What Happens When My Fixed-Rate Mortgage Ends?

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A fixed-rate mortgage offers peace of mind during the introductory phase of the contract. Your monthly payments are static, making all financial planning far easier. That being said, a fixed-rate mortgage ends after several years, depending on how long the fixed term  period was set – which can usually be anything from 2 up to 10 years, depending on your contract and property.

“So what happens when my fixed rate mortgage ends?” is a question we’re often asked. While you’ll no longer have the certainty of what your repayments will be from that point on, there are plenty of things you can do to deal with the end of your fixed-rate period. This article will go over what to ask yourself, your options with your current lender, a new mortgage or remortgage process, and finally, what would happen if you do nothing.

How do I prepare for the end of my fixed-rate mortgage?

The first thing you must do when considering the end of your fixed-rate deal is to ask yourself a series of questions to identify what are your best options.This includes:

  1. Can you afford higher payments? This is possibly the most important question you can ask yourself. What many mortgage payers tend to fear about the end of a fixed-rate deal is higher interest rates. Factor in all your regular expenses, your groceries, disposable income and emergency funds. How much more can you pay whilst being comfortable?
  2. Do you want to stay with my current lender? Your current deal is ending, but another may begin with loyalty benefits if you are to remortgage. Is this something your lender offers? Most lenders know that there’s a whole market out there vying to sign other deals that are more advantageous for you. It may be a good idea to bring up a good mortgage deal or two, to notify your mortgage lender and let them know that you, and competitors, are willing to compete.
  3. Are you comfortable with a variable-rate mortgage? This isn’t a question you can ask yourself if you’re not familiar with the concept of a standard variable rate (SVR). An SVR mortgage deal consists of interest rates that will react to market conditions. This essentially means you’ll be putting your monthly repayments up to the economic climate, which could result in it being lower or higher. We recommend you speak to mortgage experts to fully understand where you may stand.
  4. How much equity do you have? Your equity in your property will determine the quality of mortgage deals you’ll be offered. Equity, of course, is how much of your home you actually own. Every time you make a payment, you gain equity, until the full sum is paid and you have full equity. You can find this out by subtracting the mortgage balance still outstanding from the market value of your property. A borrower with high equity (usually around 20%) can qualify for better interest rates and mortgage deals as a whole.

What are my options after my fixed rate period?

Think of your mortgage and how much there is left to go, as well as having a window to cut new mortgage deals, and you may think there are too many options to choose from. The fact of the matter is, though, there are really only four choices you can make.

Remortgage with your Current Lender

Renewing your current mortgage with your current provider is the simplest way to move forward.

Pros

  • Easier – The fact is, your financial information is already on file with your current lender. There will be no need for new submissions or even a valuation of your property (provided the lender is confident in the value based on the market, and your LTV).

Cons

  • No Competition – Your current lender, if you go back to them, no longer has to compete for your business. They may not be incentivised to budge on the new interest rate or the like.
  • Better Deal – You could be missing out on a better deal. A new mortgage deal may come with better terms.

Remortgaging with a New Lender

Remortgaging with a new lender means a new mortgage deal.

Pros

  • New Deal Potentiality – Remortgaging with a separate new lender means you’ll be able to have access to potentially better offers than you had during your previous mortgage. This is because you’ll have higher equity and a proven track record of making repayments. This could lead to substantial savings whilst you pay off your home.

Cons

  • Fees – There is a potential that you will end up paying new fees during your new mortgage. This can be anything from a valuation fee, to arrangement fees associated with the new deal.
  • Paperwork – You will need to redo the paperwork. This is a necessary part of the product transfer.

Do Nothing (And Switch Straight to Lender’s SVR Mortgage)

Doing nothing will mean the lender will automatically roll you over into their standard variable rate. SVRs are almost always higher than fixed-rate mortgages and can fluctuate based on the market.

What’s the best path forward when my fixed rate period ends?

When it comes to finding the right mortgage provider that will give you the best deal, whether that be your current or a new lender, there are several methods you can take to make the most of the new opportunity.

Mortgage Broker

Mortgage brokers are the middleman between the mortgage lender and the mortgage buyer. We act as experts on all things mortgagerelated, and it’s our job to have close ties and connections not only to mainstream lenders but more flexible providers.

Pros

  • Whole Market Access – A mortgage broker has access to many mortgages, and not only that – but a better understanding of the accessibility and boundaries established. A mortgage broker’s job is to have a catalogue of providers that they can fully match with providers, whether they be another fixed-rate mortgage deal or otherwise.
  • Tailored – Getting advice from a mortgage broker means getting advice tailored precisely to your situation. They are able to iron out the details of your case and give good suggestions.
  • Negotiators – A mortgage broker’s job doesn’t end at finding the right deal for you, but also arguing your case better. This isn’t to say you can’t do it well enough – only that a mortgage broker has a better understanding of the rules and how much they can push for.
  • Time Reduction – A broker will take a lot of the administrative work off of your hands. This is not only to sweeten the service and make it more manageable but also so that they have clear, immediate reference.

Cons

  • Fees – A mortgage broker naturally has to charge fees to ply their trade. After all, there is a great deal of work that goes into finding you the best remortgage deal from our broad panel of lenders. If you were to use our services, we would be working hard to put you in the best possible financial situation.

Comparison Websites

Websites that allow to compare one mortgage provider with another exist, and have proven a valuable tool for clarity if nothing else.

Pros

  • Comparison – It’s easy to compare deals side by side on a comparison site. It gives a quick overview of the current market’s interest rate, for example. It also allows you to filter your search based on what you’re looking for, as well as your own capabilities (equity calculations etc).
  • Ideas – Comparison sites can be a useful reference for ideas on currently available rates and potential terms. While they don’t provide the most in-depth information, for generalities, you can go into negotiations knowing where you stand as a baseline.

Cons

  • Listing Complications – Recall how we claimed comparison sites are good as a baseline. It’s partially because there’s likely to be a limited panel of lenders being displayed there. Smaller lenders and niche offerings may be excluded from the list, for example, or what is there may be outdated or missing information.
  • Limited Understanding – There will almost always be caveats with every mortgage deal that a mortgage provider will understand and take into account if the overall deal is acceptable to them otherwise. This can’t be accounted for on these websites.

Direct To Lenders

Direct-to-lender mortgages involve applying for a mortgage directly with a bank or other lending institution.

Pros

  • Exclusive deals – There may be exclusive deals available that offer special reduced mortgage repayments, excluding annoyances like early repayment charges etc.
  • Direct communication – You will be able to speak to and discuss your situation at length, which can be helpful when wanting to know specifics about a deal that may twist it in your favour.
  • Control – You have more control over this process than others, allowing you to tailor your application to what you want.

Cons

  • Time Consumption – Researching a myriad of lenders and comparing their offering will consume a lot of your own personal time.
  • Complexity – Mortgages can be complex, and you may end up running into areas where you can’t navigate with informed decisions.
  • Limited View – You can only see the lenders you personally approach, meaning you may miss out on more niche, specialist lenders who suit your criteria perfectly.

Conclusion

All in all, your fixed rate period coming to an end can be a worrying time for many. But don’t be overly concerned! In the end, we will always recommend you go to a mortgage broker for expert help. When the Bank Says No has helped many clients achieve their dream home even with adverse credit or other credit issues not in their favour. Contact us, and let us help you similarly. 

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Emma Jones
Emma Jones
Emma began her career in Lloyds Banking Group, first in the unsecured & secured loans department at Halifax and later as a mortgage advisor at Lloyds. During 9 years in these roles and a further 2 years at Yorkshire Building Society, Emma was able to observe the impact of the recession, and how the banks let their customers down by denying loans and mortgages. Wanting to be a driving force for change, she stepped into a market advice role where she has been able to help clients when others couldn’t. Identifying a gap in the mortgage space, Emma went on to establish When the Bank Says No. As a keen property investor, she has been the focus of features in publications including The Sunday Times and This is Money. Emma’s greatest joy is overcoming the low expectations of their customers, many of whom have all but given up on getting a mortgage due. One thing Emma has learned through her own personal struggles is every client must be treated like a human and understood better by advisors and lenders in the industry. “We all have to navigate life events which can ultimately impact your financial status. It shouldn’t mean dreams of homeownership or business growth should have the breaks applied”. Emma and her team’s passion for helping people overcome the challenges they may face when applying for a mortgage have fuelled the success of When the Bank Says No.

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