Can You Remortgage after Fixed Rate Mortgage Ends?
You have a couple of options open to you once your fixed-rate mortgage has come to an end. We explain these options to help you decide what steps you need to take next.
Basically there are two options. The first is to do nothing and to move onto the Standard Variable Rate of your current mortgage provider. The second is to remortgage.
We’ll look at the benefits and drawbacks of both of these options below. Whatever you decide, you should start looking at your options about 4 months before your fixed-rate mortgage comes to an end. This will give you time to review all the options and get the paperwork agreed and signed if you do decide to remortgage.
Option 1 - Do Nothing
If you do nothing and let your fixed-rate mortgage come to an end, your current mortgage provider will simply move you onto their Standard Variable Rate, also known as SVR.
Each mortgage lender sets its own Standard Variable Rate, so you will need to contact your lender to find out what interest rate you will be charged when your current mortgage ends.
The Standard Variable Rate can move up or down and can be influenced by the interest rates set by the Bank of England.
Being on a Standard Variable Rate mortgage can make it more difficult to budget each month as you’re never sure what your interest rate will be that month.
Often, the Standard Variable Rate is not as competitive as other Fixed Rate or Tracker mortgages you might find on the market so it’s important to make sure that you do your research.
You will need to factor in all the other costs associated with remortgaging. You won’t have to pay an early redemption fee as your current deal will have ended but you will still need to the pay the arrangement fees for the new mortgage, which can be anywhere between £500 and £2,000 but is usually around £1,000.
It’s best to speak to an independent mortgage advisor who can help you understand whether you’re better off staying on the Standard Variable Rate mortgage or if you should remortgage.
Option 2 - Remortgage
Once you’ve checked whether you can get a better deal than the Standard Variable Rate mortgage you’ll move onto once your current mortgage has ended, you may decide to remortgage.
You’ll probably find yourself a better deal than the Standard Variable Rate mortgage you’ll move onto. There are Tracker mortgages which track the Bank of England base rate or fixed-rate mortgages so you know exactly how much you’ll pay for a fixed period of time. You can fix your rates for usually between 2 and 5 years, but you could fix your rates for up to 10.
This can be a sensible option if you are facing increased costs like a new baby as you know exactly what you will pay on your mortgage for that time period. But, you should note that interest rates can rise and fall, so whilst it protects you from rate rises, it doesn’t give you the benefits of rate drops.
In addition, if your last mortgage deal was arranged some time ago, new affordability calculations have come into play when applying for a mortgage. These could mean that you cannot get another mortgage arranged under these new calculations.
You can find a Mortgage Affordability Calculator online which should help you look at your income and your outgoings and give you an idea of how much you could borrow and whether you would be OK to remortgage.
If your financial circumstances have changed since you last applied for a mortgage, you may decide to remain on the Standard Variable Rate so you wouldn’t need to reapply.
Whatever you decide, our Conveyancing Solicitors can help you with a remortgage if that’s what you choose to do.
Simpson Millar Solicitors are a national law firm with over 500 staff and offices in Bristol, Cardiff, Lancaster, Leeds, Liverpool, London and Manchester.