When we receive the mortgage offer for our clients, a key thing we talk to them about is what the lender can offer them in the future. The three main things being, product switches/transfers, mortgage porting and further advances.
Firstly I want to talk about product switches, we will always invite our clients in when their initial advantage period is about to end on their current mortgage so that we can discuss what options are available to them going forward. Once the initial period ends the client will usually go onto the lenders standard variable rate, the word “variable” being significant as it can change at any time. This is usually a much higher interest rate than what the client has previously been on meaning that their mortgage payments are going to rise.
The best options are usually to either remortgage to a different lender or switch product with your existing lender. An independent mortgage adviser is able to weigh up whether what your current lender is offering is better than what is out there with other lenders through remortgaging. However, there may also be cases where it is not possible to remortgage at that time such as if a client has recently gone self employed and cannot provide any accounts yet as proof of income. If a product switch is your only option consulting an adviser at this point is still essential so they can help you decide which of the products have been offered to you by your lender is best to go for.
A key thing we talk about when we recommend fixed rate mortgages is the downside of these, which are early repayment charges. These are charges you have to pay if you want to redeem your mortgage before the end of its term. The most common reason for doing this is if you want to move house. However many lenders will allow you to port your mortgage, meaning that you take your current mortgage and just move it with you to your new address. If you will have to pay early repayment charges, your adviser will need to weigh up whether it would be better to either pay the charges and get a new mortgage elsewhere or stick with your current lender and move the mortgage with you.
Often mortgage porting will also include further borrowing as many people staircase to a more expensive property. When you ask your lender for additional borrowing this is called a further advance. You are able to do this for other reasons as well, even if you are not moving. For example if you have enough equity in your property you may consider using a further advance for home improvements, car purchases, and other big expenses e.g weddings or holidays. However you should always consider other options available to you before doing this as it is often more costly to borrow extra on your mortgage as you will be paying interest over a longer term than a personal loan for example.
Sammy McCann BSc(Hons), Cert CII(MP)
22nd June 2019