Your short-term mortgage may be coming to an end. Don’t forget to put arrangements in hand to renew or transfer. It could be an expensive memory-lapse if you do.
The FSA (Financial Services Authority) is very happy with the way rules for renewing two or three year home loans are working out, but mortgage brokers tell a different tale and are less impressed, saying that borrowers are confused and could be out of pocket over the system.
When your short-term mortgage is coming to an end it would be helpful if you could rely on your lender to send you a reminder. Although some do, they’re not actually under any obligation to send you this information. They do have to inform you that the interest rate is to alter, with the obvious result of an increase in repayments. Unless, of course the rate comes down, which would probably be as likely as a flying pig? The rate they’ll be offering you will be their standard variable rate, which is likely to be something like 2.25% higher than the rate you’ve been on.
If you find yourself in the position that you have actually inadvertently switched to SVR, you’ll need to do something about it as soon as possible. For some-one with a £100,000 loan, switching from a standard variable rate deal can expect to save around £1,000 per annum for each one-percentage point reduction in their interest rate.
On average, it will take four to six weeks to re-mortgage with an alternative lender. Make certain that you allow at least this time to have everything in hand to change lenders in plenty of time, to plan an easy change-over. The FSA recommends that you study the “Key Facts” document which you will have received at the start of your mortgage. This will give you the date that your loan comes to an end. They recommend that you make a note of it.
Lenders vary, some will give you about three months notice, which is fine, some will write to you a few weeks before, which may mean a period on the higher rate whilst you’re making arrangements. Remember, some won’t write at all.
Whilst it makes sense to shop around for a similar, or preferably lower, interest rate to your current one, don’t dismiss remortgaging with your present lender out-of-hand. There will be a saving on exit fees, often around £300, valuation and legal fees if you stay faithful. It’s worth checking on what their offer would be.
Competition is strong on the mortgage front. All the companies would like your custom and you may find some will help with the costs of transferring the mortgage by meeting valuation costs and the legal costs to tempt you to switch to them.
The advantage of using a mortgage broker is that they’ll do all the research for you, finding the best deals and weighing up all the different aspects of your loan. Form filling will be kept to an absolute minimum too, once you’ve given them your details. When the time comes to renew the mortgage they’ll seek out the best deal again and let you know what they’ve come up with. Get onto the internet and search under mortgage brokers to get the ball rolling.
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