Remortgaging a Fixed Rate Mortgage Early

Whether you’re looking to remortgage early to get a better rate, because you want to borrow additional money or you want to switch lenders, it’s important to weigh up the pros and cons of remortgaging and to consider the costs as well as the benefits.

In this article we’ll look at when you can remortgage a residential or buy-to-let mortgage, what penalties you might incur by doing it early and how a broker can help you decide the right course of action.

How soon can you remortgage a fixed rate mortgage?

Most lenders require you to have been registered on the title deeds for six months before you can remortgage but a broker can help you find an appropriate lender if you need to remortgage less than six months in.

After six months you will have a lot more flexibility and can normally opt to remortgage at any time as long as you can pay the associated costs.

A fixed rate mortgage is, as the name suggests, set at a specific rate of interest for a fixed term, normally two, three or five years, although sometimes longer.

In return for the protection against interest rate rises, fixed rate mortgages have an early repayment charge, payable if you remortgage before the end of the fixed rate term.

Making changes to your mortgage during the term

If you expect interest rates to rise and can see the benefits in remortgaging to a new fixed rate deal sooner rather than later, it’s important that you consider exactly how much that might cost.

How much does it cost to remortgage early on a fixed rate?

There are several costs that you could face, the largest usually being the lender’s early repayment charge (ERC). The ERC is calculated as a percentage of the loan, normally between 1-5%. For example if you had a £200,000 mortgage and the repayment charge was 3%, you would have to pay £6,000.

The percentage often reduces depending on how much of the fixed rate term you have remaining, so you may pay less if you’re closer to the end.

You may also have to pay an exit fee, which is a set admin fee for ending the mortgage, the arrangement fee on the new mortgage and potentially legal costs if you are changing lenders.

You may also be liable for the cost of a valuation, although many lenders will cover some of these costs as an extra incentive for switching.

Extending your term

If you want to make changes to your existing mortgage within a fixed rate term your first step is to contact your lender and explain your situation.

Some may be happy to make changes such as increasing the length of the overall term without it impacting the other conditions of your mortgage, but this varies between lenders.

Remember that even though you reduce our monthly repayments by extending the term of your fixed rate mortgage, you will normally end up paying more overall.

Borrowing more

Normally adding extra borrowing by releasing equity will mean a remortgage, leaving you with the fees described above, but there may be other ways to work around it though without having to remortgage, depending on what it is that you want to do.

For instance, if you are considering remortgaging for home improvements or other big ticket items, a secured or unsecured loan could be an alternative, depending on how much you need.

Another option is something called a further advance, where you borrow extra money from your current mortgage lender, but as an add on, with a separate rate to your existing mortgage. This could be a good idea if remortgaging is too costly and you want to keep your existing deal.

Why you should speak to a broker if you need to remortgage early

Remortgaging early is a big decision, and it’s sensible to have expert support to help you get the best deal and minimise costs.

A broker who specialises in remortgaging will be able to speak to both your new and existing lender and work out exactly what the remortgage is going to cost you versus any potential longer term savings or other benefits.

If you decide that remortgaging early definitely is the best option for you then your broker will be able to find you the best rates on a new mortgage and hopefully save you money overall.

They will have access to a lot of deals that otherwise aren’t easy to find and with their existing relationships with lenders they may also be able to negotiate on your behalf.

Which lenders will let you remortgage early?

It isn’t a given that every lender will allow you to remortgage at any time. Some may have restrictions in place if the loan is below a certain value or if you’re very early on in the contract.

Your reason for remortgaging could also impact your options as some lenders will impose different maximum LTVs depending on what you’re remortgaging for.

You’ll need to make sure you have enough equity in your property to be eligible to remortgage.

Some lenders may waive the ERC if you are remortgaging with them – known as a product transfer – although this significantly limits your options and may mean you end up settling for a less competitive rate.

This is where a broker is invaluable, as they’ll be able to compare deals across the whole of the market.

Refinancing a fixed rate buy-to-let property

Remortgaging a fixed rate buy-to-let early follows a similar process to a residential property.

Contacting your current lender is a good first step to make sure that you’re able to remortgage, then find a broker who specialises in buy-to-let remortgages to help you explore your options and get the best deal.

Get matched with a remortgage specialist

Remortgaging early can be expensive, but with the help of a broker specialising in remortgages you should be able to keep fees as low as possible and hopefully find yourself better off long term.

Give us a call now on 0808 189 0463 or make an online enquiry and we’ll assess your circumstances and match you with the advisor that’s best suited to your needs.

Our broker matching service is free of charge and there’s no obligation, so let us arrange a chat with a broker and see what a difference they could make.