What happens when your current mortgage deal comes to an end?
Posted on 17th October 2023 at 14:57
You may have received a letter from your mortgage lender to advise your current rate is coming to an end. What happens next?
Do you shop around to get a better deal?
Do you stay with your current lender and go for the rate they are offering?
If you do nothing you will revert to the lenders standard variable rate. This rate is normally significantly higher than your current deal.
There is no tie in to the lenders standard variable rate meaning you can leave at any time without incurring early redemption penalties. But with a significantly higher interest rate, it is important to review and not let this happen.
In the first instance I would always advise to shop around. Just because your lender is offering you a rate, does not mean that is the best rate in the market for your eligibility. Speak to a broker who can review the market for you and find the right rate for your circumstances.
When I am reviewing rates for my clients, I am not looking at the lowest percentage. I am looking at the over all cost including valuation fees, lender arrangement fees and any other associated fees to gain the true cost of this mortgage over the specified rate period, for example 5 years.
That way my clients know I am advising them on the most cost effective solution.
A lot of remortgage products include free valuations and cashback to help pay the conveyancing costs. Some lenders offer free legals with their deals. It is worth noting that you would have no legal representation as the conveyancer is working for the lender. I would therefore always advise to go for the cashback option over the free legal services.
Staying with your current lender can have its advantages.
Firstly, no legal costs are applicable for product transfers. This means the mortgage can normally complete quicker than a remortgage.
Secondly, some lenders have loyalty products for their clients meaning you could get a slightly better rate than they offer to new clients. Luckily as brokers we have access to these rates so can still incorporate this into our research when looking at the right deal.
Finally, utilising your current lender may be the best option from a criteria perspective. If your circumstances have changed since the mortgage has been taken out you might not be eligible to go to other lenders. However, discussing with your current lender, due to having history with them, they may be happy to offer you a product transfer due to your existing relationship with them.
If your current mortgage deal is due to end between now and the next 6 months, let me review the options for you. If the rates come down between application and completion, most lenders will let us move you to the lower rate meaning you benefit from a better interest rate.
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