The Short-Term Mortgage, Short Fixed Rates and How Both Options Can Save You Money

 

With Brexit looming and consumer trust in the housing market getting a little jittery, now is the opportunity to utilise short-term mortgages or short-term fixed rates.

What, then, constitutes a “short-term mortgage”? The shortest mortgage term you can get is 5 years. This type of mortgage is often reserved for those who can afford the high monthly repayments and want to avoid interest repayments, whereas fixed rates allow borrowers certainty and the ability to plan around fluctuating rates.

Advantages of Short-Term Mortgages

By boasting a shorter repayment window, borrowers tend to pay less in interest rates. The major draw of this short-term option is the ability to circumvent the cumulative qualities of longer mortgages, especially in regards to fees.

Short-term mortgages benefit from an added degree of foresight. It’s easier to see how the housing market will be in 2-3 years, meaning those who hold short-term mortgages can predict and avoid any nasty changes in the housing market.

Requirements to Get a Short-Term Mortgage

With this mortgage’s short turnover, it is obviously a bit of a luxury. Not a lot of us can afford to borrow and pay the value back in such a short period of time. For those who think they have enough equity to achieve this mortgage, then two major requirements need to be met: enough equity and capital.

While this reads as easy, showing enough capital and equity is tough, especially with a short turnaround. These types of mortgages are very much suited to property developers, landlords, the wealthy and those in their older years that have built up significant capital over their life.

An aspect of long-term mortgages that borrowers can find frustrating is repeated credit checks. Lenders like to keep tabs on those who borrow from them, but with a short-term mortgage, this common lender pet peeve can be avoided. Due to the short run of the mortgage, lenders don’t need consistent updates, especially considering the evidence of strong equity borrowers would need to show to get a short-term mortgage. Overall, while very niche, the short-term mortgage is a great solution for those who want to invest without the risk of accumulating debt. A commendable alternative, though, is adopting short-term fixed-rate mortgages.

Advantages of the Short-Term Fixed Rate Mortgage

The massive advantage of a short-term fixed rate is how it allows you stability among fluctuating interest rates. For example, if you chose to take on a 35-year mortgage, you can choose to adopt a fixed-rate for a set period of time, usually in increments of 2, 3, 5 or 10 years.

Once this agreed term is over, you’ll have to agree on a new fixed rate term with your lender, remortgage, or face being transferred onto your lender’s standard variable rate. As a result, you’re relatively immune to the nasty side of interest rate spikes, as upon agreeing your new deal, you can adapt finances accordingly.

If you’re encouraged by the luxury to pay back mortgages quickly, or the ability to protect yourself from interest rate spikes, then our friendly and experienced mortgage brokers can help. Get in touch with us today to learn more about short-term mortgages, short-term fixed rates and which one suits your situation better.

Article By Chris Evans

February 8th, 2019

Chris heads up the specialist mortgage team which encompasses first charge mortgages, buy-to-let finance and second charge loans.

Chris has spent the last 17 years gaining experience in mortgages, protection and secured loans with roles at Legal & General, Nemo and Mortgage advice bureau giving him a broad understanding of the property finance markets.

Having Joined the Pure Group in 2017 he has worked with Ben to establish and grow the 1st and 2nd charge proposition exponentially in a short period of time. Chris has overseen the recruitment and development of an extremely experienced team of employed and self employed advisers that continues to deliver year on year growth.

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