How do mortgages work?

[Cookie1989]

Hi all,

I am currently saving for a mortgage with my husband. We both work full time and I was having a look online about fixed term mortgages. So I realised that there are a couple of options.. so if for example we chose a fixed term mortgage for 3 years, in 3 years time do we actually need to reapply for another mortgage from scratch, along with two wages and a new deposit..?

Im wondering because if we have children he will be the only one working for a period of time and if we come up for a mortgage renewal we will only have his wage. It genuinely confuses me as I thought once you were accepted and settled into your new property that was it.

Can anyone give some advice pls
Thanks

your mortgage will keep going regardless, it will just go onto the standard variable rate after the fixed term end. This may be more than you're currently paying so you probably want to secure another fixed term.

I have heard of situations where people get stuck on standard rate as they don't pass affordability for a new fix. I think these are more historic e.g. they took out a 105% mortgage back in the day when they didn't check affordability.

You won't need more deposit money though

Ahh thanks! That’s great 😀

Sorry this isn't quite right.

In 3 years time you will be free to either carry on the SVR, take out a new deal with the existing provider or find a new provider.

If you choose a new provider then you may need to demonstrate affordability etc. Which means you may need to show payslips.

Yes, you won’t be stuck on the SVR. Your provider will offer you a new deal with no checks, or you may reapply elsewhere with all the affordability checks again but no deposit.

The svr in 3 years could be less than your current interest rate- this happened to me and I paid pittance for a mortgage for several years! But you should prepare to remortgage and have to pay a few £000 to do so. That's one advantage of a longer term fixed rate eg 5 years. Longer until you have to worry about that again but you'll pay more for a 5yr fixed rate and could lose out long term (unlikely though as interest rates physically can't drop substantially). But no need to find a new deposit!

If you do plan to have children it may be worth you taking out the longest fixed rate you can. The interest rates may drop slightly but in the long term it may be better for you to know exactly what your mortgage payments will be for x length of time.

Ps I remortgaged while I was on mat leave and earning just smp despite the fact that the previous time we remortgaged I had a High ish salary. Being on mat leave won't affect your mortgageability.

Once you pay your deposit and take out a mortgage that’s you settled for the term you’ve taken out. Maybe you’ve taken 5 year fixed term for example.
That just means over the 25 or 30 years agreement of your mortgage with a bank you are agreeing to those terms for 5 years of it.
After 5 years your bank will likely put you on their most expensive interest rate as you are out of “fixed term”.
You are then free to move to another lender for a better rate or renegotiate with your current bank.
You don’t need another deposit.
There are some costs involved with moving banks (remortgaging) but can be negligible depending if you are getting a better rate for another fixed term with new bank.