Are you stuck in your home if you are tied into a fixed mortgage, or is it still possible to move?
Over recent years, uncertainty in the economy, housing market, and generally in life has left many of us yearning for something different. For many, this has resulted in a change of some sort, whether a job, career or home. This search for certainty and something concrete may have resulted in you tying into a mortgage deal for a long time.
Over recent years, uncertainty in the economy, housing market, and generally in life has left many of us yearning for something different. For many, this has resulted in a change of some sort, whether a job, career or home. This search for certainty and something concrete may have resulted in you tying into a mortgage deal for a long time, just so that you knew exactly where you are, regardless of what happened in the economy post-covid. This way, you won't be impacted negatively by the Bank of England base rate increases, inflation or other economic factors that can cause a mortgage lender to amend their interest rates.
It was a fair prediction that interest rates would've had to increase at some point; they had been at an all-time low for so long that there was nowhere else to go.
Alterations in interest rates will affect the monthly cost of your mortgage, so variations in this payment could significantly impact your life and the available cash you have each month. To avoid this uncertainty, many of us tie into a fixed rate for a set period with our mortgage lenders.
These fixed rates are most often for 2 years which isn't usually much of a problem as, realistically, we can plan ahead for this time. We would usually know if we were planning a house move in the next two years, big life decisions are not generally out of the blue, and in fact, many of us consider moving for 2 or 3 years before taking the first step. Perhaps even if we are super organised, we could plan our move around the fixed rate term ends.
But, with the uncertainty that has been felt in the economy in general, post-covid, and inflation and interest rate rises on the up, there has been an increase in mortgage lenders offering 5 and even 10-year fixed-rate mortgages. Having the peace of mind that your monthly payment is not about to fluctuate can be very comforting. But what if your circumstances change? What if you suddenly decide to relocate, or you need a larger or, indeed, smaller property? Are you stuck there because of your mortgage?
Or what if the rates take a nose dive in a year or so when the economy has recovered, and you realise that you are dramatically over-paying now and are stuck with this high monthly rate when you could have it much cheaper elsewhere?
The answer is no; you're not stuck not at all. There are options available if you need to move within a mortgage fixed term.
Port: contact your lender to see if there is an option to port your current mortgage deal from your existing property to a new property. The mortgage terms won't change when you move, but the loan will be secured against the new property.
Redeem: Redeeming the mortgage means paying off the loan. Of course, this means that you will end the mortgage deal early and will most likely come with an early redemption penalty, but this option should be considered and researched thoroughly. It may be the case that a new mortgage deal could, in fact, reduce your monthly payments, ultimately making paying the early redemption penalty worthwhile.
Moving house is never a decision that comes to people lightly, but it is not something that you should feel trapped by. If you have to relocate for work commitments or a child's schooling, or perhaps you simply want a change of property and have seen the home of your dreams, there is no need to regret fixing your mortgage deal a few months ago and having to let that perfect house pass you by.
If you feel that fixing your mortgage now for a longer term would be beneficial, then go ahead. You must do what you think is right for you at the time, and if things change and it is no longer suitable for you, there are ways to handle it.
If you are curious about your mortgage and want to determine whether paying the early redemption fees is a good idea, you need to speak to your mortgage lender. However, if you want to investigate further and talk to a financial advisor to help you, you need to speak to a whole market independent advisor.
For more information, get in touch with our team of property experts.