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Should you opt for the 3-Year fixed mortgage rate, you enter into a contract with your lender for 3 years. Under this contract, you'll pay a fixed rate of interest for the term of the agreement.
At the end of the 3-year term, you can choose a new contract that meets your financial requirements at the time. The contract term is different from the amortization period which denotes the total duration within which you'll pay back the borrowed amount.
The 3-year fixed mortgage rates vary according to the expected earnings from 3-year government bonds. These profits depend on the general economic conditions in the country. Your lender might set the interest rates according to his lending strategy and prevailing market conditions in the credit sphere. For an estimate on the future interest rates, you can track the expected earnings offered on government bonds.
Although not many people opt for this program, under particular conditions, it can prove to be advantageous to the borrower. That’s because it offers them the positives of both, the 3-year and 5-year variable mortgages.
When you switch to a 3-year mortgage, your lender will likely cover your legal and appraisal costs. However, this facility is not available if you have a mortgage connected to a line of credit or a collateral charge mortgage.