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Having a fixed-rate mortgage offers the comfort of knowing exactly what your monthly payments will be. But, what happens when this fixed rate expires? Your mortgage payments can change, and understanding these changes is key to effective financial planning. This post will explain how much your mortgage might go up when your fixed rate expires and why it’s crucial to consult with a mortgage advisor.
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How Fixed-Rate Mortgages Work
A fixed-rate mortgage is a home loan with an interest rate that remains the same for a specific period. This period typically lasts two to five years but can go up to ten years. During this time, your monthly payments remain the same, offering predictability for budgeting.
Once your fixed-rate period ends, you’ll usually be transferred to your lender’s Standard Variable Rate (SVR). The SVR is set by your lender and can be changed at any time, making it less predictable than a fixed rate.
Potential Change in Mortgage Payments
When you switch to your lender’s SVR, your payments may increase. The SVR is often higher than the fixed rate, reflecting the Bank of England’s base rate plus a certain percentage decided by the lender.
Keep in mind that the SVR can also go down, reducing your payments. However, it generally provides less certainty than a fixed rate. For example, if the Bank of England base rate goes up, your lender may decide to increase their SVR, increasing your payments.
Exploring Your Options
There are several options to consider when your fixed rate ends:
- Remortgaging: This means switching your mortgage to a new deal, either with your current lender or a different one. Remortgaging can help you secure a lower interest rate, saving money on your repayments.
- Product transfer: Some lenders may offer you a new deal at the end of your fixed term, which can be more attractive than their SVR.
- Stay on SVR: If the SVR is lower than the available fixed rates, you might choose to stick with it. However, this comes with the risk of rate increases.
Importance of Seeking Mortgage Advice
Professional mortgage advisors can guide you in making an informed decision about your mortgage. They’re knowledgeable about the complexities of the mortgage market and can offer tailored advice based on your specific circumstances. They can help you weigh your options and find a mortgage deal that suits your financial situation.
Whether you choose to remortgage, transfer to a new product, or stay on your lender’s SVR, a mortgage advisor can ensure you understand the potential costs and benefits of each option.
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When your fixed-rate mortgage expires, it’s essential to explore your options to avoid paying more than necessary. While moving to your lender’s SVR might result in higher payments, alternatives like remortgaging or a product transfer can potentially offer savings.
Navigating the end of a fixed-rate term can be challenging, but professional advice can make it easier. Seeking advice from a mortgage advisor can provide clarity and confidence, helping you make an informed decision that aligns with your financial goals.
Remember, this is a complex topic with many variables to consider, and professional advice can prove invaluable. So, as your fixed rate comes to an end, reach out to a mortgage advisor for tailored advice to suit your situation.