Mumsnet has not checked the qualifications of anyone posting here. Free legal advice is available from a Citizen's Advice Bureau, and the Law Society can supply a list of local solicitors.

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.

nipersvest Wed 30-Jan-13 14:22:42

once your current deal ends you just go automatically on to the svr (standard variable rate) offered by your mortgage company. you might want to check the % of interest rate against what you are on now to see how much your payments will change. you don't need to apply or be assessed for this to happen. you can get in touch with your lender and see what other deals they have to offer if you wanted.

KatherineKrupnik Wed 30-Jan-13 14:23:50

No - our mortgage ends. It was a 2 year mortgage, not a 2 year mortgage rate. We have to re-mortgage.

DoItToJulia Wed 30-Jan-13 14:24:00

Watching with interest!

upinthehills Wed 30-Jan-13 14:26:48

Unless you have paid off the mortgage in the 2 years - so the duration was 2 years, I would expect your lender to transfer you on to the svr. If you want to seamlessly move to a new mortgage product or lender you will need to sign up to a new package in advance of the product end date.

Charmingbaker Wed 30-Jan-13 14:27:49

Firstly you need to know what kind of mortgage you have - repayment, interest only or endowment, as what happens next will depend on that.

KatherineKrupnik Wed 30-Jan-13 14:29:03

Interest only mortgage. The duration of the mortgage was 2 years.

nipersvest Wed 30-Jan-13 14:30:28

ah, sorry i misread the op then!

but i would have thought if there was still debt remaining, then yes, you'd need a new mortgage or to clear the debt by some other means.

frasersmummy Wed 30-Jan-13 14:31:30

well if the mortgage has ended then the house belongs to you and the bank should give you your title deeds to the property which they will have been holding while it was mortgaged.

Charmingbaker Wed 30-Jan-13 14:34:11

You need to contact the lender ASAP and find out from them what will happen. It is likely they will transfer you onto their SVR, if so you need to find out what that rate is and how it will affect your current payments. You then have to decide wether to continue with your current lender or find another mortgage deal.

KatherineKrupnik Wed 30-Jan-13 14:35:53

I wish, frasermummy, think they will hold onto them until I can put £70k into their hands!

So will our new mortgage lenders transfer the amount directly to our old mortgage lenders??

Am bemused by it all!

KatherineKrupnik Wed 30-Jan-13 14:36:29

x post. Thanks charmingbaker

frasersmummy Wed 30-Jan-13 14:37:53

sorry didnt read your post properly .. i'm not usually guilty of that..

Its all really bewlidering isnt it.. really helpful not.. sorry

Viviennemary Wed 30-Jan-13 14:38:33

I'm not quite sure exactly what you mean. If your particular mortgage deal ends you carry on and pay the variable rate set by that building society or bank. . But if you're mortgage ends that means you've paid off what you owe. I'm a bit confused with your post.

CunfuddledAlways Wed 30-Jan-13 14:38:47

sorry i dont really understand? do you still owe money??

Viviennemary Wed 30-Jan-13 14:39:33

Sorry I understand now. Interest only. In that case I'm not sure. I apologise!

KatherineKrupnik Wed 30-Jan-13 14:43:51

I probably don't know exactly what I mean either, sorry for confusion.

I thought the mortgage ENDS, it was a 2 year mortgage, not a 25 year mortgage. We pay interest only. But does it only END when you pay the money off? I thought they lent you the money for a set time & at the end of it you had to pay it off... or remortgage, surely?

KatherineKrupnik Wed 30-Jan-13 14:44:23

sorry - I don't think the mortgage ends, it does definitely end.

yellowsnownoteatwillyou Wed 30-Jan-13 14:44:33

If you have an interest only mortgage and the term of the mortgage is now finished, you will either need a repayment vehicle to clear the amount, or you will need to remortgage with another company or the same and start a new mortgage term.

Alibabaandthe40nappies Wed 30-Jan-13 14:47:37

You will need to either pay off the balance, or get another mortgage.

Why did you only take it out over two years if you knew you wouldn't have paid it off?

KatherineKrupnik Wed 30-Jan-13 14:49:45

Because one of the mortgage holders retired in 2 years so they wouldn't give it for longer, but got better rates than doing it another way. We explored lots of options!

piprabbit Wed 30-Jan-13 14:52:21

Sounds like you need to call your mortgage provide to clarify what they think is going to happen.

I'm very surprised that anyone would lend you £70k for 2 years without wanting to have some sort of plan as to how you are going to pay off the capital as well as the interest. Were they expecting the mortgage to be pais off using some sort of lump sum on retirement?

fabulousathome Wed 30-Jan-13 14:53:34

So do you have the 70K to pay it off or do you need to get another mortgage?

You will need to have your property valued again I would assume.

Alibabaandthe40nappies Wed 30-Jan-13 14:55:37

Right - so have you paid it off?

Alibabaandthe40nappies Wed 30-Jan-13 14:56:46

OP - do you realise that if you cannot either pay it all back or get another mortgage that your current lender will simply repossess your house?

You sound incredibly naive.

nipersvest Wed 30-Jan-13 14:58:17

my fil had a similar arrangement, he was 7 years off retirement, so could only get a 7 year mortgage. but his was an endowment one as he had to have a way of clearing the debt otherwise they wouldn't lend the money.

Charmingbaker Wed 30-Jan-13 15:02:51

Just to reiterate what other posters have said you need to get expert advice ASAP.

KatherineKrupnik Wed 30-Jan-13 15:05:31

Why wouldn't we be able to get another mortgage?? Obviously not the retired person but plugging the other earner details into internet things we could borrow up to 100k?

We could clear the mortgage with other funds but would prefer to re-mortgage.

KatherineKrupnik Wed 30-Jan-13 15:07:50

will call mortgage provider during tomorrow's nap time!

fabulousathome Wed 30-Jan-13 15:08:05

Well OP you need to hurry up and sort it out, if you only have two months. These things take time to arrange.

I think we are all a little bit surprised that you haven't looked into arrangements for the future yet? I would have been exploring my options at least 6 months before the mortgage term finished.

FunnysInLaJardin Wed 30-Jan-13 15:12:06

I'm very surprised that your mortage provider allowed you to take a 2 year mortgage without any means to repay the capital. Do you have an endowment policy?

Alibabaandthe40nappies Wed 30-Jan-13 15:12:06

Well how are we to know your financial situation? Seems very odd that you haven't tried to pay as much off as possible.

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

If it ends in 2 months time you should either have the capital balance ready to pay your lender or have the same amount lined up ready from another (or the same) lender.

I would suggest you talk to your current mortgage provider fairly urgently. They may like to keep you as a customer (interest only products being highly lucrative) and offer you another deal or they may be able to reassess you for a capital/interest mortgage. You could also shop around other lenders and see if any can offer a better deal. IFAs or independent mortgage brokers can be useful for that.

FunnysInLaJardin Wed 30-Jan-13 15:13:13

so from what you say do you have the means to repay? I am rather confused tbh

KatherineKrupnik Wed 30-Jan-13 15:20:08

It ends in 5 months. Panic not.

sooperdooper Wed 30-Jan-13 15:24:45

I'm confused as to how the whole mortgage ends, not just the deal you're on. I always though a mortgage term was for the full period to pay off the amount borrowed, so how was the mortgage only for 2 years if that didn't pay off the amount owed?

Like, our mortage term was for 25 years, but the 5 year fixed rate we were on ended last year and we went on to the srv

Sooper - if you hav an IO only mortgage you don't pay off the amount you borrowed the capital - so you will have a lump sum to pay off. IMHO lot's of people have gone with IO and will possibly not have the funds to pay it off. So no doubt people will claim they have been mis sold these products like the endowments which is many cases really weren't!

Reapyments mean you pay off Interest each month and a bit of the capital too - if you get a mort calc you can see how much each month is Int and how much is the capital part - really a good way to incentivise anyone to make overpayments as you save loads of interest and shorten the term too.

NatashaBee Wed 30-Jan-13 15:33:26

I've never heard of anything like this before. Could you provide a link to the bank and mortgage product you're on, so people can read through the Ts and Cs?

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.

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

Guide to Interest Only Mortgages

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

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

How much capital do you have in the house?

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

You need to repay teh capital

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?

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 16:13:12

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

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.

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.

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.

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

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

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.

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

that sounds more like it smile

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).

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).

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

If one of you is retired please sort this out!

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

what do I need to sort out, noddyholder?

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 16:34:34

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.

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.

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.

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.

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.

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

Join the discussion

Join the discussion

Registering is free, easy, and means you can join in the discussion, get discounts, win prizes and lots more.

Register now