2 year fixed rate mortgage - what now?

May

Can some one please explain what happens at the end of a fixed term of 2 years on a repayment mortgage?

The interest rate was about 4% when the mortgage was taken out - fixed for 2 years.

What I don't understand is, what happens after that? Does the interest rate change to a variable rate and I stick with my present mortgage company or do I apply for mortgage with someone else for the amount of mortage orignally borrowed minus 2 years worth of payment?

Ian_W

Provided there are no exit penalties "overhanging" your fixed rate the options are much as your final para.
Approach your own lender first and find out what they'll offer, otherwise they will just let you go on to their SVR - which is usually a place not to be. Dependent on what they offer, read Martin's remortgaging guide and then see if you can better elsewhere. When you're comparing, don't forget to add in fees & charges - depending on the size of your mort they can make quite a difference, or not too much at all.
Basically, if your lender doesn't offer a good deal [ie 4.5% or thereabouts for 2 yr fixed] you'll probably be better off switching. You will also have the choice between trackers & fixed and the length of time you want each to last - 2,3, 5, 10years etc. Some pretty good rates and deals about at the moment - ENJOY!!

MortgageGenie

May wrote:

What I don't understand is, what happens after that? Does the interest rate change to a variable rate and I stick with my present mortgage company or do I apply for mortgage with someone else for the amount of mortage orignally borrowed minus 2 years worth of payment?

If you're staying with your existing lender and just switching product then the term should be a continuation of what's outstanding (although you can ask for it to be shortened/extended). However if you moving lenders then you'll have to decide what term you want. Yes it could be "term originally borrow minus 2 years" or minus 1,3,4,5 years etc... It depends what your budget will allow, the shorter the term the less you will end up paying in interest over the duration of your mortgage however be careful not to over commit.

meanmachine_2

WHat happens May is....nothing.

The bank quietly puts you on to their standard rate, probably around 6.5%

If you can't be bothered to do anything about it, that's where you'll stay.

As others suggest, go for a 2 or 5 yr fixed, at around 4.5%

You won't be able to remortgage for the same rate, however, so whatever happens your mortgage payments will be going up.