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what happens when a mortgage ends?

(63 Posts)
KatherineKrupnik Wed 30-Jan-13 14:20:15

Our mortgage was a 2 year mortgage that finishes in a couple of months. What happens?! Do we arrange a new mortgage to carry on seamlessly or are we expected to pay off what we owe in a lump sum...? (surely not) Presumably we will have to be assessed all over again, can't remember how long the process took last time, but how long should we allow for that so that we do have something in place?

Thanks in advance.

FunnysInLaJardin Wed 30-Jan-13 22:52:27

right then, that sorts it out grin I would go for a tracker. We are on a 2.29% tracker and have saved about £35k since we swapped 3 years ago. Its unlikely to go up in the forseeable as I understand. Incidentally our loan is about £450k so more than the OP

Alibabaandthe40nappies Wed 30-Jan-13 17:07:55

Right now I understand where you are.

What is your LTV? You should look around to see what deals there are, you might be able to do much better than the SVR.

Sunseed Wed 30-Jan-13 17:06:14

You should have received a copy of the Mortgage Offer Letter when you took out the current mortgage. Check the smallprint in that first to confirm exactly what the arrangements are. Most mortgages will switch to SVR at the end of the initial period but not all do - some may change to a different rate - it depends on the lender. It should also illustrate what the new monthly payments will be at that rate. Use this as your starting point to compare other deals that may be available to you, both with the same lender and with others. Don't forget to include any admin charges that may apply if you leave your current lender.

Whichever lender you use, you should get your ducks in a row now in terms of income evidence and outgoings because they WILL want to check affordability. All lenders are much stricter now on this than they were 2 or more years ago. They are also much stricter on their lending policies with regards to Repayment or Interest Only (i.e. some don't offer IO at all, some will be only on a low (under 60%) Loan to Value (LTV).

You should allow maybe 2 months for your application to be assessed. Many are much faster but if queries are raised they can take time to sort out. Some lenders are starting to trim their rates at the moment so now is a fair time to start looking about to see what's available. Again, depending on the lender, Mortgage Offers are valid for about 3-6 months from date of issue so you can hold on to an offer without actually completing on it straight away.

At £70k borrowing then to make the sums stack up you could do with finding a deal that has no (or very low) booking/admin fees and free legals/valuation.

My best advice is for you to consult an Independent Mortgage Adviser - you'll probably have to pay them a fee but their professional advice could save you an expensive mistake in the long run, plus they will do all the running about for you in sourcing the best deals which again will save you time and energy.

nipersvest Wed 30-Jan-13 16:47:26

ok, so we've got it straight now that it is as was first thought, your deal is ending. phew!

when ours ended, we just went onto the svr, and have stayed there for now. we could change to a new deal, but although the interest rate is slightly lower, once the fee's were taken into consideration, it didn't make that much difference. if you are staying with the same provider, you don't need to give them any additional info, that was what we were told by ours anyway. we tend to stick with the same one as our situation is complicated due to self employment and it's a pita to start from scratch.

KatherineKrupnik Wed 30-Jan-13 16:35:28

LOVE the name OnTheBottom!

yes, am going to look into the different rates. We might go for another fixed interest rate as we are risk averse.

KatherineKrupnik Wed 30-Jan-13 16:34:34

Wish MN had an edit button.

One of us is retired, but there are 3 of us on the mortgage, & only the non-retired 2 have ever been responsible for it financially. Don't think that matters, does it? The retired one was essentially on it for affordability as at the time we (dp & I) didn't have an income to get a mortgage, but had deposit & could do monthly repayments.

I was scrolling madly to the bottom of this to say that your Interest Only period was coming to an end, NOT your mortgage, but I see you got that sorted out!

Do however check and see if the Standard Variable Rate is the only other option (they may have other choices that they don't automatically offer).

An ECB tracker rate is usually good (but hard to get hold of nowadays) - the lender charges you interest based on the European Central Bank rate plus 0.5%/0.75%. Whenever that rate changes, so does yours.

Or they might have a fixed rate offer for a couple more years - this is usually higher than the variable rate, but would give you peace of mind re affordability.

All these things used to be very easily available 5-7 years ago, but might not be available now though.

<remembers fondly being offered 3 different fixed interest rates at one time...then snaps out of the dream>

KatherineKrupnik Wed 30-Jan-13 16:30:19

what do I need to sort out, noddyholder?

noddyholder Wed 30-Jan-13 16:28:34

If one of you is retired please sort this out!

KatherineKrupnik Wed 30-Jan-13 16:28:24

I think that we had initially looked at getting a guarantor mortgage, & that would have only lasted 2 years because the guarantor was 2 years off retirement. That must have been what stuck in my head. Instead we got a mortgage with the guarantor on it (& just learnt from my mortgage provider that we will have to go through an affordability assessment process etc in order to have him taken off, not sure if we will bother or not).

NatashaBee Wed 30-Jan-13 16:27:22

Presumably, though, you'll want to investigate moving to a repayment mortgage when your income increases, unless you have an investment or plan to repay the actual capital (ie you're putting money into savings separate to your current IO mortgage).

NatashaBee Wed 30-Jan-13 16:26:04

that sounds more like it smile

KatherineKrupnik Wed 30-Jan-13 16:25:36

also, as to the IO thing - we went onto IO because we knew we would have a limited income (one earner household) & wanted to be sure we could budget for our monthly payments. We knew that after the initial 2 years our income would have increased & we would switch to repayment.

KatherineKrupnik Wed 30-Jan-13 16:22:48

Update - okay, no wonder you were all confused as I was clearly totally barking up the wrong tree.

Just called our mortgage provider & our mortgage doesn't end till 2022 - our rate ends & we go onto SVR, just like normal. No idea what I was thinking of, I'm going to blame pregnancy brain when we signed up for the mortgage & sleepless nights since blush

noddyholder Wed 30-Jan-13 16:22:17

Most banks now need massive LTV for interest only so maybe look at repayment

I can't imagine why anyone would want another IO mortgage if they had the funds elsewhere to clear the whole thing. They cannot possibly be gaining more interest than you'd be paying on the mortgage. It's just throwing money away.

shrimponastick Wed 30-Jan-13 16:19:32

So, you don't have the capital to pay the lender?

You need to remortgage then. As others have said it can take some time, so you need to crack on.
We have an IO offset mortgage over 10 years.

Lonecatwithkitten Wed 30-Jan-13 16:13:42

You are asked will one mortgage company pay direct to another. No not usually there will be a solicitor involved who either you or the bank will choose so that the charge on the property is registered.
You may need a new valuation for a new mortgage company.
You do need to get your skates on, remortgaging with the same company on the same property still took me 4 months last year.

noddyholder Wed 30-Jan-13 16:13:12

AT the end of IO the capital is repayable. I don't think this is for real.

Viviennemary Wed 30-Jan-13 16:09:19

I must say I haven't heard of this type of mortgage either. I know about interest only and fixed term. But at the end of the mortgage period which is in a couple of months you will owe £70,000. I am surprised too that the company allowed you to take out such a short term deal. Be careful you aren't put on to some sort of emergency high interest rate the day after your mortgage finishes.

noddyholder Wed 30-Jan-13 15:52:48

You need to act quickly 5 months is nothing in this scenario. What repayment plan do you have for the capital? I find it hard to believe a bank loaned you money for 2 years only IO without?

noddyholder Wed 30-Jan-13 15:51:23

You need to repay teh capital

MamaGeekChic Wed 30-Jan-13 15:49:12

How much capital do you have in the house?

CogitoErgoSometimes Wed 30-Jan-13 15:35:26

Guide to Interest Only Mortgages

They can be useful products short-term for various reasons.

CogitoErgoSometimes Wed 30-Jan-13 15:33:32

Interest only mortgages, by definition, mean you never pay off the capital. So it's like having a credit card at maximum for several years and just paying the minimum each month... it never goes away. When the mortgage ends the lender wants their capital back either from savings or from selling the property or borrowings from elsewhere.

Repayment mortgages... which is what you have sooperdooper.... involve capital and interest repayment at the same time. So eventually you owe nothing.

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