Can You Remortgage Early On A Fixed Rate?
You may be considering leaving your fixed rate mortgage early. If you wish to lock into lower rates over an extended period, need a more flexible mortgage, or need to raise cash for home renovations or an emergency, remortgaging early could make sense.
With interest rates currently in limbo and speculation as to whether they'll fall in the latter half of 2023 or stay up thanks to a resilient high inflation figure, many people are struggling to weigh up their options for their next mortgage deal.
2-year or 5-year fix?
But for those with a deal coming to an end in the next 6 months - you might be able to lock in early to lower rates now, and either take them or leave them when the time comes.
How does it work?
Most mortgage lenders allow you to apply for a product transfer up to 6 months before your current deal ends (or at any time if you're already paying your bank's SVR - Standard Variable Rate).
So, you can get a quote today (either fixed or tracker), and have up to 6 months to decide whether to take it.
When your current deal expires, you can either take the quote you got 6 months ago, or if rates have gone down since then, take your lenders new offer - whichever is cheaper.
You just need to know your lender's remortgage timeframe, because you don't want to be paying any ERCs for switching early.
Most banks offer between 3 and 6 months, but here's a comprehensive list of the main providers in the UK:
*accurate as of June 2023.
In the rest of this article, we'll answer they other key questions surrounding remortgaging early:
Is it a good idea to remortgage early? What are the pros and cons? Will I be charged? Stick around to find out.
What is a fixed rate mortgage?
Fixed-rate mortgages are home loans where the interest rate remains the same for a set period, usually between 2 and 10 years. Fixed rate mortgages offer you the security of knowing exactly how much you will be paying each month, so your loan repayments will not fluctuate with interest rates, especially when they rise.
Mortgages with fixed rates of 2-5 years are the most common on the market. Still, many borrowers are now considering 10 year fixed rate mortgages since UK interest rates are currently so high, and further rate rises are expected.
When your fixed rate mortgage ends, you are automatically switched to the lender's standard variable rate (SVR), which is often a much higher rate than the one you have been paying.
How early can I remortgage a fixed rate?
Due to the 6 month mortgage rule, remortgaging within the first 6 months of taking out your fixed rate mortgage is difficult. You can, however, remortgage at any time after this. It depends on what you stand to gain from remortgaging whether it's a good idea or not.
Remortgaging before your fixed rate period ends may result in early repayment charges. The length of the deal you want to exit is also a key factor - two year deals cost less to exit than five or 10 year deals. In evaluating the overall benefits of switching mortgage products, you should consider the costs of leaving your current deal.
Most people are content to stick with their current fixed rate deal until it ends, but there are good reasons to remortgage early, which we look at below.
Should you remortgage early?
Whether you should remortgage early depends on whether you are better off with a new mortgage product and whether the cost of remortgaging early outweighs the benefits.
Is it worth remortgaging early?
Most people will wait for a fixed term to end before remortgaging to find better rates, especially if it's only a 2 year deal and they can wait. But there are several scenarios where remortgaging can make sense.
- Remortgage to get cheaper rates
If you find a mortgage with lower rates than you currently pay, it may be a smart move if the savings you'll enjoy on the new mortgage outweigh the cost of any early repayment fees.
- Remortgage to raise cash
You could find yourself in an urgent situation with the need to raise cash for private medical bills or home repairs. Or it may be that you have built up significant equity in your home or seen the value of your house increase. In this case, you can remortgage early, cover any early repayment costs, and release this capital for an important project you want to take on - such as building a house extension or purchasing a second investment property.
- Remortgage to consolidate debt
It may make sense to remortgage early to pay off other short term debts you have. Rolling up all your debts into one mortgage payment can be much cheaper overall.
- Remortgage for a more flexible product
Circumstances can change, and it's possible to fall ill or lose your job and need to take a mortgage payment holiday as a result. Or you may want a mortgage with the ability to make interest only payments or overpayments. Remortgaging to a more flexible mortgage product in these circumstances can be beneficial, especially if you've still got many years to go before your current deal expires.
Speaking to a specialist mortgage broker can be helpful as you weigh up whether you should remortgage or not. With a vast knowledge of the mortgage market and access to specialist lenders, they can help you assess your current situation to see if there is a mortgage product that will make remortgaging worthwhile.
How to remortgage a house early
The first place to start is with a thorough search of the mortgage market, comparing lenders and deals. You should also contact your current lender to see what early repayment fees you will need to pay if you exit your fixed rate early.
You could use a specialist mortgage broker with access to specialist lenders and deals you won't find on mortgage comparison sites to compare the best rates.
Remortgage with the same lender.
When you remortgage with your existing lender, it’s known as a ‘product transfer’. Because your current lender knows all about you and your property, this is typically the easiest way to remortgage.
It is usually less expensive since you won't have to pay solicitor and valuation fees, and your lender may even waive any ERCs.
It is, however, a good idea to compare your current mortgage lender with other lenders since they are not always able to compete with other mortgage products on the market, particularly products that will make remortgaging worthwhile.
Remortgage with a new lender
Switching to a new lender may be necessary to get the best rates or terms you need, but the process is more complex and takes longer than remaining with your current lender.
You will almost definitely have to pay early repayment fees to your current lender, and a new lender may also charge you valuation and solicitor fees. However, often these are waived when you take out a new mortgage deal.
It's essential to weigh the costs and benefits of switching mortgage lenders in time and money. The long-term benefits of remortgaging with a new lender can outweigh any upfront costs.
And do you go with a fixed rate or a tracker? Our video covers the pros and cons of each option:
What are the costs of remortgaging early?
There are two types of costs involved with remortgaging a property early - the cost of leaving your current mortgage and the cost of setting up a new mortgage. It depends on your situation, but here are some fees you should be aware of.
How to get the best remortgage deal in 2022
At Clifton Private Finance, we can help you secure a remortgage or product transfer remortgage before your fixed rate ends.
Our expert remortgage brokers can review your current situation and advise you on the best course of action using their expertise and access to specialist lenders and the whole mortgage market.
There is no charge for an initial consultation and in-depth review of your situation.
We provide high-quality mortgage solutions for the UK and international clients.
- Remortgage finance from £100,000
- Market leading rates
- Access to high street, private & specialist bank mortgage deals
- Up to 95% loan to value (residential mortgages)
- Up to 80% loan to value (buy to let mortgages)
- Interest only mortgage and short term finance interest roll up options
- Maximising borrowing, e.g. mortgages for professionals, lenders that will allow 5x up to 6x salary
- Revolving mortgage options - unlock the equity in your primary home & access funds whenever you need to
- We can help if you have complex income, e.g. income from multi currency, multiple income sources, offshore trust or family trust arrangements, where the property is held in an offshore company, bonus & dividend income & using retained profits for company owners
- Solutions for UK expats, non-dom & foreign nationals buying or remortgaging UK property
- Equity release for over 55s - Solutions for releasing capital in retirement, e.g. home improvements, boosting income, mitigating IHT, raising a home deposit for children/grandchildren
- Fast, professional service. We understand that sometimes finance needs to be arranged quickly!
- If you have assets that you would like to be leveraged as part of the transaction, such as your investment portfolio, other property or pensions; our team can look at leveraging these assets to negotiate more flexible lending criteria and more favourable interest rates, to help you get the best deal.
Book a no-obligation consultation with one of our expert remortgage advisors at a convenient time for you:
Or call us now on 0203 900 4322 to discuss your requirements.
Please read our complete guide to remortgaging here.