Your end of mortgage term options

In this brief guide, we are going to discuss what end of mortgage term options you have for various mortgages.

End of mortgage term options: Fixed-rate mortgages

At the end of a fixed-rate mortgage term some of the options you have include:

Remortgaging to a cheaper mortgage rate with the same lender

Remortgaging to a cheaper mortgage rate with a different mortgage lender

Be moved over to the mortgage lenders standard variable rate mortgage

Remortgaging to a cheaper mortgage rate with the same lender

Fixed-rate mortgages could last from between 2 to 10 years in some cases. They offer security due to the fixed monthly mortgage repayments but they make it harder to take advantage of any falls in interest rates as your fixed term mortgage will likely have an early repayment charge attached to it.

Once your fixed-rate mortgage ends, the mortgage lender will naturally move you over to their standard variable rate mortgage which will likely be a more expensive than your fixed-rate mortgage.

By switching to a cheaper rate at the end of your fixed-rate mortgage you will keep your monthly mortgage repayments low and maybe even lower than before but you should be aware that you will now likely have an early repayment fee attached to your new mortgage if you switch it to another fixed-rate mortgage.

By switching to a cheaper mortgage rate with the same mortgage lender you may find that your current mortgage lender is more willing to offer you better and exclusive deals such as waiving any mortgage fees associated with the mortgage switch.

Remortgaging to a cheaper mortgage rate with a different mortgage lender

Remortgaging to a cheaper rate with another mortgage lender is also an option you have at the end of a fixed-term mortgage. One of the main benefits of remortgaging with a new mortgage lender is that you will be able to search the whole of the mortgage market to find the best mortgage deal for you.

You can also use a mortgage broker to help you do this.

Be moved over to the mortgage lenders standard variable rate mortgage

The final option at the end of the fixed-rate mortgage term is to accept being moved over to the mortgage lenders standard variable rate mortgage. This mortgage rate will likely be a much more expensive rate than the fixed-rate mortgage you were previously on.

End of mortgage term options: Buy to let mortgages

The end of mortgage term options at the end of a by to let mortgage will differ depending on your investment goals. 

You may choose to:

Remortgage and release equity touse as a mortgage deposit for other properties

You may choose to sell the property ad make a return on your investment

You may choose to keep the property and continue to benefit from the rental income

If a fixed-rate mortgage term has just ended and the mortgage still has a few years to run then you could switch the mortgage to a much cheaper mortgage rate with either the same mortgage lender or a different mortgage lender

End of mortgage term options: Interest-only mortgages

The end of mortgage term options for an interest-only mortgage are quite different from most mortgages due to the fact that an interest-only mortgage will need the initial capital borrowed paid at the end of the mortgage term as the monthly mortgage repayments only contain the interest element of the mortgage.

At the end of an interest-only mortgage, the capital borrowed will, therefore, need to be repaid using the capital repayment vehicle agreed between yourself and the mortgage lender at the beginning of the mortgage. 

You are not only restricted to this mode of payment and the mortgage lender will usually accept any capital repayment vehicle which you have.

“Some of the capital repayment options which may be acceptable include:

• Unit trusts
• Investment bonds
• Pensions
• Endowment policies
• Stocks and shares
• ISAs

Your options at the end of an interest-only mortgage?

There are a few options you may have when your interest-only mortgage comes to an end. We briefly go into some of those options below.

• Using the equity from a property to pay off your interest-only mortgage
• Sell the property an downsize
• Remortgage your interest-only mortgage with a different lender
• Extend your interest-only mortgage term
• Switch to an equity release product
• Use your savings or borrow from family
• Switch to a repayment mortgage

Using the equity from a property to pay off your interest-only mortgage

If you have more than one property then you could potentially remortgage to release equity from an unmortgaged property pr a property which has a lot of equity in it, maybe due to rising house prices. You could then use the funds received from this equity to pay the full balance or some of the balance for the interest-only mortgage as it comes to an end.

Sell the property and downsize

You may also be able to sell the property and downsize to a much smaller one. This will likely give you enough capital to repay the balance on the interest-only mortgage as it ends or enough balance to repay most of the interest-only mortgage as it ends.

You should be aware that when you attempt to get a new mortgage on the much cheaper property, the mortgage lender will put you through their mortgage affordability requirements and you will need to demonstrate that you will be able to keep up on your mortgage payments if you have your interest-only mortgage still requiring you to make monthly mortgage payments.

Remortgage your interest-only mortgage with a different lender

You may be able to remortgage your interest-only mortgage to a new mortgage lender when your interest-only mortgage ends or is about to end.

The new mortgage lender will take you through their mortgage affordability requirements to ensure you can still afford the monthly mortgage repayments.

The new mortgage lender will also want to see that your repayment vehicle is still on track to repay the balance which is outstanding.

After remortgaging if you get a cheaper rate then you may be able to save some money up and overpay your mortgage to reduce the balance outstanding.

Can you remortgage your interest-only mortgage if you have bad credit?

Getting a remortgage at the end of your interest-only mortgage with bad credit may be much harder but you will simply have to see what the mortgage eligibility requirements of the mortgage lender are. Some mortgage lenders will lend to borrowers with bad credit issues on a case by case basis.

If it was a CCJ which was satisfied and is a certain age then some mortgage lenders may be willing to lend. Other mortgage lenders may lend if the CCJ was a maximum amount.

When looking to get a mortgage with bad credit the requirements from different mortgage lenders will differ and a bad credit mortgage broker may be able to assist you.

Bad credit could include:

A CCJ

An IVA

A debt management plan

A default

A bankruptcy

A home reposession

Extend your interest-only mortgage term

You may also choose to instead get an extension on your interest-only mortgage term rather than pay off your interest-only mortgage at the end of the mortgage term.

An interest-only mortgage lender will agree to extend your interest-only mortgage term if they are confident that you will be able to continue making the monthly mortgage repayments.

The interest-only mortgage lender will also usually want to see the repayment vehicle being used and to ensure it is still on track. If it isn’t, then the mortgage lender will deal with this on a case by case basis.

If you are approaching 75 then you may find it much harder to find a mortgage lender who is willing to extend an interest-only mortgage when it is nearing its end.

Switch to an equity release product

You may be able to switch your interest-only mortgage to an equity release product if you are eligible for an equity release product. This could be possible with a third-party equity release lender but may be easier to do with the same mortgage lender who has your interest-only mortgage which is about to come to an end.

Equity release products could be home reversion plans or lifetime mortgages.

With an equity release product, you may still have to make a monthly interest mortgage payment to the mortgage lender depending on the type of equity release product you choose.

The balance outstanding on an equity release product is paid off when you die or move into a care home by the mortgage lender selling your home to recoup the balance.

The mortgage lender will then pay any remaining money to your estate.

Use your savings or borrow from family

Another option you may have when your interest-only mortgage is about coming to an end will be to borrow money from your family to pay off the capital balance or use any savings you may have to pay off the balance outstanding.

Switch to a repayment mortgage

Repayment mortgages will reduce the balance outstanding as the monthly mortgage repayments contain both interest and capital repayments.

This can be a good option when your interest-only mortgage ends or is about to end as it will ensure you begin to repay the balance which was outstanding.

You will have to find a mortgage lender who is willing to lend to you and meet their mortgage affordability requirements.

“ source- Huuti

End of mortgage term options: Capital repayment mortgages

The end of mortgage term options for a capital repayment mortgage is rather straightforward. At the end of a capital repayment mortgage, you would have repaid the mortgage in full. This means you can now extract equity from the property by remortgaging or sell the property and use the proceeds to do whatever you want. At the end of the capital repayment mortgage, you will receive your unrestricted title deeds from the mortgage lender.

End of mortgage term options: Equity release mortgages

The end of mortgage term options for an equity release mortgage is relatively straightforward, ordinarily, the mortgage lender will sell the property once the borrower dies or moves into long term care in order to recover the balance plus interest on the equity release mortgage. The equity release provider will then leave whatever is left after they have recovered the balance due to them to the estate of the borrower.

In some cases, the borrower may have ringfenced some equity for their family. This value of this equity will be paid to the borrowers family upon the borrower moving into long term care or dying.

If the family member wants to retain the property then they can also choose to pay the equity release lender what is owed on the property and the charge on the property will then be lifted by the lender.

Managing your mortgage

As a mortgage holder managing your mortgage is one of the key things you will need to do to ensure you have balanced financial wellbeing. Managing Your Mortgage doesn’t mean getting an excel sheet and trying to work out how much you owe your mortgage lender, what the mortgage balance is and how long it will take for you to repay the mortgage and be mortgage-free.

Looking for the mortgage login page and having a look around isn’t the best way to manage your mortgage.

Managing your mortgage should be a passive thing. There is so much technology available now that you should be able to easily manage your mortgage with very little work and without having to search for the mortgage login page.

So what does managing your mortgage mean?

Managing your mortgage means knowing all the key facts about your mortgage in an easy to view straightforward medium. 

This means knowing when your next monthly mortgage repayment comes out, how much you pay each month, what your  mortgage balance is, when your mortgage is due to be paid off, how much you can save by overpaying your mortgage and how much you will need to overpay your  mortgage by, how much interest your mortgage costs you each month and each year, how much equity you have in your property, if you are eligible for a remortgage, what mortgage lenders may be willing to lend to you and how much you could save by remortgaging.

This is what mortgage management means and searching for the  mortgage login page and the contents within the mortgage dashboard will not give you access to this information.

Using a mortgage broker to work out your end of mortgage term options.

You may want to consider using an independent mortgage broker to get a mortgage.

Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases. This could be over 11,000 mortgage products. This may have some advantages than going directly to a mortgage lender.

A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you.

After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. 

This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your remortgage is indeed a possibility before you make a full mortgage application. 

Once you have found a home you want to buy or are satisfied with the mortgage offer for your remortgage then the mortgage broker will then look to get you a mortgage offer.

This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month if there are any limits such as early repayment fees, or annual overpayment limits.

If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer. Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it, they will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.

FAQs: End of mortgage term options

In this brief guide, we discussed what end of mortgage term options you have for various types of mortgages. If you have any questions or comments please let us know.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.