Getting a fixed mortgage is as easy as visiting your local bank and signing a document. 

But what does a getting into a fixed mortgage really mean?  Well for one, you will know exactly what your installments will be for the term that you fixed the mortgage, which means your rate is also secured and cannot go up. 

What’s wrong with taking a fixed mortgage then?  Here are the top 2 things that can kill your cash flow after signing for a fixed mortgage.

1          Fixed Installments

But this is a good thing, or is it? Having a fixed installment is excellent in an economy where interest rates are constantly increasing, because you’ll benefit from a lower monthly installment while the current prime interest rate might be much higher. 

The problem comes when you opt for a fixed mortgage in a falling interest rate market.  If you are fixed at a particular installment and the prime interest rate falls below that, you’re losing out.

2.         High Contract Fees

If you’ve signed a fixed mortgage contract you are bound to it for whatever period you’ve signed for, perhaps one year, or even longer.  Banks currently have options of one, two, five and ten year fixed mortgage terms. 

If you find yourself in a falling market you will find it very difficult to get out of it without paying a high contract penalty for trying to get out of it.  Remember, the banks have bargained on making a specific amount of money off your fixed mortgage, and if you try to get out of it they will penalize you.

In conclusion, my advice would be to do thorough research on what the interest rates are doing.  Read reports and find out if the trend is up or down and then only make your decision on where to take a fixed mortgage or not.

Well, I know that is a lot for you to take in so I am happy to spend some time with you and answer any questions you have about choosing a fixed mortgage. You are very welcome to contact my office at 086 110 6204 or send me a personal email at: info@gpfmortgage.co.za