Why choose a 3 year fixed rate mortgage?
3 yr fixed rate mortgage deals
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 deals?
In order to qualify for the most attractive deals with the lowest interest rates you will need between a 30% and 40% deposit. 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. Even if you were to remortgage after a 2 year fixed deal to then go onto another fixed rate, there are fees involved and often to get the best interest rates, you pay the higher fees.