Can I Remortgage Early Onto A New Fixed Mortgage Rate?
It is possible that you are considering leaving your fixed rate mortgage early. If you wish to lock in lower rates over an extended period, need a more flexible mortgage, or need cash for home renovations or an emergency, remortgaging early might be a good idea.
What are the pros and cons of remortgaging early? Learn everything you need to know about exiting a fixed rate mortgage more than six months early.
This guide contains the following information:
How does a fixed rate mortgage work?
Is it possible to remortgage a fixed rate early?
Is it a good idea to remortgage early?
Remortgaging a house early: how to do it?
In 2022, how to get the best remortgage deal
How does a fixed rate mortgage work?
The interest rate on fixed-rate mortgages remains the same for a set period, usually between 2 and 10 years. Your loan repayments won't fluctuate with interest rates, especially when they rise, when you have a fixed rate mortgage.
The most common mortgages on the market are those with fixed rates for two to five years. The UK interest rate is currently so high that many borrowers are considering a 10 year fixed rate mortgage. Further rate increases are expected in the near future.
You are automatically switched to the lender's standard variable rate (SVR) when your fixed rate mortgage ends, which is typically much higher than your previous rate.
The majority of people remortgage around six months before their fixed rate mortgage ends in order to find a new rate before their introductory interest rate period ends.
What is the earliest I can remortgage a fixed rate?
Remortgaging within six months of taking out a fixed rate mortgage is difficult due to the six month rule. The remortgage can, however, be done at any time after this. Remortgaging may or may not be a good idea for you, depending on what you stand to gain.
Early repayment charges may apply if you remortgage before your fixed rate period ends. It also pays to consider the length of the deal you wish to exit - two-year deals are cheaper to exit than five-year or ten-year deals. It is also important to consider the costs of leaving your current mortgage product when evaluating the overall benefits of switching.
There are good reasons to remortgage early, which we discuss below. Most people are content to wait until their current fixed rate deal ends.
Is it a good idea to remortgage early??
The benefits and costs of remortgaging early are dependent on whether you are better off with a new mortgage product.
Should you remortgage early?
Most people will wait until the fixed term ends before remortgaging to find better rates, especially if the deal is only 2 years long. However, remortgaging can be advantageous in several situations.
The savings you'll enjoy on the new mortgage may outweigh the cost of any early repayment fees if you find a mortgage with a lower rate than you currently pay.
You may need to raise cash for private medical bills or home repairs in an urgent situation. The value of your house may have increased or you may have built up significant equity in your home. It is possible to remortgage early, cover any early repayment costs, and use the funds for an important project, such as building an extension on your home or purchasing a second investment property.
In order to pay off other short-term debts, you may want to remortgage early. It can be much cheaper to roll all your debts into one mortgage payment.
It's possible to become ill or lose your job and need to take a mortgage payment holiday as a result. If you want to make interest only payments or overpayments, you may want a mortgage that allows you to do so.lows you to do so. When your current mortgage deal is about to expire, remortgaging to a more flexible mortgage product can be beneficial.
When considering whether to remortgage, speaking with a specialist mortgage broker can be helpful. In addition to having a comprehensive understanding of the mortgage market, they also have access to specialist lenders who can assist you in determining if you are eligible for a remortgage.
Remortgaging a house early
To begin, compare lenders and deals on the mortgage market. If you exit your fixed rate early, you should also contact your current lender to find out about early repayment fees.
The best mortgage rates can be compared by using a specialist mortgage broker with access to specialist lenders.
Remortgaging with your existing lender is called a 'product transfer'. Remortgaging with your current lender is usually the easiest option since they know everything about you and your property.
Since you won't have to pay solicitor and valuation fees, as well as any ERCs, it's usually less expensive.
However, it is a good idea to compare your current mortgage lender to other lenders since they may not be able to compete with other mortgage products on the market.
Switching lenders for a remortgage
To get the best rates or terms, you may need to switch lenders, but the process is more complicated and takes longer than staying with your current lender.
Your current lender will almost certainly charge you early repayment fees, and a new lender may also charge you valuation and solicitor fees. In most cases, these fees are waived when you take out a new mortgage.
When switching mortgage lenders, it's important to weigh the costs and benefits. Any upfront costs associated with remortgaging with a new lender may be outweighed by the long-term benefits.
How much does it cost to remortgage early?
A remortgage involves two types of costs - the cost of leaving your current mortgage and the cost of setting up a new mortgage. Here are some fees you should be aware of depending on your situation.
What it costs to end your mortgage early
Early repayment charge (ERC) - your lender may charge you an early repayment fee if you pay off your mortgage early. Lenders can only do this if they state it in writing in your contract. Depending on your mortgage balance, this fee can range from 1 to 5%.
Whether you end your current mortgage deal early or not, some lenders charge an exit fee when you switch lenders.
A lender charges you a fee for releasing your property deeds to a new lender. The amount can range from £100 to £300.
Mortgage start-up costs
The arrangement fee covers the lender's costs associated with processing and setting up your mortgage. You can expect to pay between £850 and £2000 - some deals with lower rates come with higher product fees to cover the lender's costs. Lenders include this in their deals.
A booking fee is charged by some lenders when you apply for a special mortgage deal. Mortgages can cost up to £200 if they aren't approved.
You will need a solicitor to add your new lender to the property deeds. The conveyancing fees are around £300, but lenders often include them in mortgages.
In order to verify that your house is a suitable security for the mortgage, your lender will charge you a valuation fee. In spite of the fact that some lenders offer this service for free, it is otherwise a fee-based service.
Fee for mortgage broker - If you decide to use a mortgage broker, they usually charge 1% of the property's value.