Standard variable rate - specific question

fran_84

Hi all

Can you tell me - with regards to Standard Variable Rate (SVR) - once your fixed rate ends - does SVR charge interest on your current mortgage balance or the mortgage balance as it was when you took out the mortgage? Eg my current mortgage balance is £138k, when I took out the mortgage it was 153k.  Which amount would my SVR charge interest against when it kicks in? 

Also do you need to show documents to provide you’re still working when SVR kicks in? Or is it just automatic given you aren’t requesting a new discounted deal. 

Thanks in advance ☺️

la531983

Interest is calculated daily, on the balance per day. Whatever the balance was 2/5/10 years ago is irrelevant when working out daily interest.

They wont ask for anything, its the default rate.

eddddy

fran_84 said:

Eg my current mortgage balance is £138k, when I took out the mortgage it was 153k.  Which amount would my SVR charge interest against when it kicks in? 

In that case, you would pay interest on £138k.

But it sounds like you have a repayment mortgage, which means you would pay the interest on the £138k each month, plus an extra chunk of money to go towards paying back the outstanding £138k.

(And as you paid off more of the £138k, you'd be paying less interest. But your overall monthly mortgage payments would probably stay the same - unless the SVR changes)

RelievedSheff

Interest is charged based on the balance on the day that your payment is due. So as you are on repayment mortgage it will be due on a decreasing balance each month.

There are no additional checks when your mortgage defaults to the SVR it will just automatically switch over at the end of your fixed term.

SVR is however going to be far more expensive then finding a new mortgage product.

Your current lender may offer you a product switch, again there are no checks for this assuming that you don't want any additional borrowing or make any changes to the term. This would be a cheaper option than going onto the SVR.

doodling

Hi,

For most repayment mortgages, interest is charged daily and added to the balance monthly, normally on the same day of the month that your payment is due.

That means that you never end up paying interest on interest unless you are late with a payment.

Moving onto the SVR is not a change to your mortgage so there is no declaration required from you and no credit checks are done.

Moving onto a new fixed rate with the same lender is also usually possible without a credit check.

You will only need to go through a full mortgage application again if you move to a different lender.

saajan_12

fran_84 said:

Hi all

Can you tell me - with regards to Standard Variable Rate (SVR) - once your fixed rate ends - does SVR charge interest on your current mortgage balance or the mortgage balance as it was when you took out the mortgage? Eg my current mortgage balance is £138k, when I took out the mortgage it was 153k.  Which amount would my SVR charge interest against when it kicks in? 

Also do you need to show documents to provide you’re still working when SVR kicks in? Or is it just automatic given you aren’t requesting a new discounted deal. 

Thanks in advance ☺️

Interest is always based on the balance at the time. Even during the fixed term, you would have paid interest on the balance, but would have started paying off more of the capital each month, thus keeping the monthly payments constant. 
Similarly now on the SVR, its on the reducing balance, but then you pay off enough of the capital so that by the end of the 25/30/whatever year term, you've paid off the lot. In between, you can always renegotiate and get a new deal which might be cheaper. 

CSI_Yorkshire

saajan_12 said:

fran_84 said:

Hi all

Can you tell me - with regards to Standard Variable Rate (SVR) - once your fixed rate ends - does SVR charge interest on your current mortgage balance or the mortgage balance as it was when you took out the mortgage? Eg my current mortgage balance is £138k, when I took out the mortgage it was 153k.  Which amount would my SVR charge interest against when it kicks in? 

Also do you need to show documents to provide you’re still working when SVR kicks in? Or is it just automatic given you aren’t requesting a new discounted deal. 

Thanks in advance ☺️

Interest is always based on the balance at the time. Even during the fixed term, you would have paid interest on the balance, but would have started paying off more of the capital each month, thus keeping the monthly payments constant. 
Similarly now on the SVR, its on the reducing balance, but then you pay off enough of the capital so that by the end of the 25/30/whatever year term, you've paid off the lot. In between, you can always renegotiate and get a new deal which might be cheaper. 

Payments would generally be constant month-to-month on the SVR too, only changing when the interest rate does.

tooldle

Read your agreement if you are considering overpayments. Rolling onto the svr in our case was beneficial, as it allowed unlimited overpayments. A new fix limited the amount of overpayments allowed.