Charges/penalties AFTER a fixed rate ends?

What_time_is_it

I have a fixed rate mortgage which is due to end in July 2024. I'm working on a plan to either pay off the remaining balance in full, or reduce the term once the fixed rate ends.
Will there be any charges or penalties for doing so?

Presumably we would switch by default to our lenders SVR and be able to do so without any charges right?
Or am I missing something?

london21

What_time_is_it said:

I have a fixed rate mortgage which is due to end in July 2024. I'm working on a plan to either pay off the remaining balance in full, or reduce the term once the fixed rate ends.
Will there be any charges or penalties for doing so?

Presumably we would switch by default to our lenders SVR and be able to do so without any charges right?
Or am I missing something?

Yeah, at the end you can pay off without a charge.

If paying all the mortgage, there might be a small admin fee like £30 or so.

What_time_is_it

Thanks @london21

Is there usually a charge for changing the term? e.g. If we can't pay off the full mortgage, but want to reduce the balance AND reduce the remaining term?

london21

What_time_is_it said:

Thanks @london21

Is there usually a charge for changing the term? e.g. If we can't pay off the full mortgage, but want to reduce the balance AND reduce the remaining term?

When the current mortgage ends you then choose another product and term. Depends on the product some mortgages have product fee and some don't. Usually when there is a product fee the interest rate is a bit lower but you compare the rates with and without product fee to choose the one that is best value. 

What_time_is_it

Thanks again.
And sorry for the naive questioning. Just reassessing things in the light of recent events.

Exodi

london21 said:

What_time_is_it said:

Thanks @london21

Is there usually a charge for changing the term? e.g. If we can't pay off the full mortgage, but want to reduce the balance AND reduce the remaining term?

When the current mortgage ends you then choose another product and term. Depends on the product some mortgages have product fee and some don't. Usually when there is a product fee the interest rate is a bit lower but you compare the rates with and without product fee to choose the one that is best value. 

Please note that this isn't automatic. You will autoamtically be put onto the SMR once your fix expires.

As london21 says, you're welcome to switch to a new mortgage (you can do this before your current fix expires within a certain time frame depending on lender - Nationwide is 3 months and you can apply 5 months beforehand). You could switch to a tracker mortgage, as that would be cheaper than the SMR, and you have complete flexibility to overpay. As part of the switch, you can also set what you want the remaining term to be - but in my opinion, better to keep it long and overpay than be committed to a higher payment, but this depends on your financial discipline.

Also regarding fees - while it depends on how much you intend to overpay, as it sounds like you will be left with a relatively small mortgage, it's unlikely a mortgage with a fee would be the best financial option - these are usually only attractive for bigger mortgages.

What_time_is_it

Thanks.
So if I go onto the SMR (SVR?) can I change the length of the term? Or would I have to choose a new product to be able to do this?

Exodi

What_time_is_it said:

Thanks.
So if I go onto the SMR (SVR?) can I change the length of the term? Or would I have to choose a new product to be able to do this?

You can't just 'change the length of the term' - you can only do this through a new mortgage/switch.

If you make overpayments however, you can usually decide how these overpayments are considered -

E.g. keep your monthly payment the same, but reduce the term or reduce your monthly payment, but keep the term the same.

Personally, I still think it would make most sense to renew to a tracker after your fix ends - as it'll be cheaper than your SMR. Or the have your fixed term expire, overpay, then renew on a new fix with the reduced balance with a shorter term.

EDIT: please note there is a minimum size on mortgages (I think £25k? for Nationwide). This may factor into your thinking.

What_time_is_it

So, let's say I've got £50k left over 15 years at the end of my fix.
If I overpay about £10k a year I could have it paid off in less than 4 years.
Would that be ok on a SMR/SVR mortgage? Would I be charged for overpaying? Or charged for completing early?

Exodi

What_time_is_it said:

So, let's say I've got £50k left over 15 years at the end of my fix.
If I overpay about £10k a year I could have it paid off in less than 4 years.
Would that be ok on a SMR/SVR mortgage? Would I be charged for overpaying? Or charged for completing early?

That would be OK on the SMR and it would be OK on a tracker (which doesn't penalise overpayments). I would still consider sitting on a tracker for >4 years than the SMR, as it will almost certainly be cheaper.

It would not be OK on a new fix as you are usually limited to 10% of the original balance per year without charge (e.g. £5k overpayment per year).

What_time_is_it

Thank again. That's what I thought, but just running through various scenarios in a bid to avoid paying 6% plus interest!
Really appreciate your patient replies.