Your mortgage deal might be ending, but you still have the option of remortgaging.
Mortgage lenders attract people with fixed and discounted rates or trackers. However, these competitive rates usually only last for 2-5 years. Once that deal ends, the cost of your mortgage payments can increase. As a result, this is an ideal time to look at remortgaging.
In this article, we’ll look at remortgaging and what you need to think about when your mortgage deal ends.
What Happens When Your Mortgage Deal Ends
Your mortgage payments change when your current mortgage deal ends. That’s because your lender will automatically switch your mortgage to their Standard Variable Rate (SVR).
As the SVR is tied to the Bank of England’s base rate, it can change without notice. More importantly, it’s usually a higher interest rate than what you’ve been paying with your starting rate. As a result, your monthly mortgage payments could increase.
That’s why some borrowers choose to remortgage and move to a lower rate elsewhere, rather than paying the SVR, to avoid the higher monthly payments.
Remortgaging is also an option if you’re already paying the SVR and you want to save money on your mortgage payments.
What to Consider Before You Switch Mortgage Deals
Whilst remortgaging can save you money, you have to weigh up what it can cost too.
Firstly, check if there’s an early repayment charge (ERC) on your current mortgage. You have to pay this fee if you remortgage during your initial fixed-rate or tie-in period. The ERC is a percentage of your outstanding mortgage so you’ll need to decide if paying the fee is worth it to save money on your mortgage payments.
Then look at the criteria of new mortgage deals, such as the Loan to Value (LTV) and minimum income requirements. These will affect what rates you’ll be able to get from other lenders.
Also, remember to find out the costs of remortgaging as there may be legal, valuation and administration fees. Sometimes deals are free of fees and lenders can also add these fees onto your mortgage, but this does mean you’ll pay interest on them.
Finally, check how much you have left on your current mortgage. If you only have a small amount left to repay, it may not be worth your while to go through the remortgage process.
How to Get Remortgage Quotes
Before you make a decision on remortgaging it’s best to get some quotes to compare different lenders.
You can talk to lenders directly to find out what they have to offer or speak to a broker to search for suitable mortgage deals.
Some brokers are tied to specific lenders whilst other brokers look for deals across the whole of the market.
Brokers will also check the small print of the mortgage offers for you. As a result, they can save you time looking for mortgages that suit your needs and could save you money.
Please Note: As a mortgage is secured against your home, it may be repossessed if you do not keep up the mortgage repayments.
If you would like to speak to us about remortgaging or reviewing your existing mortgage, please email us email@example.com.