If your current fixed-rate mortgage is coming to an end, it’s time to start looking at other deals. Should you feel unsure about the steps you should be taking, these seven can help you secure a mortgage that matches your needs:
- Decide on a fixed, variable or tracker mortgage
The first step to take is to decide on the type of mortgage you want. Now your fixed-rate deal has come to an end, you may want to have a look at the other options available.
As with your previous fixed-rate mortgage, taking out another product of the same type will mean that your payments remain the same over the agreed term. If the security of always knowing what you need to pay is important to you, it’s likely this option will be attractive. Usually, your rate can be fixed for two, three, five or 10 years, giving you short or long-term stability depending on your needs.
The other options are variable and tracker mortgages. These will both fluctuate depending on base interest rates set either by your lender of the BoE.
In the last 12 months, the Bank of England (BoE) has increased the interest base rate twice.
It’s likely that interest rates will continue to rise gradually. This, in turn, will increase your monthly payments. But should interest rates fall you’ll benefit from lower repayments. So, this is something to factor into your decisions when looking for a new mortgage product.
The type of mortgage that’s best for you will depend on whether you prioritise consistency or the potential to pay less interest in the short term and overall.
- Review your credit score
Much like when you first applied for a mortgage, your credit score is important.
The better your credit score, the more likely you are to be offered competitive interest rates. Your credit score is used by lenders to assess how likely you are to default on payments. So, having previous late payments, large outstanding credit card debt, or applying to borrow more can have a negative impact.
When you know you’re going to apply for a mortgage, review what’s on your report at least a few months beforehand. This gives you time to correct any mistakes. Not applying for or using further credit in the months leading up to your application where possible can help as well.
It’s a good idea to keep a regular eye on your credit score in the long term too. This allows you to track negative information and take steps to improve where necessary.
- Start researching deals available
Don’t leave searching for a mortgage until the last minute. There are lots of different lenders and finding the best deal can take time.
Lenders will usually ‘lock-in’ a mortgage product for three months, including interest rates. Some lenders will do this for up to six months. This means that if you find a deal before your mortgage ends, you’re still able to access the interest rate and terms offered when you applied. It can help give you peace of mind and ensure for a smooth transition.
Life’s probably too short to do this on your own. It’s complex and there are thousands of mortgage products to weigh up. It’s an area we can help with.
- Value your home
While you’ve been paying your current fixed-rate mortgage, it’s likely that the value of your home has changed. In most cases, it will have increased. If this has happened to your property, you’ll have a lower loan-to-value (LTV) ratio. This means you’ll be able to access a lower interest rate as you’ll have more equity in the property.
Therefore, having an understanding of the current value is crucial.
- Assess how much you want to borrow
First, get an accurate figure for how much you still owe on your current mortgage; you need to ensure that your new mortgage product will cover the loan.
Then, decide if you want to borrow beyond this amount. Releasing equity from your home can give you access to more cash. This can be useful for many reasons, for example, if you have plans to renovate your home. However, this will mean paying higher monthly repayments and more interest.
- Decide how long you want to borrow for
When you’re first buying a home, the standard mortgage length is 25 years, though many homeowners are now choosing to extend this. When you remortgage, you have a chance to review this.
Depending on your personal circumstances, it may be possible to increase the mortgage length, resulting in lower monthly repayments. This, of course, needs to be balanced with the fact that you’ll be paying it back for longer and increasing the amount of interest you’ll pay overall.
Alternatively, you may want to reduce how long you’re borrowing for. If you can afford to, it’s an effective way to reduce the interest you’ll pay and means you’re mortgage-free sooner.
- Organise your paperwork
Having been through the mortgage process before, you’ll know how lengthy and complex it can be. Getting the necessary paperwork in order can speed it up and reduce the chance of delays occurring. You’re likely to need your last three months’ pay slips and bank statements, your latest P60, ID documents and proof of address.
What happens if you don’t do anything?
You don’t have to actively look for a new mortgage product. If you don’t do anything, you’ll usually be moved on to your lender’s standard variable rate (SVR). Like all variable mortgages, the monthly repayments can increase and decrease.
While it might be an easier option, the product is unlikely to be competitive. The interest rate may be higher than the fixed rate you were previously paying. If you are moved on to your lender’s SVR, you’re not tied into a contract and can switch deals at any time.
One of the advantages of being on an SVR is that you’ll usually have no early repayment charge. You also won’t need to pay fees associated with taking out a new mortgage product. So, if your mortgage is likely to be paid off soon, either through monthly repayments or a lump sum it could be the best option.
If your current fixed-rate mortgage is coming to an end, you can contact us today for expert guidance and support to find the best deals for you.