Why choose a 3 year fixed rate mortgage?
When it comes to choosing a new mortgage you might have a number of priorities that you are looking for. One of these may be payment stability over a relatively short term, and so this is where a 3 year fixed rate mortgage will come into play.
Why should I choose a 3 year deal when I can get better rates on a 2 year deal?
If you think that there could be significant interest rate rises over the next few years, a 3 year deal will provide you with protection from those for longer than the two year deal. Therefore although you will be paying a slightly higher amount of interest over the time the 2 year deal runs, you could find that you are paying significantly less interest in the final year of your deal compared to someone who was on a 2 year deal.
Do a cost comparison
If you are not sure about how much you could potentially save by taking a 3 year fixed mortgage out, you can always get your mortgage broker to run some calculations for you. Even if interest rates didn’t rise over the next 3 years, there is still likely to be a saving over a 2 year fixed rate mortgage just from the different between the discounted rated and the standard variable rate in the third year of the mortgage.
What is the LTV of 3 year fixed rate mortgages?
In order to qualify for the most attractive deals with the lowest interest rates you will need between a 30% and 40% deposit, or 70% and 60% loan to value. However if you don’t have this size of deposit there are still good deals available for people who have down to a 10% deposit. Obviously the bigger your deposit the better the deal you can get.
You will also find that if you do have a low LTV that the interest rates available for a 3 year fixed rate mortgage are very similar to those for 2 year fixed rate mortgages, which means that you would definitely save money over the fixed period of the mortgage compared to taking out a two year fixed rate mortgage. Even if you were to remortgage after a 2 year fixed rate mortgage to then go onto another fixed rate, there are fees involved and often to get the best interest rates, you pay the higher fees.
See how the 3 year fixed products compare against 5 year fixed rate and 10 year fixed rate mortgages using our mortgage comparison tools.
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