,995, depending on the product.
Broker fees: this will depend on how complex your case is. For example, whether you have any adverse credit.
To find out exactly what it could cost, get in touch with on of our Mortgage Brokers for a free non-obligatory quotation.
Solicitors fees: for an ordinary house purchase, you can expect to pay anywhere between £1,000 and £2,000, so its important to shop around.
Always check out their Reviews before choosing a Solicitor. They’re a very important cog in the house buying process.
Stamp Duty: If you are a first time buyer in England, it is unlikely you will pay stamp duty if your property is valued less than £500,000.
For non first time buyers, Stamp duty will be due on properties worth over £125,000.
Mortgage Valuation: The Mortgage Lender may charge a fee to complete a basic valuation on your property during the application process.
This will be between 0-£400. But could be more if you need to use a specialist lender, if you have adverse credit for example.
Survey fees: You may choose to carry out a more thorough assessment on your property.
The most common, being a Homebuyers report, which will cost between £300-£500.
Full Structural report, if needed, will cost in excess of £600, however these are rarely necessary.
Our Mortgage Brokers
We work with a variety of Mortgage Brokers which each specialise in different Mortgage Advice areas.
When you get in touch, simply select the reason why you’re getting in touch i.e. First time buyer, Bad Credit, Remortgage etc. And we will match you to the Mortgage Broker which Specialises in your circumstances.
All of the Mortgage Brokers we work with are whole of market, FCA regulated, CeMap qualified and have consistently great reviews.
Get in touch for a free non-obligatory conversation with one of our Specialist Mortgage Advisors for further information on how they can help you.
Speak to a Mortgage Advisor
Get in touch to speak to one of our Specialist Mortgage Advisors.