Sam Dunn: 'We've been sold short on our mortgage deal. What can we do?'

House Doctor
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The Independent Online

Question: We've taken out a three-year fixed-rate mortgage deal via a broker but I've just noticed that the deal actually expires in early February 2013 – not April in that year. How can this be? We've just moved and made it clear from the start that we wanted a three-year deal yet have ended up being sold short. Can we do anything? When does three years equal two years and ten months? WO, Humberside

Answer: Sadly all too easily when you take your eye off the ball in the heat of a house-buying hiatus.

For most people, the mortgage plays the principal role in any house purchase or sale – working out how much you need to borrow; the interest cost; the type of deal you want; and for how long.

Borrowers usually focus on the first three elements, yet this latter detail – the length of your loan – is often wrongly overlooked.

A broker and/or lender will offer a three-year fixed deal, but it's critical for the borrower to double-check the deal's end date.

Typically, this will be a date of three years and six weeks after the offer is formally made – so an offer given on 1 February 2010 would usually end on 16 March 2013.

This six-week period is deemed enough for buyer and seller to tie up any loose ends and complete.

But if your property transaction runs into the sand and starts to drag on, it can eat into your deal's longevity and leave you with less of a loan than before.

"House purchases rarely run like clockwork, with all the glitches that can hinder the process – and you can often find that you've simply got less time on your loan than you thought," says David Hollingworth at broker London & Country.

And here's the galling part: if you'd spotted the expiry date during the actual buying process, you could have taken action to avoid it.

Any borrower in serious danger of losing out on loan length – and who hasn't yet completed on a purchase – can ask their broker or lender to seek another deal.

If one is available at the full three years, say, at the same price or cheaper (if markets have moved), it could be worth switching loans at this stage.

"Do the calculations to see if switching makes financial sense, but factor in the likely booking or administration fee – and not all lenders will even allow you to jump onto a new deal," warns Hollingworth.

Of course, mortgage markets may equally have moved against you and made it more expensive to switch, in which case it'll be better to stick.

In your case, however, you've completed – which means any switch would probably incur early repayments charges running into thousands of pounds.

"You will unfortunately miss out on a couple of months on the fixed rate but there is nothing you can do about this now," says Melanie Bien of Savills Private Finance.

"Your experience underlines the need to scrutinise the small print of your mortgage in the documentation very carefully."

There could be a ray of hope, though: three years is a long time and April 2013 could see mortgage offers even cheaper than yours today.

So a deal that runs out earlier than you'd expected could leave you financially better off if it means moving to a better deal.