ADVICE COLUMN: Lanarkshire mortgage expert with advice on renewing your mortgage

Hello and welcome to this month’s edition of my mortgage advice column.

This time of year traditionally sees a lot of people looking at reviewing their mortgage options as their current mortgage deal is coming to an end, so I want to highlight why getting your mortgage in order sooner rather than later can be beneficial in the long run.

Why review your mortgage?

In the current climate, everything seems to be going up in price due to inflation, the cost of living, and energy and fuel price volatility – not to mention mortgage rates. With this in mind, now is the perfect time to review your mortgage and see if you could potentially save money, or protect yourself against further rate increases.

I’ve recently had several clients approaching me who have been moved on to their current lender’s ‘Standard Variable Rate’ following the end of their mortgage deal.

This means that an increase in mortgage payments is generally inevitable, given the higher rates we are currently experiencing.

However, there are options available to you and steps you can take to combat this.

Falling onto an SVR

Many people fall into the trap of landing on a ‘Standard Variable Rate’ (SVR) with their existing mortgage provider. This means that your initial deal has expired, and you usually fall onto a higher variable rate, which can fluctuate if rates change.

Moreover, switching to an SVR can make it difficult to budget your money effectively each month, as you’ll have seen your mortgage payment increase already.

We recommend looking at what rate you’re on first and when it expires, as this will inform what you do next. Don’t get caught out thinking that your deal ends exactly two, three or five years from when you started the mortgage, usually lenders will have a specific end date for mortgage rates, in particular fixed rates, regardless of when the mortgage started, so check that first as it may be ending sooner than you expect.

Switch or remortgage?

You have two choices at this point: you can undergo a product transfer, which is where you move onto a new deal with your current lender. This may or may not be the right deal for your needs, as your lender will only have their own specific products to choose from.

Alternatively, rather than sticking with what you know, you can look at remortgaging with another lender. You can usually start the remortgaging process within six months of your current deal expiring.

This could lead to you getting a more suitable deal overall, saving hundreds, if not thousands of pounds instead of leaving it too late and ending up on a much higher standard variable rate for a period of time.

A mortgage adviser will be able to offer guidance on which option is the most suitable depending on your individual circumstances, so make sure to talk things through with them first.

Term extension

Some lenders may offer the chance to extend your mortgage term. This means that your monthly payments on a capital repayment mortgage would be spread out over a longer period, but your payments would cost less each month.

This can take the sting out of any rate increase you encounter, but would mean paying back more in the long run if you didn’t reduce your repayments again further down the line.

A mortgage adviser can discuss the ins and outs of a capital repayment mortgage and the options available to you.

Consider your LTV

The new interest rate available will depend on your ‘Loan to Value’ (LTV). This is the amount that is outstanding on your mortgage versus the value of your property.

Lenders will conduct a new valuation of your property to determine what Loan to Value bracket you fall into. Generally, the lower your Loan to Value percentage, the more competitive the interest rate you’ll get.

It’s certainly worth considering whether it’s possible for you to reduce your mortgage balance with an overpayment, so that you can lower your Loan to Value percentage bracket.

So if you have a current mortgage, check when the deal is due to end and if it’s within the next six to seven months, now could be the time to review your options.

I hope you’ve found this article useful, see you all next month for more mortgage hints and tips.

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