Can you remortgage early?
A lot of people wrongly believe that once they have chosen a mortgage, they are tied into it permanently with no way out.
This isn’t true as you always have the option to remortgage if a better deal comes along. Many homeowners on special rates (e.g. fixed or discount rates) will decide to switch as their fixed term draws to an end. The question is ‘can you remortgage early?’ and if so, how early?
Here, we will explain how to remortgage and the important things you will need to think about if you choose to leave your deal early.
How early can you remortgage?
Technically, you can remortgage whenever you want. There will be a few key things to keep in mind though if you choose to remortgage early in your mortgage term:
- Does your mortgage have early repayment fees attached?
- Will your lender charge exit fees if you move to a new lender?
- Will you need to budget for other costs e.g. property valuations?
- Do you want to remortgage with the same lender or change to a new one?
It is also best to consider why you want to remortgage. It makes sense to simply change to a deal with better rates and lower monthly repayments, but there are other reasons you could be thinking about making a switch. Other reasons to remortgage include:
- Releasing equity
- Consolidating debts
- Funding home improvements
- Changing the mortgage type (e.g. switching from repayment to interest only)
For the best results, you will want to start the process of remortgaging at least 6 or 7 months before your current deal is ending. Mortgages can be a lengthy process so you want to allow enough time for all relevant checks (e.g. credit checks) to be made, as well as things like conveyancing which can take a while to arrange.
Can you remortgage early with the same lender?
It’s definitely possible to remortgage while staying with the same lender. You might prefer to stick with what you know, particularly if you’ve not had any issues with your mortgage provider.
You can get in touch with your current lender at any point to see if there are any new deals available at better rates. Mortgage rates and deals are constantly changing, so you may find there are better rates available even only a couple of years after your initial mortgage application.
Can you remortgage early to release equity?
Releasing equity is a common reason to remortgage. An equity release allows you to release cash value from your home, based on the amount you have already repaid for your mortgage.
There are various times when extra funds could come in handy, and you can use the amount of equity (value) you have built in your property to receive them. This can be used for various things such as repaying debts or renovating your home.
If you want to remortgage to release equity, it will usually be simpler to stick with the same lender, rather than switching to a new one. You can remortgage to a new lender but if you need the funds quickly, you may find you have to wait longer if you don’t use your current lender.
How early can you remortgage without penalty?
How early you can remortgage without facing fees will depend on the lender your mortgage is with.
Some lenders will allow you to arrange a new mortgage (provided it is with them) before the end of a fixed rate deal, meaning you simply swap over once your current deal ends.
Every lender will have slightly different rules and processes and it may be worth speaking to them to find out where you stand before making any decisions.
If you have a mortgage that has early repayment charges (ERC) attached, you may find that you will have to pay a fee for leaving the deal before it ends. How much this fee will be can vary but generally it will be percentage (%) of the amount remaining on your mortgage balance.
Jack wants to remortgage to a new deal and still has £130,000 remaining to repay on his current mortgage. He will need to pay an early repayment charge of 2%, as agreed in the terms and conditions of his mortgage.
Early repayment charge paid: 2% of £130,000 = £2600 ERC.
Can you remortgage 6 months early?
Many high street lenders allow you to choose a new mortgage deal with them (known as a product transfer) with them within 6 months of the end of your mortgage. This can be useful as it allows you to choose from the interest rates on offer now, which may not be available a few months down the line.
As long as you’re not making any major changes e.g. borrowing more, it should be an easy and straightforward process. Lenders that will allow this include:
- Skipton Building Society
- Lloyd’s Bank
- First Direct
- Yorkshire Bank
- Yorkshire Building Society (will allow new deals 4 months early)
- Nationwide (will allow new deals 4 months early)
- Santander (will allow new deals 4 months early)
- Co-op Bank
- Clydesdale Bank
- Virgin Money (will allow new deals 4 months early)
Can you remortgage early on a fixed rate?
Yes, your can remortgage during a fixed rate period. Remortgaging early is possible no matter your mortgage, you just need to be aware you may have to pay extra fees for doing this.
If you are on a fixed rate mortgage, you may face a much higher rate of interest once your special rate ends and you are landed with your lender’s SVR (Standard Variable Rate).
Choosing to switch to a new fixed rate deal could help you avoid a significant increase in monthly mortgage repayments.
Should I remortgage early?
Whether you decide to remortgage early is a completely personal choice. There are upsides to switching your mortgage in advance, but also things like early repayment charges you will need to be aware of.
If you think that remortgaging is the right choice but you aren’t sure where to start, it can be helpful to speak to an independent mortgage broker for some advice.