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Fixed Rate Remortgage Deal or Variable Rate Remortgage Deal-Whats Your Pick?

After the worldwide economic downturn, the costs of living and inflation is soaring high and more and more people are considering re mortgaging as a reasonably easy and viable way to borrow money. Re mortgaging certainly can help home owners to avail a better rate on their mortgage than the one they presently have. However, with the danger of a house price collapse, it becomes quite difficult for the consumers to choose between fixed rate and variable mortgage deals while refinancing. Many people prefer the security of a fixed-rate remortgage whereas others, who like to be benefited by the financial headroom for any potential rises in costs prefer a variable-rate mortgage which often proves to be a cheaper option in the long run. If you like to know which refinancing mortgage rate suits your financial situation then you must read the rest of the article first.

Fixed rate remortgage

In fixed rate remortgage deal, the rate remains fixed, and do not fluctuate along with BoE interest rate changes.

Advantages

Fixed rate remortgage offers security to the consumers. As the rate continues to remain fixed even in the forthcoming years, the consumer gets a clear idea about the future payments from the very beginning.
As the rates remain fixed for upcoming 2-3 years there is no risk involved for the consumer unless and until the mortgage terms are over.

Downsides

In case the interest rates fall, your fixed-rate mortgage end up costing more than the variable-rate remortgages.
Sometimes Fixed-rate mortgages charge high mortgage arrangement fees.
Once the fixed rate duration is completed, you will be left with a standard variable rate (SVR) to repay the lender, which enhances your monthly payments even more.

Variable rate remortgage

With Variable rate mortgages the story is entirely different. Here the interest rates go up and down depending on the BoE base interest rate.

Advantages

With variable rate mortgages, if the Bank of England base rate falls, your monthly payments also drop considerably.
At the beginning, interest on variable-rate mortgages is lower than the lender?s fixed-rate equivalent and can to lower the consumer?s monthly payment initially.
Maximum variable-rate mortgages never charge any arrangement fee.
You can evade early redemption fees in variable rate remortgage as well.

Downsides

Once the base rate goes up, your payments also rise up

With variable-rate mortgages it is quite difficult to budget for as you can never be sure how much your monthly payments will cost you in the long run.

Which one is right for you? Final thought

Once you go through the pros and cons of both fixed rate remortgage and variable rate remortgages it becomes much easier to make the right choice. This decision entirely depends on the amount of risk you can afford to take in future. If you like to play safe and have little disposable income left with you after meeting all your financial obligations, you can plan ahead for fixed remortgage rate. However variable-rate mortgages are certainly a cheaper option to begin with and though its more of a risk, it can potentially lowers your monthly payments considerably.