Variable Rate Mortgages for Harrow Property Buyers
In recent years, there has been a steady increase in new homeowners implementing variable rate mortgages. As interest rates continue to grow, you will need to understand and implement a modern strategy for interest rates.
Variable Rate Mortgages (VRMs)
VRMs are considered somewhat of a risk or gamble for home buyers. With this type of mortgage rate, you get lowered interest rates and smaller initial payments. You are, however, gambling that these rates will not rise as time passes. Fortunately, you come out on top if the rates do not increase. If the rates do not stay low, you must explore different options to prevent being tied to high interest rate loans. These loans can easily cause financial problems as you face a higher payment on your monthly mortgage.
Over the past three to four years, VRMs have historically very low, attractive interest rates. A lot of homeowners took advantage of these rates to purchase homes that they could not otherwise afford. These low rates came as a consequence of the Global Financial Crisis as central banks around the world drove down their prevailing rate. All financial companies and loan providers dropped their rates too. For borrowers, the rates have stayed at these low levels so people are enjoying some very advantageous mortgage rates.
How to Avoid Increasing Rates
It is not likely that interest rates will stay at these low levels for a long time into the future. The chances of rates rising are much higher than of interest levels declining any further. So to avoid increasing interest rates on a variable rate mortgage, you have two primary solutions to choose from.
Firstly, you will want to consider quickly converting to a fixed mortgage rate (FRM). FRMs have also stayed notably low over the last few years or so. If you switch to a fixed rate mortgage, you can stabilise your budget and finances. This is possible because your payment is a set amount per month. If for some reason these rates drop at a later date, you have the option of switching back to a VRM.
Some homeowners will unfortunately have to deal with the truth, and that is that they took a loss on interest rate gambles. This will generally happen when homeowners realise they are unable to make the mandatory monthly payments so they get a fixed rate loan. If you find yourself in this position, it is necessary to sell your house and downsize to another property. For the most part, it is best to act quickly so your equity will not be lost. You can avoid additional losses if you make changes now. This does sound tragic to many homeowners, but it is not. While you are required to downsize, you will not lose your equity if you sell in a timely fashion.
Even if you have not addressed it, interest rates are indeed likely to rise. Now is the best time to come to terms with your variable rate mortgage, so you are not faced with financial stress. Talk to a local mortgage broker about a Harrow variable rate mortgage.