If you’ve had a fixed rate mortgage deal for some time, you’ll know that it’s coming to an end, and you’ll more than likely be considering what your next steps are going to be.
But do you know what your options are?
Do you know which is the best choice for you?
Do you know what actually happens when your deal ends?
Well, let’s start with the easy one, at the end of your fixed rate mortgage deal your lender will move your mortgage on to their SVR (Standard Variable Rate), which more often than not will result in you paying much more each month due to a high rate of interest.
We know that generally, people don’t like to think about their mortgage, in an ideal world we could set it up once, tuck it away and never think about it again.
In reality, it isn’t as simple as that, failing to keep on top of your mortgage will almost definitely result in you suffering financially and pouring more of your money into the bank’s pocket.
Fortunately, we’re here to prepare you for what’s going to happen in the months leading up to your deal’s end date and outline the things you should be thinking about.
Option 1 - Product Transfer
The first reminder you're likely going to get will be from your mortgage lender, in recent times banks have been falling over themselves to try and engage with their existing customers and offer them a shiny new rate towards the end of their deal - the first of your three main options.
This kind of product is called a product transfer, they're the bank's way of trying to secure your custom for another couple of years and they can be really good for some people.
The process involved in getting this new rate is usually a lot simpler and requires less work from you, and because you're an existing customer the bank also isn't quite as interested in seeing much in the way of documentation, hence why they can be so appealing.
Your product transfer offer will also likely be at a relatively low rate, it might even be the best option for you, but how do you know?
The truth is it's really quite difficult to make that judgment on your own, without the advice of a qualified expert, and that's what your bank is relying on, they'd like you to see this moderately low rate and snap it up without a thought for the potential savings you could be throwing away.
In summary, a product transfer means staying with your current lender on a new rate of interest, with little requirement to provide documentation and with less scrutiny over your circumstances. Good for people who have new financial commitments or a change of income or employment. While they may be offered at a relatively low rate, they might not necessarily be the cheapest deal on the market.
Option 2 - Full Remortgage
Your second option is to look into your ability to remortgage, this could mean switching your lender to achieve a better deal.
If you're going to remortgage, it's crucial that you use a whole of market mortgage broker to carry out your mortgage research and make a recommendation.
Not only will this ensure you're getting the cheapest deal on the market, it also means someone will take on the bulk of the work on your behalf, you'll only really need to supply documents.
Remortgages can take longer than a product transfer, they require some legal work and a greater requirement for paper evidence of your circumstances, things like bank statements etc.
This is a good option for you if your circumstances have improved or stayed the same and you're looking to save some money on your monthly mortgage payments, that or you'd like to raise additional cash to make some home improvements.
Option 3 - Nothing
Whatever you choose to do when your mortgage deal ends, make sure it isn't this.
Doing nothing at the end of your mortgage term will mean that your deal moves on to standard variable rate, this is not where you want to be.
Standard variable rate is in almost all cases far more expensive than your current deal, it is also liable to change at the lender's discretion meaning you have no protection against rate rises and will be forced to pay more.
According to research by HSBC, It is estimated that the average Brit loses £4,000 per year by remaining on the standard variable rate and not looking into their options.
Even if it turns out you can't remortgage or get a product transfer, it's always worth speaking to an independent mortgage adviser to fully understand your options, many advisers offer a free consultation that'll achieve just that, you can book yours with us here.