What To Do When Your Fixed Rate Mortgage Ends

Firstly congrats on buying a property, to begin with. Getting a mortgage and going through the process of buying is both exciting but also exhausting. There are loads of different types of mortgages, but when you first bought your home it’s likely you agreed to a fixed rate mortgage.  Chances are you didn’t think about it again. You probably signed up and thought it would be forever until you’d be looking to renew. Whether you signed up for a one, two, three, five or even ten year fixed mortgage time flies and before you know it the fixed term will be coming to an end.

A fixed rate mortgage is where the amount you pay each month is fix in and consistant for the duration of your agreement. This can be great if interest rates rise, but you can also lose out if they drop. But they’re generally a safe bet for consistancy and to allow you to plan your spending. We opted for a five year fixed rate mortgage because rates were pretty good and we wanted to lock it in for longer.

But what do you do when your fixed rate mortgage time comes to an end? Here are your options:

Switch to another fixed rate mortgage with your current lender

The variable rate that you’ll automatically switch to when your fixed rate mortgage ends is likely to be worse than choosing another fixed rate mortgage term. Sticking with the same lender will be very straightforward as they won’t need to run all the checks that they did the first time around.

Sticking with the same lender can be as simple as picking a new deal and switching to it instantly. So as soon as one fixed term ends, the other starts.

Remortgage with a different lender

It may be cheaper to move mortgage lenders. Just like you do with insurance you can shop around for a better rate with your fixed rate mortgage term. Most lenders will offer a crossover period so you may be able to switch around three months before the fixed term ends without incurring any penalties. You can check the terms of your fixed rate mortgage agreement to see if yours has this period.

If you choose a new mortgage lender you may require conveyancing solicitors to handle the legal side of things. This including confirming ID’s, checking documents, transferring mortgage funds between parties etc. It’s worth checking if your new lender includes a free legal package in the deal, if not it may work out more expensive as you’ll be paying for a solicitor yourself.

Do nothing

You don’t have to rush into making a decision, you can do nothing. Once your fixed rate mortgage ends you’ll move onto a standard variable rate (SRV) of interest with your current lender. This means you may be paying a different rate of interest per month. And this rate isn’t likely to be the best on the market. But if you don’t have time to look into the best option you can leave it for a few months before choosing another fixed rate mortgage which is likely to give you a better rate.

When to start looking for a new mortgage term

You can start shopping around for a better mortgage deal a few months before yours comes to an end. This will help you secure the best rate as soon as your deal comes to an end. It will also help stop the variable rate from kicking in if you don’t choose another fixed rate term early enough. This can help avoid additional interest kicking in.

You can use online comparison sites to compare mortgage deals. But you can also seek the help of a mortgage broker or mortgage advisor who are experts and can help you find the best deals out there. We paid a one-off fee meaning every time our mortgage term comes to an end our broker will help us find a new rate. And this continues for our whole lives which means we don’t have to worry about finding the best deal.

Should you get another fixed rate mortgage?

This type of mortgage is usually the cheapest option but there are some scenarios where it may not be the best option. If you are planning to move soon you may have to pay a fee to repay a fixed term mortgage, so you may want to choose a much shorter fixed rate term, or a variable term. The early repayment fee if you move house and then take out a new mortgage can be thousands of pounds.

But if you’re planning on staying where you are then it’s a good idea to choose another fixed term deal to take advantage of better interest rates. Especially if they’re lower than the variable rate. Plus you’ll know where you are financially and how much you’ll be paying each month for the next few years.

Have you had a fixed rate mortgage term come to an end?