What happens when your mortgage deal expires

Understanding what happens when your mortgage deal expires is crucial for homeowners. Failing to take action can result in being transferred to a higher standard variable rate (SVR), leading to increased interest payments. This article explores the implications of mortgage expiration and highlights the role of a mortgage broker in finding the right solutions for homeowners.

The Standard Variable Rate (SVR) and its impact

The SVR is the default interest rate set by lenders. It is applied to borrowers who have a mortgage with the lender but who do not have a specific deal such as a fixed rate. Lenders typically set their SVRs much higher than their other mortgage deals. This means that landing on the SVR should be avoided if at all possible. Generally, the best way to do this is to have a new mortgage deal in place before your current one expires.

The proactive approach: Remortgaging before your mortgage expires

The process of securing a new fixed rate in advance is relatively straightforward. You can consult with a mortgage broker or directly approach lenders to explore your options. They will assess your financial situation, including factors such as income, credit history and property value, to determine the most suitable mortgage options available to you.

One significant advantage of remortgaging before expiration is the flexibility it offers. Even after securing a new mortgage, you typically have the freedom to change your mind before renewing the mortgage agreement. This means that if circumstances change or you come across a better deal, you can explore other options without being locked into the initially secured mortgage.

It is crucial to understand that the specific terms and timelines for remortgaging can differ among lenders. Therefore, seeking guidance from a mortgage broker is highly recommended.

Exploring mortgage options

The residential mortgage market is dominated by repayment mortgages. These are mortgages where your monthly repayment pays off the loan as well as the interest. There are, however, still some interest-only deals available for those who qualify for them.

Even though repayment mortgages are standard, there are numerous variations on them. Probably the most obvious one is that there are variable-rate and fixed-rate mortgages. There are also offset mortgages where you can forego interest on your savings to reduce the interest on your debt. There are also niche mortgages such as “green” mortgages for energy-efficient homes and long-term mortgages that last for longer than 25-30 years.

Furthermore, you might discover that there are more mortgage lenders on the market than you might have realised as a consumer. Some of them might have very defined markets (e.g. local building societies). You may, however, still qualify for their deals, if you think to apply for them.

Overcoming obstacles to getting a mortgage deal

A mortgage broker can be instrumental in helping you navigate challenges that might otherwise have derailed your mortgage applications. Here are some examples of what this could mean in practice.

Credit blips: These can pose a challenge when seeking a mortgage, but a mortgage broker can assist in evaluating your credit history, comprehending the underlying circumstances and collaborating with lenders who are more accommodating towards applicants with imperfect credit. Their expertise and previous experience enables them to guide you in presenting your credit profile in the way that lenders wish to see.

Reduced income: A mortgage broker understands the impact of reduced income on your ability to meet mortgage payments and can explore options tailored to your new financial situation. They have access to lenders who offer products suitable for borrowers with varying income levels, ensuring you find a mortgage that aligns with your current earnings.

Property devaluation: A mortgage broker can leverage their market knowledge and network of lenders to identify solutions. They can work with lenders who consider factors beyond property value alone, such as your financial stability and ability to repay the mortgage. This increases the likelihood of finding a mortgage option that suits your needs, even in a situation of property devaluation.

There can be an early repayment charges that you need to consider

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Your home may be repossessed if you do not keep up repayments on your mortgage.