With central banks continuing to hold interest rates at an historic low, the time is right to lock in to the cheapest fixed-rate mortgage deal. Family finances are very tight and saving money has become an absolute priority.
Cheapest Fixed Rate Mortgage
This article provides first-time buyers and existing homeowners with a guide how to ensure that they get a cheap fixed mortgage rate. Find out how to reduce monthly repayments before interest rates commence a new, upward trend.
Raising Credit Scores
A credit report that is free from missed and late payments is fundamental to getting the best fixed mortgage rate deals. There is no point in applying for deals that require the good credit if in a Debt Management Plan as an application will be rejected. Credit searches will show for a minimum period of 12 months.
Credit Report Errors
A homeowner or first-time buyer is advised to get hold of a copy of their credit report to check for inaccuracies. Incorrect data can cause a loan application to be rejected so it is important to get these corrected before applying for credit.
- The Consumer Data Industry Association stated that up to 3% of all reports contain errors. Other consumer groups claim that the rate could be as high as 25%.
Employment History
Those who have been in stable employment for an extended period of time are more likely to attain the cheapest fixed-rate mortgage deals. An inextricable correlation exists between stable employment, reliable loan repayments and a lower default rate.
Negative Equity, Default and Forced Sales
Just like any other business, banks will seek to protect their legitimate business interests. One of the main ways that they achieve this is through a house deposit. It ensures that they are able to recover their money in the event of either negative equity or a forced sale (foreclosure or home repossession).
Higher House Deposit
Financial institutions offer the cheapest fixed-rate mortgage deals to those who provide a bigger house deposit. Whilst there are some 10% deposit deals starting to emerge, the majority of homeowners and first-time buyers will still need to provide 20% to 25% of a properties value upfront.
Cheap Fixed-Rate Mortgage Vs Existing Loan
- Those who are already tied-in to a loan are likely to find that it isn't financially viable to terminate an agreement prematurely due to the size of the early redemption penalty.
- The best fixed-rate mortgage rate may be the existing deal if a homeowner has a poor credit history. Raising credit scores is essential before applying.
The cheapest fixed-rate mortgage deals are available to those who are in stable employment, are able to offer a decent deposit and have excellent credit. If this isn't the case, try to be realistic. Raising credit scores, the provision of a higher house deposit and a better record of employment can all be achieved in the future.
Sources
Tedeschi, Bob (2009, April). "Faulting Credit Firms on Fixing Errors." The New York Times.
Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional before proceeding.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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