Your fixed rate mortgage has ended, so what does that mean as a Shared Ownership leaseholder? If you’re thinking there’s little you can do – you might be surprised.
So, how does it all work?
If you took a two year fixed rate and it’s due to end in two months’ time, at which point you’ll automatically drop on to the lender’s Standard variable rate – it’s likely this will cost you more per month. About now, two months before it ends is the right time to start planning and you have three basic options.
Firstly, as a Shared Ownership Leaseholder you have the option to buy more shares. By owning more equity of your home, you could reduce your overall costs in the long run - it means paying lower monthly payments to your Housing Provider or none at all if you go all the way up to 100% ownership. It’s easy to find out if this is possible by speaking to an independent financial advisor who is familiar with shared ownership.
You need to decide whether you want to buy more shares - before moving forward with either of the next two options.
The next option is a re-mortgage, now this could either be for the same amount as your current mortgage or if you’ve decided to buy more shares (sometimes called staircasing) you’d borrow your current amount plus an extra amount for the additional shares in your home.
It’s worth mentioning that you may not need to input any cash to buy more shares, it can often be done using the existing equity in your home.
Seeking advice on re-mortgaging is the most effective option, it will give you the assurance of getting the mortgage most suitable for you. Assuming you choose a Mortgage Adviser that works with the whole of the mortgage market, then you’ve got someone else doing all the legwork to find the best lender. You receive advice and a recommendation on the very best new mortgage product to suit your needs.
The whole re-mortgaging process usually takes anything between 3 to 6 weeks from start to finish. Often these mortgage products come with no upfront costs and free legal fees or cashback – making it even more attractive. Furthermore, some brokers like Metro Finance, for example, will charge no broker fee for re-mortgages.
The final option you have is the lesser mentioned ‘Product Transfer’. It’s highly likely that your current lender will have new mortgage products available to you. If you use this option there’s usually no need for valuations and no need for financial affordability checks – just pick a new product and off you go.
The ‘Product Transfer’ can be done by you directly with the lender. However, if you choose a broker like Metro Finance to do this for you, we won’t charge a broker fee and we’ll also provide a full advice service to ensure you are still getting the best product – in other words we’ll tell you what else is out there, before you commit to picking a product from your existing lender.
We often get asked ‘What would you do if you came to the end of your fixed rate?’ Of course, as a Mortgage Broker I may be biased towards using a mortgage brokering service – but it is sensible to ask a professional broker to give you the full picture of all mortgage providers including product transfers from your own lender.
Using this common sense approach, it could work something like this:
- Telephone call to broker
- Broker searches all lenders to find most suitable product
- Broker reports back to you with a recommendation
- That recommendation could be to stick with current lender on their new product
- Broker submits digital forms to chosen lender to switch products
- Job done!
Whatever you decide, probably the worst thing to do is nothing at all. There really is no need to let your current fixed rate end, and then go on to pay the lender’s Standard Variable Rate.
Ready to buy more shares of your SO Resi home?
Call SO Resi Aftersales on 020 8607 0550 or contact us here
Guest blog written by Jon Lord, Managing Director at Metro Finance