mortgage after the first 5 years fixed are up. what happens next?

[unwashed potato!]

we are only 3 years in, but trying to plan ahead what we can expect.

we're on a 5 years fixed rate, but have been paying off as much as we can early so have much less when it comes to the 5 years point.

what happens next?

do we just call/shop around to find a better rate, and move to them, and if so, how easy/costly is this?

We're on 2.34% interest.

Am i right in thinking now we've paid as much early repayment as we can, the repayment will come right down along with a better interest rate?

on top of the above, will having kids effect the price in any meaningful way? For instance, all going to plan, we're looking to have the kid pop out 5 months before our renewal date, but i hear it's worth shopping around 6 months before the renewal comes, so if kids effects the price, would we even need to tell them about one on the way? especially given that it may take a while for her to get pregnant so it could be that she's due same time/later than renewal date.

As you can see I like to plan ahead with regards to mortgages

 

[Martynt74]

You've be moved onto the SVR when the fixed term ends.

However you're usually free to renew the plan a few months prior to the rate ending or switch elsewhere.

I've found there's usually 2 ways things can go.

1 - Stick with your current provider, in this case it's usually as simple as a switch to the new rate/term. Very few checks in terms of affordability etc

2 - Switch to another provider. In this instance it would be the same affordability checks as you'll have likely gone through 3 years ago.


As for how expensive/any potential savings. It'll depend whether you've paid off enough to move into a lower level of LTV (Eg if you were 90% but have gone down to 80% you may not see much difference, if you've gone sub 70%/60% then that generally unlocks a lower rates).
You'd also have the mortgage fee to pay if you go with a rate which includes that.

Depending on how interest rates move in the next few years you may even end up on a worse rate if the base rate creeps up as expected so don't be alarmed if you see 3-4% options.


Really though there's not much point thinking about it yet as everything could change in 24 months. House prices could tank/soar which would impact your LTV, interest rates could rise which would hit any rates you're offered etc. Just stick it out of your mind and revisit in with 3-6 months to go.

 

[ci_newman]

The biggest risk to your mortgage offer is whether your wife plans to remain in work or if she'll quit to be a SAHM. That could effect your affordability, and the baby will have an impact on your affordability too.

 

[unwashed potato!]

thanks both

The biggest risk to your mortgage offer is whether your wife plans to remain in work or if she'll quit to be a SAHM. That could effect your affordability, and the baby will have an impact on your affordability too.

Unless things change, she wont be SAHM as my job allows me to take of a child pretty much almost full time.

As for how expensive/any potential savings. It'll depend whether you've paid off enough to move into a lower level of LTV (Eg if you were 90% but have gone down to 80% you may not see much difference, if you've gone sub 70%/60% then that generally unlocks a lower rates).
You'd also have the mortgage fee to pay if you go with a rate which includes that.

We bought the house for £425k, and currently have £286k left to pay. with 2 years left and early repayments, we will hopefully be left with £240k or less, so less than 60% of the bought for value. Would i be right in thinking they would re-evaluate the house value, so in fact our LTV would be even better if the house price has gone up?

 

[Martynt74]

Yeah they would re-evaluate and given the wise prices have been recently i imagine you'd be worth >500k based on 5 years increases at £425k purchase price (Complete rough estimate). Sounds like you'd be in the lowest category. I don't think there's any extra benefits for being below 60% though.

 

[unwashed potato!]

Yeah they would re-evaluate and given the wise prices have been recently i imagine you'd be worth >500k based on 5 years increases at £425k purchase price (Complete rough estimate). Sounds like you'd be in the lowest category. I don't think there's any extra benefits for being below 60% though.

ok that's reassuring. with the work I've broken my back to do at this house I sure hope it's worth minimum £500k.

 

[413x]

ok that's reassuring. with the work I've broken my back to do at this house I sure hope it's worth minimum £500k.

For an idea stick in into zoopla historic house price check.

It'll give an idea of change.

For mine it says bought Feb 2020 for 262
Now 309.

What I'm wondering is with interest rates rising is it worth paying the early exit fee now to lock in a low long term rate?

 

[ShadowMan]

Our 2 year ends in Feb so going through this now. Deal has been locked at 0.95%. We were in 95% LTV Feb 2020 and how is the <75% bracket as house has risen by a considerable chunk.

Mortgage offer is valid for 6 months so our is done and with solicitors with a completion date set 1 day after expiry of old deal. Start looking at rates and engage a broker 6 months before your term ends.

 

[Semple]

For an idea stick in into zoopla historic house price check.

It'll give an idea of change.

For mine it says bought Feb 2020 for 262
Now 309.

What I'm wondering is with interest rates rising is it worth paying the early exit fee now to lock in a low long term rate?

That's a very much finger in the air valuation.

Our house was a set of new houses built in 2010, only a dozen, so not a massive estate. They were all built identically, so same layout and same area size. Decorations for kitchen and bathroom alternated between the houses, but style/appliances were all identical. For all intents and purposes the sale price for them all were identical as well.

I accept some of the neighbours have had a new kitchen/bathroom which will have added value, but most haven't, yet when you look at Zoopla's estimated prices, they can skew nearly 25% one way or the other.

 

[unwashed potato!]

Our 2 year ends in Feb so going through this now. Deal has been locked at 0.95%. We were in 95% LTV Feb 2020 and how is the <75% bracket as house has risen by a considerable chunk.

Mortgage offer is valid for 6 months so our is done and with solicitors with a completion date set 1 day after expiry of old deal. Start looking at rates and engage a broker 6 months before your term ends.

That's good to hear.

what costs have been involved to go from your old one to the new one?

 

[Deleted User 298457]

Just go through Habito and be done with it.

<75% LTV you will get preferred rates subject to no other nonsense happening.

Fix for as long as possible, rates are uber low.

 

[ShadowMan]

That's good to hear.

what costs have been involved to go from your old one to the new one?

I think about £300 for solicitors and £1k mortgage fee (overall cheaper than a fee free product and can be added to mortgage). We are getting £500 is cashback too from Nationwide so will cover the fees in the end.

I used L and C as a broker as they don’t charge any fees. Used their preferred solicitor as it’s online and only a remortgage. Easier than shopping around. All paperwork bar the deed has been done online and via scanning. The deed I had to post.

 

[Martynt74]

I think about £300 for solicitors and £1k mortgage fee (overall cheaper than a fee free product and can be added to mortgage). We are getting £500 is cashback too from Nationwide so will cover the fees in the end.

I used L and C as a broker as they don’t charge any fees. Used their preferred solicitor as it’s online and only a remortgage. Easier than shopping around. All paperwork bar the deed has been done online and via scanning. The deed I had to post.

Out of interest what do solicitors do during a remortgage?
I’ve just always done it myself and it’s always been super easy.

 

[fezster]

Unless you're staying with the same lender, you will always require a solicitor for a remortgage. They will undertake all of the usual checks and transfer funds from the new lender to the old and update deeds at Land Registry etc.

 

[Ahleckz]

Just go through Habito and be done with it.

<75% LTV you will get preferred rates subject to no other nonsense happening.

Fix for as long as possible, rates are uber low.

This idea only works if you don’t plan to sell. The difference in monthlies between 2 and 5 years is £5 a month. Which makes me think I should pick the £5. However if I want to sell early I have to pay 3% of the total value as a penalty. Trying to weigh up if it’s better to go for 2 year and then reevaluate then or just go for 5 and hope I won’t need to sell.

I do think I’ll be wanting to sell in 3-5 years.

 

[Trifid]

This idea only works if you don’t plan to sell. The difference in monthlies between 2 and 5 years is £5 a month. Which makes me think I should pick the £5. However if I want to sell early I have to pay 3% of the total value as a penalty. Trying to weigh up if it’s better to go for 2 year and then reevaluate then or just go for 5 and hope I won’t need to sell.

I do think I’ll be wanting to sell in 3-5 years.

Don't they just do an additional mortgage for the difference if you move house?

 

[Ahleckz]

Don't they just do an additional mortgage for the difference if you move house?

Sorry, I missed a key detail out. This is for a flat I rent out so would be unlikely to be able to port it.

 

[Craig_d1]

This idea only works if you don’t plan to sell. The difference in monthlies between 2 and 5 years is £5 a month. Which makes me think I should pick the £5. However if I want to sell early I have to pay 3% of the total value as a penalty. Trying to weigh up if it’s better to go for 2 year and then reevaluate then or just go for 5 and hope I won’t need to sell.

I do think I’ll be wanting to sell in 3-5 years.

We're in the process of moving house at the mo and we're 4 yrs in on a 5yrs fixed rate on half our mortgage, the other half being a lifetime tracker at base +0.69%. Again, the penalty for paying it off early is 3% of the fixed rate part of the mortgage. Seeing as our rate is 1.79% with 11 months to go, it's cheaper to keep it. We're porting the mortgage to the new property. The main thing to consider is the value of each property. We're downsizing, and our LTV is 37/63. when moving we can keep the same loan to value without having the mortgage reevaluated. for us that means we have to pay some of the mortgage off to maintain the same loan to value, and the excess money we have from the sale stick into a saving account till the fixed rate comes to an end and then use that to pay down the mortgage

 

[Psycho Sonny]

ok that's reassuring. with the work I've broken my back to do at this house I sure hope it's worth minimum £500k.

Doesn't matter if it's worth £450k, £500k or £5 million tbh.

Once you hit 60% LTV you get the best rates and even if price stayed the same your are at 40% LTV therefore the value of the home doesn't benefit you in any way either than resale value. It won't put you into a better band for interest.

If you are 3 years in you will need to pay an ERC to leave currently.

Therefore come back in 18 months time. Whilst it's good intentions there is literally nothing you can do now.

I would suggest that you extend the term when it comes to renewal to maximum offered. Stop overpaying your mortgage and then put that money into a S&S ISA and invest into lifestrategy 100 on vanguard instead. You will easily get more than 2% gain per year for the foreseeable.

 

[b0rn2sk8]

When we re-mortgaged last we just used the banks solicitors which had zero cost and was seamless.

I’m surprised people regularly engage their own for thing kind of work.