The Mortgage Details That You Should Check Now
As the rising cost of living sets in, many mortgage holders are wary of potentially large increases in their monthly outgoings when their fixed rate deal comes to an end. Shopping around, or having a professional adviser do it for you, is vital to ensure a good deal, but it’s not the only priority for mortgage holders – here are the questions you should ask yourselves now.
Does My Mortgage Fit My Circumstances?
The best mortgage for you depends on many factors, and your circumstances may be different to when you first took out your loan. If you plan to move house in the near future, for example, your adviser can work with you to understand whether your current deal is ‘portable’ to a new property as well as your likelihood of approval and the pros and cons of this approach.
Similarly, if you find yourself with more disposable income or have received a lump sum, perhaps through an inheritance or a pension, you may be considering paying off your mortgage entirely. Expert advice can ascertain what early repayment charges apply to your current deal, which will also be a consideration for those looking to remortgage. At between 1% and 5% of the outstanding mortgage balance, these fees can make a significant impact on the cost effectiveness of remortgaging or becoming mortgage free.
When Does My Current Fixed Rate Deal End?
Knowing when your current fixed rate deal ends can help prevent costly mistakes. Unless action is taken, your mortgage will automatically move to your lender’s Standard Variable Rate (SVR) at the end of your fixed rate period. The SVR changes over time in line with wider market trends and is liable to increase when the base rate is raised by the Bank of England. With the average SVR currently standing at 6.84% according to Moneyfacts.co.uk, this can represent a significant increase in monthly outgoings.
While working with an adviser can streamline the mortgage search and application process, lenders can take time to review documentation and finalise offers, so we recommend that you seek our support around six months before the end of your current fixed rate deal.
What Rate Does My Lender Currently Charge, and What is Their SVR?
Many of us are more familiar with what our mortgage payment costs each month than with the interest rate we’re currently paying. Pinning down this detail will help you compare mortgage deals on a like for like basis and understand the likely impact of a higher rate.
With the average two year fixed-rate having risen from 2.38% a year ago to 5.33% currently, it is likely that any new mortgage deal will result in a higher monthly payment. While this can be daunting, it’s important to establish the SVR your mortgage will automatically be transferred to if you don’t take any action. A new fixed rate deal or even a lower SVR from another lender may be more expensive, but is still likely to offer savings compared to the cost of inaction.
With so many variables to consider, tailored financial advice can help you find the deal that’s right for your circumstances. Why not schedule a chat with a member of our team today to find out more about your options?