When should you start preparing to remortgage and will your lender notify of your current mortgage deal ending? This is the question Darren Polson is tackling in this week’s Q&A
The QuestionI’ve had a letter from my buy-to-let lender that my five-year fixed rate is ending in two weeks. I am a bit surprised by this as I had no notification before this time. Now I don’t have enough time to search around for a new deal and will need to move to the standard variable rate which is going to cost me £600 a month more.
Is this regular practice to provide only two weeks’ notice of a renewal? I phoned my lender, and they told me it was sufficient, and it was my responsibility to know when my product was coming to an end. What is your understanding and what course of action should I take?
What you have described is unusual as lenders tend to contact clients anywhere from seven months to one month before the end of your rate.
Although there is no set timeframe across the market, lenders will vary as to when you are able to secure a new rate. It usually tends to be six, four or three months prior to your rate ending.
By securing a new rate, you have peace of mind that should rates change, you won’t be impacted as your new rate is locked in.
You have two main options when you are nearing the end of your current deal:
A mortgage broker can search the market based on your outstanding mortgage balance and property value to see what rates are available to you.
This would effectively be a new mortgage application, which can incur legal costs and other set-up fees (your broker can ensure free legals and free valuation with certain lenders). Some lenders also offer cashback deals for remortgage cases.
There will be a credit-scored application and a full income / expenditure assessment.
This is classed as a rate switch or product transfer. The benefits of this are that there is almost never a credit score or need to provide proof of income as the lender has already assumed the risk with your current mortgage.
There is also no need to carry out a valuation as the lender will have their own internal valuation of the property which can mean your loan-to-value is positively impacted by the lender’s valuation rather than market value.
This could result in a better rate at this loan-to-value bracket.
Based on what you outlined, time is of the essence in your situation. I would advise you to speak to a broker, who can provide an assessment of your options and give you the best rates on the market for your circumstances.
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Darren Polson is head of mortgage operations at Aberdein Considine. He has been a regular columnist for what MORTGAGE for over three years and is here to answer YOUR questions.
If you have a question for Darren please email kate.saines@emap.com or leave a message in the comments below.
