Life Changes That Should Trigger a Mortgage Review

A mortgage is the most significant financial commitment that most people make in their lives. Your mortgage agreement may last for 40 years or more, and if you stay in the same property for all of that time, it is easy to forget the mortgage entirely. However, there are several good reasons to review your mortgage throughout your life, especially when big changes occur, and not only when you are selling or moving house.

In most people’s lives, many things will change in the years after they sign a mortgage agreement, and the deal that initially worked for you may no longer be the best option. There is also the matter of the fixed term structure that most modern mortgages have. Under these deals, your mortgage rate is fixed for a period of two, five or ten years, after which it can increase significantly and leave you paying thousands of pounds in additional interest. Reviewing your mortgage, learning more about your options and remortgaging at the right time are all ways to minimise this risk and continue to make your money work for you.

The most important time to review your mortgage is when your financial circumstances change, which is often tied to significant life events such as finding a new job, getting married or having children. Here, the remortgage solicitors at JMW outline some of the key times when a mortgage might be advisable in response to an important milestone in your life.

Getting Married

Getting married or entering into a civil partnership often means merging your finances with those of someone else and one partner moving into a property owned by the other, both of which will affect your mortgage. Adding a partner to a mortgage requires consent from the lender, and while this is not usually an obstacle it can still make sense at this stage to consider a remortgage.

When your financial circumstances change, your borrowing capacity changes and you may be able to secure a better mortgage deal than you previously had. For example, if you can afford greater monthly repayments with the addition of a second income, you may be able to shorten the overall mortgage term and reduce the interest you will eventually pay. Restructuring the deal could unlock greater financial benefits compared to overpaying month by month (which is capped at 10% by most lenders), or free up cash to pay for renovations and accommodate a larger family.

Having a Child

Bringing a child into the world will transform your finances and as the largest financial product in your life, your mortgage may need to adjust to take this into account. If you have not remortgaged recently, doing so could enable you to fix your monthly payments at a level you can afford consistently. It is important when evaluating this to take into account the impact of parental leave on your income alongside the costs of raising a child.

Taking the opportunity to remortgage at this stage can deliver additional benefits. For example, it can enable you to release equity that can cover the costs of renovations or home improvements, which can create extra space for your growing family. This will also increase the value of your property, which can have its own impact on your mortgage.

Changes to Your Property Value

If the value of your home has increased significantly since you took out your original mortgage, the ratio of how much you wish to borrow compared to this value will have changed. This is called the loan-to-value or LTV ratio, and if you move to a lower bracket you can often access better mortgage deals. In these cases. This may give you the option of remortgaging to reduce your mortgage term or lower monthly payments, which makes this a key opportunity to review your existing deal.

When Your Fixed Term Ends

You may not think of this as a significant life event, but it can make a big difference to your financial health. At the end of a fixed term mortgage, your mortgage lender will usually move you to a standard variable rate (SVR), which is often a much higher interest rate than your current deal. This can be an important time to continue changing – whether that means swapping to a new lender or a product transfer with the same lender.

You can usually switch your mortgage without any early repayment charges when the fixed rate ends and avoid switching to the SVR. Most mortgage offers last for three to six months, so you can start looking for a new product in plenty of time before the higher interest rate applies, and save money by completing the switch at the optimal time. If you are switching to a new mortgage provider, there will also be legal work to take care of, so it is worth starting this process as early as possible.

As noted above, early repayment charges will apply if you switch your mortgage provider before the end of a fixed term. However, this may still be a financially beneficial decision in some cases. If your finances have changed dramatically, the cost of an early repayment charge may be outweighed by the savings on offer with a new mortgage product.

Whatever your circumstances, it often makes sense to speak to a financial advisor or conveyancing solicitor for guidance on your options and the approach that could deliver the best result for you.