Cheap Mortgages: Benefits of Low Interest Rate

Your ability to repay a mortgage loan depends largely on the interest rate. Interest rates are either fixed or variable. The mortgage rate is determined by the availability of fund. During economic downturn when the demand for mortgage loans tend to plummet, banks and other lending agencies try to attract borrowers by reducing their mortgage rate. Cheap mortgages enable borrowers to clear their debts within a short time.

To avoid uncertainty of fluctuating interest rate, and especially to avoid the increasing debt burden following hike in mortgage rate, numerous borrowers prefer mortgages on a fixed rate. However, when the interest rate starts declining, people who have borrowed on a variable rate enjoys the benefits of decreased debt burden. To take advantage of cheap mortgage deals, re-mortgaging is the best option for debtors who have borrowed at a fixed rate that is currently higher than the prevailing interest rate.

New Mortgages on Cheap Rate

With the interest rate plummeting, this is the best time to seek a mortgage loan for buying properties. The low interest rate eases loan repayment. If you are expecting the interest rate to fall further, you may ask for a mortgage loan at a variable rate. To enjoy the advantage of the low interest rate for a longer time, mortgage loans at a fixed rate is a viable option for most borrowers.

Remortgaging on Cheap Mortgage Rates

To secure a cheap mortgage deal, people who have taken a mortgage loan at a higher interest rate may seek remortgage. The process of clearing an earlier debt with the proceeds of a new mortgage loan is called remortgage. By opting for remortgage, you can save few thousands of pounds. Moreover, it also helps to pay off an expensive mortgage, replacing it with an affordable deal that reduces the monthly mortgage repayment. However, while considering remortgage, remember to take into account the cost of early repayment charge for clearing the existing debt. In most cases, people who have taken a mortgage loan on a long-term fixed rate usually benefit by paying the early repayment charge and shifting to a new cheap mortgage loan. Remortgage is also an attractive option for reducing the repayment burden for people who have taken a mortgage loan at a variable interest rate. With the interest rate almost at its lowest point, this is the best time to switch to a cheap mortgage deal on a fixed long or medium term interest rate.