5 Important Steps As Your Fixed-Rate Mortgage Approaches Expiry
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If you are a homeowner with a fixed-rate mortgage, you may be approaching the end of your fixed-rate term. This marks a crucial juncture in your mortgage journey, as it opens up various opportunities and considerations. In this article, we'll explore five important things to do as you approach the expiry of your fixed-rate mortgage product.
1. Review Your Mortgage Options
As your fixed-rate term nears its end, it's essential to review your mortgage options. You have several choices, each with its implications:
Revert to Standard Variable Rate (SVR): When your fixed-rate term ends, your mortgage typically reverts to the lender's SVR. This rate can be higher than your fixed rate, resulting in increased monthly payments. It's a good idea to understand the SVR and how it compares to your current rate.
Remortgage: Many homeowners choose to remortgage when their fixed-rate term ends. This involves switching to a new mortgage deal, which could be another fixed-rate, a tracker rate, or a variable rate mortgage. Before deciding, shop around for competitive offers and consider your financial goals.
Overpayment or Capital Reduction: If you have the financial means, you might want to use this opportunity to make overpayments on your mortgage or even pay off a portion of the principal. This can reduce the overall interest you pay and shorten the mortgage term.
2. Assess Your Financial Situation
Before making any decisions about your mortgage, it's essential to assess your current financial situation. Consider factors such as:
Income Stability: Do you expect changes in your income or employment situation in the near future? This can impact your ability to take on a new mortgage product.
Outstanding Debts: Take stock of any other debts you have, such as credit cards or personal loans. Reducing high-interest debts can free up funds for mortgage payments.
Savings and Investments: Evaluate your savings and investments to determine if you have access to funds that could be used to pay off a lump sum or for a larger deposit on a remortgage.
Financial Goals: Consider your short- and long-term financial goals. How does your mortgage fit into these goals? For example, are you planning for retirement, education expenses, or a major renovation?
3. Seek Professional Advice
Navigating the mortgage market and making the right choice for your unique circumstances can be challenging. Therefore, it's highly advisable to seek professional advice. Consult with an independent mortgage adviser who can:
Compare Offers: A mortgage broker can provide you with a range of mortgage offers from various lenders, helping you find the best deal based on your needs.
Explain Options: They can explain the pros and cons of different mortgage products and how they align with your financial goals.
Assess Affordability: They can help you determine how much you can comfortably afford and whether it's the right time to remortgage or consider other options.
4. Budget for Additional Costs
When remortgaging or switching to a new mortgage product, it's crucial to budget for additional costs. These can include:
Arrangement Fees: Some mortgages come with arrangement or application fees. Be sure to factor in these costs when comparing offers.
Legal Fees: You will likely need a solicitor or conveyancer to handle the legal aspects of your new mortgage. Get quotes for their services.
Valuation Fees: The lender may require a valuation of your property, which can incur fees.
Early Repayment Charges: If you are remortgaging before your current deal's expiry date, check for any early repayment charges associated with your existing mortgage.
Exit Fees: Some lenders charge exit fees when you switch away from their products.
Budgeting for these costs ensures you're financially prepared for the transition to a new mortgage.
5. Stay Informed and Act Promptly
Lastly, as your fixed-rate mortgage product approaches expiry, stay informed and act promptly. Mortgage rates and economic conditions can change, so keeping a close eye on the market is essential. If you decide to remortgage, initiate the process well in advance of your current deal's end date to avoid reverting to the lender's SVR. This proactive approach can save you money and provide peace of mind.
Conclusion
Approaching the expiry of your fixed-rate mortgage product in the UK is a significant financial milestone. It offers you an opportunity to reassess your mortgage options, improve your financial situation, and align your mortgage with your long-term goals. By reviewing your options, seeking professional advice, budgeting for additional costs, and staying informed, you can make a well-informed decision that benefits your financial future and homeownership journey. Remember that every individual's circumstances are unique, so tailor your choices to your specific needs and goals.