What Happens When My Mortgage Fixed-Term Ends?
If you’re a homeowner coming to the end of a fixed-rate mortgage, you’re likely to be feeling concerned that your monthly payments are about to skyrocket. But, if you’re prepared and well-informed about your options, you can put a plan in place to make sure you take the best next step.
How Does a Fixed-Rate Mortgage Work?
If your mortgage has a fixed rate, the interest rate is locked in place for a specific term. The term will be agreed when you first take out the mortgage, and you have a guarantee that you’ll pay that rate for the duration of the term and your monthly repayments will stay the same.
What Happens at The End of The Term?
At the end of your fixed-rate deal, your mortgage will move onto a ‘standard variable rate’, which is invariably much higher than most fixed-rate deals. This could have a massive impact on your monthly repayments.
Standard Variable Rates are set by individual lenders and can move up or down as they see fit, however they do tend to track in line with the Bank Rate.
So, What Are My Options?
You have two options:
- Do nothing, and your mortgage will automatically switch to a Standard Variable Rate.
- Remortgage to a new deal, either with your existing lender or a new one
If you intend to remortgage, it pays to speak to your existing lender three to four months before your current deal comes to an end. Find out what the best rate they can offer you is, then shop around to compare what you can get from other lenders. If your property has risen in value substantially, you’ll be in the best position to secure a competitive rate.
Comparison sites can be a useful tool for finding the best deal, but remember that they won’t all give you the same results, so it’s worth checking out more than one. You could also go to a mortgage broker to find the best rates.
What’s Involved in Moving to A New Lender?
As with any financial arrangement, if you pick a deal with a new lender you will need to pass their credit checks and affordability assessments. When you have an offer agreed, a solicitor will deal with the paperwork and send a signed deed to your new lender, who will pay off your existing mortgage. Your mortgage repayments to your new lender will then commence as per their offer.
Will it Cost Me to Remortgage?
Yes, there are costs associated with remortgaging. The exact amount will vary by lender, but you could be subject to the following charges, amongst others:
- Product fees, which can range from £500 to £2,000 and are payable upfront
- Valuation fees, up to £500
- Solicitor fees, up to £500
- Transfer fees, usually between £25 and £50
It’s important you check what fees are payable when researching the best remortgage deal for you.