5 min read
If your fixed rate mortgage deal is ending soon, and you’re wondering what happens next, read our article to find out more about what your options are.
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Mortgages deals can be fixed, anywhere from two to 10 years and in that time, a lot can happen to your circumstances, mortgage rates, and the mortgage market. Read on to learn what happens after your mortgage term ends and what your options are.
In this article:
When your fixed rate mortgage comes to an end, you will automatically move onto a standard variable rate (SVR) mortgage. This isn’t always the best option as the interest rate on SVR mortgages is usually higher, therefore your monthly repayments could increase dramatically.
You can decide what to do after your fixed term contract ends, before it ends, in some circumstances, six months prior to it ending. Therefore, around three to six months before your mortgage term ends, you should start reviewing your options.
There are several things you can do to prepare yourself for the end of your fixed term mortgage, you should start doing these around six months before the end of your mortgage term.
First of all, you should check the terms of your current mortgage, this includes, when it ends, your current interest rate, the standard variable rate once the term ends, and your outstanding mortgage balance. You should also remind yourself of any other terms in your contract, such as early repayment charges, exit fees and porting rules.
Knowing all of you terms, helps you compare your current mortgage to any new deals, and can help you evaluate what’s important to you in a mortgage deal.
A mortgage adviser is the best person to help you find out what the best deals on the market and will be able to help advise you of your options.
Your monthly mortgage repayments are highly likely to change when your fixed term contract ends, and so it’s important to understand how you will be affected, as early as possible. You can sometimes remortgage six months before your term ends and so planning ahead can help you budget and sort your finances accordingly and will give you time to get used to any increases.
Three to six months before your mortgage term ends, you should start reviewing your options, so that you’re in the best place possible when your fixed term mortgage ends.
The three main options you have are:
You’ll automatically transfer to a SVR mortgage when your fixed term contract ends. Staying on the SVR often means that you’ll likely end up on a more expensive interest rate. This works in a similar way to car insurance renewal deals; you can end up being worse off staying as you are. Although doing nothing is certainly easier, it doesn’t necessarily make financial sense.
They can often have no early repayment charges – this can be good for those who are moving house in the near future, or who are wanting to make overpayments.
No fees to pay – as you automatically move to this mortgage type, there are no administrative fees to pay, unlike when you remortgage.
They are usually more expensive.
They’re more volatile and the interest rate can change at any time – it’s not only affected by changes to the Bank of England’s base rate but it can also be changed simply down to your lenders discretion.
Not good for budgeting – as your payments could likely change each month.
Switching to a new mortgage deal, either with your existent mortgage provider or with a new one, is called remortgaging.
Less admin work – your lender already has information from when you originally applied for the mortgage, therefore you wouldn’t need to provide documents such as ID, proof of address and proof of income again.
They wouldn’t need to complete a property valuation – as this would have been done through your original mortgage offer.
Incur fewer costs – less likely to need a conveyancer to help you through the remortgage.
Takes less time – usually only takes around six weeks to switch to a new deal with the same provider.
Easy to do – switching deals is usually easy and can sometimes be done through a banking app.
Could be more expensive in the long term – different lenders might provide better deals or offer better terms.
When you switch lenders, you will need to reapply for a mortgage, and your new mortgage provider would have to run a credit check to ensure affordability, as well as completing a property valuation.
Get the best deal available to you at the time – shopping around opens up more offers and deals.
Takes longer to process – as there are more checks to complete, remortgaging with a new lender is likely to take around four months to complete.
Costs more – you’ll have additional legal costs to pay as you’ll need to instruct a conveyancer to help you through the remortgaging process.
More admin work – your new lender will complete an affordability check, meaning you will have to supply documents such as proof of ID, proof of address and proof of income.
You will need a property valuation – your lender will get someone to value your property to ensure that it is worth the amount it is being mortgaged for.
If you’re asking yourself, should I remortgage, read our helpful guide for more information.
Let us help with your conveyancing, get a personalised remortgaging quote today.
You will usually need to instruct a conveyancer to complete the legal work when remortgaging with a new lender. Learn more about the remortgage conveyancing process to understand how it works.
Use our online remortgage calculator to get a quote for your remortgage.
Remortgaging a property that has spray foam insulation can come with challenges. Recently, many mortgage lenders are having concerns about spray foam because of its potential to impact ventilation and roof structure.
This means that having spray foam insulation could limit your remortgaging options or require additional checks to satisfy lenders. To avoid complications, we recommend working with a surveyor who can assess the condition of the spray foam and provide a report that reassures both you and potential lenders.
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