Selling a House With a Fixed Rate Mortgage

Fixed-rate mortgage deals can be a comfort to those who prefer to know exactly how much their repayments will be, however, they are best suited to borrowers looking to stay put in their original property for the duration of that term.

In this article, we’ll look at whether you can move home before you come to the end of a fixed-rate deal, how this can be done, and where to seek the right advice before you make the move.

Can you sell a house with a fixed-rate mortgage?

You absolutely can, there are no legal restrictions on this type of transaction, however, it’s fairly unlikely that you’ll be able to avoid paying fees if you choose to do so before your fixed-rate period ends.

That said, not all lenders charge these fees, so if you’re one of the lucky few who are able to leave a fixed-rate mortgage fee-free, there will be no difference from any other property sale.

Will you pay a penalty? – Early repayment charges (ERC) explained

Yes, it’s highly likely – but not necessarily in every case and the amounts involved will vary from lender to lender.

The reality is when you secure a fixed-rate mortgage deal you’re benefiting from the stability of maintaining the same monthly payments on your mortgage for a predetermined duration, regardless of what happens to interest rates. Your lender is therefore taking on the risk that if interest rates rise during your fixed period, they will take the hit financially, so that you don’t have to.

In order to mitigate some of this risk, the majority of lenders offering fixed-rate deals include early repayment charges (ERCs) and sometimes, additional exit fees as well. If you choose to break the terms of the agreement by leaving the fixed-rate before the agreed period has ended, you’ll need to pay them.

ERCs are not a standard charge and how much you’ll need to pay will be determined by each lender, but typically this is in the region of 1-7% of the value of your outstanding loan. For example, if your outstanding balance is £180,000 you may need to pay between £1,800 and £12,600 in fees in order to leave early.

Sometimes the percentage of ERC you need to pay will reduce the shorter you have remaining on the term, so even if you can’t wait until the fixed-term ends, waiting as long as you can before moving will minimise your costs in some cases.

Transferring your mortgage to another property

One way to avoid paying ERCs and exit fees is to look at porting your mortgage to your new home with you. Porting simply means taking your mortgage with you when you buy a new home, keeping the same terms and conditions and interest rates.

While not all lenders allow this, the majority of fixed-term products from high street lenders nowadays are portable. Your mortgage terms should highlight this, but if you’re unsure, your lender will be able to advise you.

See our complete guide to porting a mortgage for further information about this.

What if you don’t need another mortgage?

If you don’t need another mortgage because perhaps you’ve inherited your new home, you’re moving in with relatives, or planning to rent a property to live in, then you have a few options available:

• Wait it out – delay your move until your fixed-term period ends to avoid paying fees. This will obviously be easier if you have a shorter fixed-rate deal or are coming to the end of a long one
• Pay the fees – In some cases, especially if you have no other option logistically, you may need to pay the fees involved with leaving a fixed-term deal early
• Let out your existing home – depending on how long you have left on your fixed-rate term, renting your property until it’s ended may help you to avoid ERCs. Your lender may be willing to provide a consent to let for a short duration.
  If you have more than a year left, however, most lenders would expect you to remortgage on to a buy-to-let mortgage in order to let your home. In this case you would still incur ERCs as you would still be exiting the deal early

Should you wait until your fixed rate period is over?

It really depends on your wider circumstances and whether you’re able to port your mortgage or not. If porting is out of the question, then if at all possible, waiting until your fixed-rate term ends usually turns out to be the most cost-effective option.

This is not often viable, however, so if you can’t port or wait until the end of your deal, your best bet is to speak to a mortgage broker.  They will be able to search the entire market and help you to minimise the overall costs of moving home by securing you the most competitive remortgage rates.

Get matched with a broker experienced in fixed rate mortgages

If you’re hoping to sell up and move home, but you found yourself trapped by the expense of leaving your fixed-rate deal early, a mortgage broker will be best placed to offer you the advice you need.

They can look at all of the options available to you, and whether you decide to port, remortgage or simply wait it out, they will ensure that you’re making the right choices, taking into account your long term home ownership goals.

Our free broker-matching service will match you with a knowledgeable broker with experience to match your precise needs in no time, simply contact us on 0808 189 0463 or make an enquiry. Your initial consultation will always be free and you’re under no obligation whatsoever.