Do you, in common with millions of other home owners, have a short-term mortgage? If so, it’s very easy to set up the monthly repayment and then get involved with so many other aspects of your life that time slips away and before you know it, the two or three year period of your loan is coming to an end. Whilst many lenders write to their customers towards the end of the loan period, it isn’t compulsory.
When you sign on the dotted line for your mortgage deal, you are issued with a key facts mortgage document which will include all the loan details together with the all important date that your fixed price deal will come to an end. If you forget this date and also fail to receive a reminder, the first thing you’ll become aware of it a notice of a change in monthly re-payments, which means that you’ll be going on to the lender’s usually expensive SVR, or standard variable rate.
As an example, on a loan of £150,000, you could easily be paying out a substantially higher amount - more than £200 a month extra. This is assuming that the SVR is 2.25% more than the “special rate", which would not be unusual.
Obviously most borrowers would opt to change to an alternative short term mortgage, but it takes between four to six weeks to arrange this change-over. If you are extremely diligent at remembering to take action you may run into problems too as if you ask what your options are when there’s more than a month or so to run, your lender will very often say they’re unable to make a decision until nearer the date. Then you’ve been stalled and still can’t make a decision.
There has been some improvement in the way insurers are handling the situation. An increasing number of them are contacting borrowers around three months before the end of their current deal and setting out options.
It’s not always the right thing to automatically change to another lender to get the best price. Consider your options carefully. If you stay with your current lender, there will be a saving on legal charges and you shouldn’t need another valuation. Nor will exit fees be charges, which could mean a fairly big saving. It just could be that a slightly more expensive deal with your current lender may work out best in the long run.
Because of this and with the intense competition in the re-mortgaging business, it’s becoming increasing common to find new lenders who will fund the charges, just to get your business.
If you used a broker to arrange the mortgage, you may well find that they’ll send you a friendly reminder. This is a service which will be no problem for them and another thing less for you to think about, which has to be good news. Your broker will weigh up the deals and come up with some facts and figures when it comes to renewal too. The internet’s the place to look and an on-line broker’s the person to look for.
Get great articles on Mortgages from Mortgages Matter