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As the name suggests, a 10-year fixed-rate mortgage is a long-term loan where your interest rate and monthly repayments remain the same for ten years. This means that, whatever happens with the Bank of England’s base rate over the years, your repayments will not be affected.
Fixing your rate and repayments for ten years can give you peace of mind, as it provides you with the chance to budget into the future. In fact, you’ll know exactly how much you owe your lender each month.
Fixed costs – As mentioned, one of the most obvious benefits is that your monthly repayments will stay the same for ten years. This means that you’ll always be safe in the knowledge that, should interest rates increase significantly, your repayments won’t become unaffordable.
Beat interest-rate hikes – Long-term fixed-rate mortgages can protect you against rising interest rates. Considering the UK’s current economic situation and rises in the Bank of England’s base rate, mortgage prices are bound to grow. A 10-year fixed-rate mortgage could offer some peace of mind in what is an uncertain time for homebuyers.
Easier long-term budgeting – Being aware of your monthly payments can help you keep your finances in check. With a 10-year fixed-mortgage rate, you’ll know exactly how much to set aside for mortgage expenses and what you can use for other personal spending.
Fewer fees – Taking out short-term fixed deals means that you’ll have to pay an end-of-period fee more frequently. With a 10-year fixed-rate mortgage, you can expect to pay fewer fees over the decade.
More expensive than short-term deals – You may find that 10-year fixed-mortgage rates are more expensive than short-term fixed deals. This is because you’re paying for the security of locking in your rate for a significant period.
Hefty exit fees – If your circumstances change and you need to switch or pay off your mortgage, you’re likely to face a pricey early redemption charge (ERC). This can amount to hundreds, if not thousands, of pounds.
You’ll pay more if interest rates fall – One of the downsides of any fixed-term deal, and a 10-year one especially, is that you won’t be able to negotiate a more favourable rate if interest rates fall. Even if interest rates stay steady over the next ten years, it’s likely that you’ll realise at the end of the term that it wasn’t the cheapest option you could have gone for.
There is no right or wrong answer, as it depends entirely on your needs and preferences. When deciding whether it’s a good solution for you, try to consider a few aspects.
For instance, think about your future plans. Where do you see yourself in ten years’ time? A lot can happen in a decade, and you may have to move home for a number of different reasons. In this case, a 10-year fixed-rate mortgage may not be the best option.
However, if you suspect that interest rates will rise and not decrease in the next ten years, it could be a valuable solution.
Also, if you like to budget and keep a close eye on your monthly spending, then a 10-year fixed-rate mortgage can offer you the peace of mind you deserve.
No, not necessarily. If you’re thinking about taking out a 10-year fixed-rate mortgage, you can rest assured that there are many options that allow you to get it with a reasonable deposit.
That said, you’ll always find more favourable deals when you pay a bigger deposit. In fact, a larger deposit can bring your interest payments down.
Yes, you can. If you’re ready to pay off your 10-year fixed-mortgage period, whether that's because you have the finances or simply need to, you're free to do so.
Bear in mind, though, that you’ll have to pay an ERC. This fee can amount to thousands of pounds. Each lender will have their own rules and policies, but most mortgage providers will allow you to overpay 10% of the outstanding debt every year.
At the end of your 10-year fixed-mortgage deal, you should generally be able to take out a new fixed-rate or variable-rate plan without being charged.
If you don’t do that, you’ll be moved onto the lender’s standard variable rate (SVR). The SVR tends to be higher than a fixed rate, so you may want to consider remortgaging before the SVR kicks in.
Getting a mortgage when you’re self-employed may prove to be a bit more challenging, as you don’t usually take home a secure, fixed annual salary. That said, though, you should still be able to gain access to the same mortgage deals as anyone else, including a 10-year fixed-mortgage.
There is a chance that lenders will expect you to have been in the trade for three years before they’ll consider your application. What’s more, you will probably need to show them two or three years’ worth of accounts and income.
Again, when applying for a mortgage, lenders will need to check your credit score and history. This way, they’ll be able to determine whether you're likely to be a reliable borrower.
There is no hiding that people with a bad credit score may find it trickier to get a mortgage. But this doesn’t mean that you can’t or won’t be able to get one. You may be asked, however, to put down a bigger deposit and pay higher interest rates.
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