Renewing Your Mortgage: Why It’s Crucial to Act Sooner Rather Than Later

As we enter a new year, many of us are taking the opportunity to review our finances and make positive changes to our lives. For homeowners, one crucial aspect of this is reviewing their mortgage options. With the current climate of rising prices, inflation, and energy costs, it’s more important than ever to ensure you’re getting the best deal on your mortgage.

Mortgage rates are on the rise, making it essential to review your options.

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. Not only does this make it difficult to budget your money effectively each month, but it can also lead to higher mortgage payments.

Budgeting effectively is crucial when it comes to your mortgage payments.

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.

Remortgaging with another lender could lead to significant savings.

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.

Extending your mortgage term could provide temporary relief, but may cost more in the long run.

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.

A lower Loan to Value percentage can lead to more competitive interest rates.

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. 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.

Reviewing your mortgage options can lead to significant savings and peace of mind.