Should I fix my mortgage?
When you are heading towards the end of your fixed-term mortgage, you’ll be faced with several choices. For example, do you look for a new mortgage deal, or do you allow your current agreement to end and transition over to your lender’s standard variable rate (SVR)?
If you do decide to look for a better mortgage deal, it’s often a question of knowing where to start and what to look for. With so many different mortgage products on the market, it can be difficult to know how to get the best value for money.
In this article, we’ll discuss why it makes sense to remortgage at the end of your current term and why choosing a fixed-rate mortgage is often the best option.
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What are the benefits of a fixed-term mortgage?
Fixed-term mortgages are currently the most popular product on the market – and with good reason. Having a fixed-rate mortgage means that you have the security of knowing how much you will be paying over a set period.
Knowing exactly how much you are paying on your monthly mortgage repayments makes budgeting for all of your other outgoings all the easier.
When your current mortgage ends, your lender will move you over to their SVR, unless you have arranged for a new mortgage deal. A standard variable rate mortgage more often than not has a higher interest rate than fixed-term arrangements.
It’s also worth remembering that a variable rate can be changed at any time by your lender, so even if you are comfortable paying a higher rate, you’ll have to guarantee that your payments will not increase.
Following a decade of remaining relatively low, interest rates have started to climb in recent years, meaning that shopping around and securing an affordable fixed-rate is more important than ever.
Is a fixed-term mortgage the only option?
No, there are several mortgage types available and a variable rate can be the most beneficial option for some borrowers.
It is important to know what products and deals are available before you make a final decision. Working with a mortgage broker will help you secure the best deal for your circumstances. While a fixed-term mortgage is the most popular product on the market, your broker will help you decide if this is the right option for you.
What are the different remortgage types available?
There are various types of mortgage options available to borrowers who are approaching the end of their current mortgage agreement. These include everything from SVRs to fixed-rate and current account mortgages:
- Standard variable rate – A variable rate set by individual lenders. Rates are variable and tend to be higher compared to fixed-rate products.
- Fixed-rate – A fixed-rate payment set over a period of time. This is the most popular mortgage product currently.
- Flexible mortgages – A flexible mortgage where borrowers can over and underpay. Rates tend to be less competitive with this type of product.
- Tracker rate – Tracker rate mortgages are similar to SVRs, but the rate of interest is directly tied to the Bank of England base rate.
- Current account mortgage (CAM) – Current accounts and mortgages are combined into a single package. Borrowers still make monthly payments, but their current account balance acts
as an offset to the total amount owed on the mortgage. - Offset mortgages – Offset mortgages are similar to CAMs, but the mortgage and current accounts of borrowers are kept separate, which makes monthly budgeting less confusing.
When should you apply for a remortgage?
When the end of your fixed-term deal is on the horizon, it’s time to begin the process of finding a better deal. Most lenders will allow you to do this six months before your current agreement is due to end.
It’s better to act sooner rather than later to avoid transitioning over to your lender’s SVR, so don’t be afraid to begin doing your research or reaching out to a mortgage broker ahead of time.
Once you’re ready to remortgage you’ll need to present all of the documentation that you provided when you first applied for your current mortgage. Try to get everything you need in one place (passport, utility bills and payslips, etc.) a few weeks before you finally apply for your remortgage.
This will help everything run smoothly and giving everything to the lender at once means that it is less likely that your application will be evaluated by several people.
Should I stick with the same lender when remortgaging?
Whether you remain with your current lender at the end of your fixed-term mortgage agreement will depend on your unique circumstances. Unless your mortgage is very close to being paid off, switching to your lender’s SVR is unlikely to represent the best financial value.
This doesn’t mean that finding a better deal means going elsewhere. Sometimes, your lender will offer you a competitive rate to stick with them, whereas other times you’ll be able to scour the market and find a competitive rate – it’s a matter of shopping around!
Mortgage brokers can help you here, as they’ll have access to thousands of products from hundreds of lenders. At Edward Mellor, we can also secure exclusive deals from leading high-street lenders that aren’t available anywhere else. These can even include rates from your existing lender that you wouldn’t otherwise have access to.
Fix your mortgage now!
If your fixed-term mortgage is coming to an end and you’re ready to find a better deal, the team at Edward Mellor is waiting to hear from you.
We pride ourselves on our friendly and proactive approach to securing the best deal on your mortgage. To begin your remortgage process, please don’t hesitate to contact us or give us a call at 0161 443 4830.
Your home may be repossessed if you do not keep up repayments on your mortgage.
