A 3 year fixed rate mortgage is a type of mortgage where the interest rate and the monthly repayments are fixed for three years. This means that even if interest rates fluctuate, your rate won’t and neither will your monthly mortgage payments.
A three year fixed rate mortgage could be a good choice for you if you like the certainty of knowing how much you’ll have to repay every month for the next three years. It can help you with planning and budgeting, and many people like the peace of mind that a 3 year fixed rate mortgage can provide, as it means their payments are guaranteed to stay the same for the term of the initial deal. For this reason, a three year fixed rate mortgage is often popular with first time buyers.
In return for the peace of mind that your repayments will stay the same for the next three years, this type of mortgage tends to be slightly more expensive than a variable rate mortgage. The longer the fixed rate mortgage term you choose, the more expensive your mortgage payments are likely to be. This means 3 year fixed mortgage rates in the UK are typically cheaper than 5 or 10 year fixed rate deals, but more expensive than a 2 year deal.
3 year fixed rate mortgage process
If you want to be certain that your mortgage payments won’t change if interest rates rise in the next few years, a 3 year fixed rate mortgage could be worth considering. Remember that it works the other way too, and if interest rates drop, you won’t benefit from this - meaning you could miss out on a lower rate of interest if they drop during your three year term. But if you’re happy with the monthly payment amount and like the idea of having this set in stone, then it could be a good option for you.
Bear in mind that most lenders will impose an Early Repayment Charge (ERC) if you leave a fixed rate deal early, so consider whether your circumstances might change in the next three years. Most deals can be taken with you if you move home, although you’ll have to meet your lender’s eligibility criteria at the time of your move, so it’s not guaranteed.
If you’re sure you want to go ahead with a 3 year fixed rate mortgage, get started with our mortgage finder to see which deals you’re eligible for. Our mortgage experts will then compare them for you to make sure you get the best value 3 year fixed rate mortgage.
3 year fixed rate mortgage eligibility criteria
The eligibility criteria for 3 year fixed rate mortgages, just as with any other mortgage type, vary between lenders. They will be looking to see that you can afford repayments not just when you get your mortgage, but also for the whole mortgage term - so as well as proof of income, they’ll be looking at your spending habits and may want to know if you expect your circumstances to change.
You should have the following prepared before starting the process of applying for a mortgage. The more information you have, the more likely you are to get the best 3 year fixed mortgage rates:
- 3-6 months of payslips
- 6 months of bank statements
- Proof of any benefits received
- P60 from your employer
- Utility bills
- Tax returns or accounts if you’re self employed
3 year fixed rate mortgage repayments
The biggest benefit of 3 year fixed rate mortgages is that you know exactly how much you’ll have to repay every month for the next three years, so you can budget with certainty during that time.
When the three years end, you’ll usually be moved onto your lender’s standard variable rate (SVR), which is often higher than your fixed rate, meaning that your monthly repayments may increase at this point. You can either remortgage or look for another deal with the same lender once your fixed term is over.
If you wish to change your mortgage during the three year fixed term, or have to pull out for any other reason, you’ll likely be liable for an Early Repayment Charge (ERC), which is often a significant amount of money
Finding the best 3 year fixed rate mortgage deal
L&C can help to find the best value 3 year fixed rate mortgage for you, whether you’re looking for a repayment deal or a 3 year fixed rate interest only mortgage.
We have access to over 90 lenders and our expert mortgage advisers will work to find the best deal for your personal circumstances. To get started, check out our mortgage best buys to see the best deals currently available and talk to us or start filling in your information online to see if you’re eligible.
To ensure you have the best possible chance of getting a good rate, make sure that you check your credit report before starting the mortgage application process. The three main credit reference agencies are Equifax, Experian and TransUnion, all of which offer free and subscription services. Once you’ve reviewed your report, make sure there’s no incorrect information as discrepancies can adversely affect your mortgage application.
