At the end of your initial mortgage term (typically 2, 3, 5 or 10 years) your monthly mortgage payments may increase. This is because once you reach the end of your initial product period, your interest rate will move onto the lenders standard variable rate of interest (SVR). This will usually be higher than the interest rate you have been used to, therefore your monthly payment will increase. It is important to note that in this scenario, when your monthly payments increase you are only paying more in interest, you are not paying more off your mortgage debt so it is not a good situation to be in.
What are your options?
Prior to reaching the end of your initial product, your lender will contact you to let you know of other mortgage products they have that you can move on to, these are known as retention products. Importantly however, many lenders offer better rates to new customers rather than looking after existing ones so there may be better options for you in the open market, so speaking to your mortgage adviser before the end of your initial product is always important. Moving to a new lender at this point is known as remortgaging and lenders try to make the cost of this as little as possible or even free of charge.
Your Fenton Simpson mortgage adviser will check all of the retention products with your existing lender, compare these with the rest of the market and then advise on the best option for you. Once you know what the best option is we will be able to process this on your behalf, leaving you free to focus on the more important things in life.
To make sure that none of our clients are ever paying more than they need to be, we contact all of our clients before the product expires to ensure they do not end up on their existing lenders SVR.