With many property purchasers buying homes with a two, three or five year fixed rate deal, every moth there are hundreds of thousands of borrowers who are reaching the end of their fixed rate mortgage deal.
When your mortgage deal ends, you can choose to do nothing and move on to a higher SVR rate or remortgage onto a better deal. If you do nothing you could find that your mortgage repayments jump up by a lot. However, you can avert these higher costs by moving onto the best possible rate.
Fixed rate mortgages
By taking out a fixed rate mortgage you are locking your rate for a set amount of time – usually two, three, five or 10 years. This means that the amount you repay each month is guaranteed regardless of what happens to interest rates during your deal, this gives a level of certainty so you know how much your outgoings will be each month, helping you to budget and plan ahead.
Moving to a SVR
When the term ends you will move onto a standard variable rate or SVR mortgage. These are usually far higher than your fixed rate deal – and could be as high as four or five per cent. SVR mortgages don’t track the Bank Rate directly but are set by individual lenders and can go up and down usually in line with wider interest rates.
A lender will often contact you before our current mortgage deal expires, but many may find themselves moved onto the SVR without realising. You may receive an offer from your current lender, but it’s important to get advice to make sure this is the best deal available to you.
If the value of your property has gone up since you bought your property, you could be eligible for a much lower rate with another lender, which is something the Mortgage Hub can assist you with.
Once you have found the best deal you will need pass the usual credit and affordability checks before receiving a binding offer. Your solicitor will take care of the paperwork and a signed deed will be sent to your new mortgage provider. Your existing mortgage will be repaid and you will start making repayments to the new lender.
However, if you want to make considerable mortgage overpayments a SVR might be beneficial because there won’t typically be any early repayment charges attached, allowing you to repay the mortgage without any penalty. In addition, if you have a relatively small mortgage for example £50,000 or less, it might not be worth remortgaging as the new mortgage fees could outweigh the potential savings. Some lenders won’t take on small mortgages.
What will it cost to remortgage?
Remortgaging will cost money as there are several charges you could be liable for including product fees, valuation fees, solicitor fees, transfer fees and valuation fees so it’s worth weighing up whether it is right for you in the short and long term.
Talk to us at The Mortgage Hub about remortgaging and let us find the best deal suited to your circumstances.