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Finances

What Happens When My Fixed Rate Comes to an End

February 12, 2018 by admin in Finances, Tips

 

What is a fixed rate?   

A fixed-rate mortgage means the interest rate on the deal will be locked in place for a fixed period, whether that be two, three, five or ten years. This gives you the certainty in knowing how much your monthly mortgage repayments will be exactly. For many, it can mean a helping hand in budgeting and maybe treating yourself to that posh restaurant that’s just opened.

All good things must come to an end…

Even fixed-rate terms on mortgages. If you haven’t renewed your mortgage by the time your fixed rate ends you will fall onto your lenders ‘standard variable rate’ (SVR).  And as the name suggests can change from time to time, often leaving you paying a higher rate than you did previously.

What are my options when my fixed rate mortgage comes to an end?

  1. Do nothingand move to your lenders SVR.
  2. Remortgage to a new deal

It’s important to shop around if you decide to remortgage, we would recommend using a mortgage advisor, ideally one that uses whole of market. For more info on mortgage advisors, see the guide on why to use an independent mortgage advisor here.

If you’re undecided, GIGLY have put together a few questions to ask yourself before your fixed rate comes to an end.

5 Questions to ask when you’re looking to remortgage

  1. Should I change lender?

You don’t automatically need to change lender to get a better deal, but it is worth shopping around. For best results, it’s a good idea to start looking at new mortgage deals about 14 to 16 weeks before your fixed-rate period expires. This will allow sufficient time for the paperwork to get sorted. That way, you can switch straight to your new mortgage without ever paying the SVR.

  1. Can I afford higher repayments?

Spreading your repayments over a longer term can mean you’re paying less each month but more interest overall. Although, a shorter term will mean you’ll pay your mortgage off earlier but it’s important not to leave yourself overstretched and consider the affordability of any new deal.

  1. What are the fees?

There are a number of fees involved when it comes to remortgaging such as valuing your property, arrangement and product fees and potentially early repayment fees if you decide to leave your mortgage deal early. You might find it works out cheaper overall to switch deals with your current mortgage provider rather than to remortgage with a new lender to reduce the number of fees that you could be charged.

  1. What kind of mortgage do I want?

You can choose between moving onto a new fixed or tracker rate mortgage or revert onto your current lender’s SVR. Although lenders should contact you before your deal expires, many customers fail to notice and end up falling on to the lenders SVR without realising.

If you receive an offer from your current lender to move to another deal – check it against deals from other lenders online.

  1. Have my circumstances changed?

Check the value of your home, if it’s gone up, you may be entitled to a better deal. If your personal circumstances have changed you may want to discuss your options with a professional mortgage advisor. If you decide to remortgage to a new lender, they will carry out affordability checks – you’ll have to show things like your bank statements and payslips as well as evidence of your bills and living costs.