Mortgage refixes are not often top of mind for people. When it pops up – seemingly out of nowhere – it can be tempting to refix for the same period at the going rate without giving it a thought. But it’s worth taking a moment to think things through, and even better, talk it through with your financial adviser. It can save you a lot of money and stress down the line. So, what should you consider before refixing your mortgage?
Is your current mortgage structure working for you?
Has your financial position changed since you last refixed your mortgage? Maybe your cost of living has drastically increased, and you need the flexibility to access more of your money just for day to day living. Or perhaps you’re now in a job that has a bonus structure, and you want the ability to pay down your mortgage in lump sums. In times of financial uncertainty, revolving credit accounts can be a good option. You pay down your mortgage but the money is still available if or when you need it.
If your mortgage structure seems no longer fit for purpose, book in a time for us to review your mortgage and ascertain whether a restructure is right for you.
What changes are you planning to make in the near-mid future?
As there is usually a cost to breaking a fixed term rate, it’s important to think ahead before settling on a refix term. Are you planning on having a baby and going to a single income household? Are you going to sell your home? Think about what’s coming up in the next 1-2 years and how your mortgage may be affected.
If you’re fortunate enough to be expecting a substantial pay rise, check in with us about whether your bank will allow you to increase your regular payments during a fixed period. Each lender has their own rules – some allow you to increase and decrease your repayments at any time, others allow a single one-off payment. BE CAREFUL, some lenders don’t allow you to reduce back down again until the end of the fixed rate period, so you need to be sure you can comfortably manage any increase. Your financial adviser will be able to tell you the rules for your lender!
What’s the general forecast for fixed term rates?
While market predictions can be as useful as a badger in a bag, it’s still worth looking at what is expected to happen in the short term. Find out what the market thinks interest rates will do, decide your own risk tolerance and weigh both against your current situation and plans for the future.
When do your other mortgage accounts become due for refixing?
It’s important to diversify the dates your mortgage accounts’ fixed rates become due, unless you have a specific event you are working toward. This cushions the blow if interest rates were to drastically increase; you won’t be looking at your entire mortgage increasing in cost all at once. Refix for a period that ensures the account won’t mature at the same time as your other accounts.
Giving advice and support at the time of refixing is a key part of the service Building on Basics provides. If you’re due for a refix, book in a time for us to talk through your situation and we’ll help you identify the best option.