If you’re on a fixed-rate mortgage deal or you are thinking about applying for one, you will understandably want to know what happens when your mortgage term ends.
In this guide, we will discuss your fixed rate mortgage options with you but if you have any questions after reading this post, get in touch with our expert team for further mortgage advice and support.
What is a fixed rate period?
The fixed-rate period is the amount of time that your fixed rate mortgage deal will last for. This might be a 2-year fixed rate or a 5-year fixed rate mortgage or even a 10-year fixed rate period. During these periods, the interest rates will be locked and your monthly repayments will remain the same.
As fixed-rate mortgages have an end date, you will need to consider your options before the end of your mortgage term.
It’s wise to wait until your existing mortgage is about to expire as you may be subject to early repayment charges if you switch to a new deal before your term ends. However, if you think you will be financially better off by switching during the fixed rate period, you do have that option. So, let’s delve into what happens when my fixed rate mortgage ends.
Fixed term mortgage ending
When your fixed rate mortgage ends, you have several options with your mortgage moving forward.
You can move onto your current lender’s standard variable rate (SVR), switch to a new mortgage deal with your mortgage provider, or remortgage with a new mortgage lender.
If you decide not to roll your mortgage onto your lenders’ standard variable rate, you have the choice of different mortgage types when you make the switch. These include fixed and variable rate mortgage deals.
Fixed-rate mortgage vs variable rate mortgage
With a fixed-rate deal, you will know what your monthly payments will be as the interest rate will stay the same.
Variable rate mortgages, such as tracker mortgages and discount rate mortgages, can be recommended if the Bank of England base rate or the lender’s rate of interest is low. But as these can change at any time, the interest on your mortgage could rise. When this happens, your mortgage repayments will increase in size.
Which mortgage rate should you choose?
Typically, you will be financially better off with most fixed-rate deals as you won’t incur more interest if the mortgage rate suddenly goes up. Of course, you won’t benefit if interest rates go down but for peace of mind, you might still prefer fixed rate mortgage deals as your payments will remain the same.
Ultimately, the choice is up to you but it’s always worth speaking to an expert mortgage broker at YesCanDo Money for our advice and support. We will present the following options to you and will help you make the right decision before your fixed rate ends.
It has been our experience at YesCanDo Money that people leave it too late to remortgage. We carried out in-house research and found that people were waiting on average 7 weeks too late to remortgage. On an average size mortgage of £200,000 this would cost £217 each month and they are unnecessarily on the standard variable rate. So our advice is to start remortgaging early! – Stephen Roberts
Find out what your options are with your current mortgage lender
Before you decide on a new deal you should find out what your current lender can offer you.
This is because staying with the same lender can sometimes be the right choice. As they already have your details, you won’t need to provide a lot of paperwork for your next mortgage. Therefore, the mortgage process can be quicker, easier, and cheaper
So, before you explore other deals, find out what products your existing lender may be willing to offer you at the end of your fixed term. Be sure to ask them about their current SVR too.
When you have this information to hand, you will have an understanding of the interest rates that will be attached to your next mortgage if you stick with your current lender.
From here, the following options will be open to you.
1. Move onto your lender’s Standard Variable Rate
The average standard variable rate is typically higher than the interest rate on a fixed-rate mortgage so this option is usually not advised.
However, if it’s not too much higher than the current fixed rate, this option might still be beneficial to you.
This is because you can avoid the mortgage fees that a new lender will charge you if you decide to remortgage elsewhere.
You can also make mortgage overpayments without being penalised. Doing this could give you the opportunity to pay off your mortgage early.
Unfortunately, variable rate mortgages can be risky, so while the initial interest rate could be relatively low, there is the chance that it could increase at any time. As such, if you do move onto your lender’s SVR, you should consider switching to a fixed mortgage at a later date if you can find a deal that is a lot cheaper.
2. Remortgage with the same mortgage lender
If your current mortgage lender can offer you an affordable fixed rate deal, remortgaging with the same lender is certainly an option worth considering. The interest should be lower than that on their standard variable mortgage, so your monthly mortgage payments will be reduced.
But while your mortgage lender might be able to dazzle you with their new fixed deal, be aware that it might not be the best deal on the market. As such, you shouldn’t agree to a new deal with your lender until you have compared it to the deals that are being offered by other mortgage lenders.
If you can get a cheaper deal with the same mortgage lender, or if the mortgage rate is not too much higher than the best deal on the market, you might want to remortgage with your existing lender. This is because you won’t have to pay the mortgage processing fees that a new lender will charge you.
But if, after doing the maths, you think you will be better off elsewhere, you should consider the next option.
3. Remortgage with a new mortgage lender
As there are thousands of mortgage deals on the market, there is a high chance that you will save money by moving to a new lender once your existing deal ends.
If you leave your current deal before the mortgage term ends, you will have to pay the early repayment charge that is set by your current lender. As such, it is often wiser to arrange a remortgage with a different lender when your current deal is about to expire.
Should you decide to make the switch, you aren’t automatically guaranteed mortgage approval. This is because the new lender will carry out a credit check and a mortgage affordability assessment before they agree to make you a mortgage offer.
If your mortgage application is accepted and you are happy with the deal being offered to you, then making the switch can be advised if you think you will be financially better off.
4. Sell your home and move on
If you’re thinking about moving home, the best time to do it could be when your fixed mortgage ends, especially if the value of your property has gone up. This is because you may be in a position to pay off your entire mortgage.
If you make a profit after selling your home, you will then have extra funds available for your next mortgage deposit. If you have a lot of excess cash after the sale, you may have enough for a larger deposit and this will give you access to better-fixed rate deals with more affordable mortgage rates.
Should you decide to move on from your home, get in touch with our team of mortgage advisers as we will explore all of your mortgage options with you.
Get a expert advice from YesCanDo – a fee-free mortgage broker
Talk to us before your fixed rate mortgage ends, as mortgage brokers this will give us plenty of time to plan a new fixed rate and make sure you will not need to either go onto your current lender’s standard variable rate and also pay any early repayment charges. Now is the time to speak to our expert team about fixed rate mortgages.
After checking the entire mortgage market, your appointed mortgage advisor will discuss all of your options with you and will advise you on which is the lowest interest rate and deal that will be better for you when your current fixed rate period ends.
If you decide to switch to a different lender, your mortgage advisor will also advise you on what you need to do to access the lowest fixed rate mortgages and interest rates. They will also assure that you do not pay any early repayment charges and give you other advice related to your affordability.
To learn more, get in touch with our team today. We will make sure you move onto the most suitable mortgage for your circumstances once your fixed rate period ends and will give you all the advice you need on your mortgage journey.