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Remortgaging can be a great way to save money on your mortgage payments or access funds that are currently within your home, via a remortgage to release equity.
Many homeowners will look to start their remortgage process about 3-6 months before their current deal is set to finish. That being said, there are homeowners are unsure whether they can remortgage during a fixed term, much earlier than the norm.
A fixed term mortgage is a type of mortgage where the interest rate remains fixed for a set period, typically between two and five years. During this time, you are contractually obligated to keep up your monthly mortgage payments.
In this article, we will explore whether it is possible to either remortgage or remortgage to release equity during a fixed term, as well as whether this is something you should actually look to do.
Typically speaking, homeowners will look to take out a remortgage on their property, around 3-6 months before their deal is set to expire. This gives enough time for a mortgage broker to do their job and creates a nice transition, as your new deal will be about ready to start as your old one finishes.
This also prevents you from falling onto your mortgage lenders standard variable rate of interest, commonly called an SVR, which tends to sit at a percentage much higher than the Bank of England base rate, moving as the base rate does, changing purely at the discretion of the mortgage lender.
These are generally more expensive deals to go on and it is unlikely that this will be your best option. Your mortgage advisor will instead use this time before the current deal ends, to search for appropriate deals, catering to your plans and needs, like if you perhaps want to remortgage for home improvements.
To remortgage during your fixed term, whilst the fixed term is still ongoing (and before the customary 3-6 months prior), would be considered as remortgaging early. Technically, yes you can do this, you can remortgage early whilst you’re still in the fixed term.
That being said, whilst there is nothing to necessarily stop you from doing this, you also have to bear in mind that you will likely be subject to early repayment charges from your mortgage lender, as you are breaking the contract you signed at the start of your deal.
Well this ultimately depends on what it is you are looking to achieve. As always, first and foremost, we would suggest taking out remortgage advice. People generally don’t remortgage unless they need to, so it’s really only something you’d want to do if you have a good reason.
Popular options for this include to find a better deal, if you’re still stuck paying an interest rate that is higher than you otherwise could be paying on a new deal, as well as to protect against possible interest rate rises and changes to inflation.
What it really boils down to is making sure that it is financially viable for you in the long-run, as early repayment charges can be quite expensive. Is it actually going to benefit you to do this, or would you be better off just waiting? That’s the most important thing to consider here.
You can learn more about this in our article “Can You Remortgage Early?“
Once again, you’ll typically want to avoid this due to the early repayment charges that could be present, as depending on how early you want to do this, you could be facing high costs. The earlier you do this, the more expensive it could be.
So long as it makes sense financially and despite the charges you can save money, it shouldn’t be an issue, but we would absolutely recommend that you speak with a mortgage lender ahead of time in order to make sure this is the best route for you.
Whilst a remortgage would generally mean that you are taking out a new mortgage, with a new mortgage lender, you may actually be able to take out a new mortgage with the same mortgage lender. This is called a product transfer mortgage and we find it’s often just as popular as a remortgage.
You may find that, much like your mortgage advisor, your mortgage lender will notify you when your deal is due to expire, so that you can make plans to remortgage. Once again, it is still possible, however, to take out an early product transfer mortgage.
Although you may still have to pay an early repayment charge for doing this, you may also find that staying with the same mortgage lender will see you paying fewer fees, as you won’t have the added legal costs that come with remortgaging to a new mortgage lender.
You can learn more about product transfers in our article “Can I remortgage with the same lender? Product Transfer Advice“.
As is the case with any mortgage, you can expect to pay a variety of fees when you remortgage. This is especially the case when you are looking to remortgage early, as you will most likely have to pay an early repayment charge.
This is one you will almost always have to pay if you are looking to leave your mortgage early. The earlier you leave your contracted mortgage (during the fixed period), the more expensive this is going to be.
The reason you are given this charge, is because you signed a contractual agreement with your mortgage lender, to state your credit would be paid back over a desired period. Whilst remortgaging can be great for you financially, it is also technically a breach of your terms and thus can see you charged.
Exit fees will likely be found on most mortgage types and in some cases are a requirement to finish your mortgage, once you have paid it off in full. These can be encountered both when you finish your full mortgage term and when you remortgage onto a new deal.
Valuation fees can be found primarily with a remortgage, as when you Product Transfer, you’re staying with a mortgage lender who already knows your properties value. Conversely, the new mortgage lender will likely want to see what they are working with and how much it is worth.
Some mortgage lenders may offer this free with their service, whilst others may not. Your mortgage advisor will be able to go over this in much more detail with you during your free mortgage appointment.
You can learn more about property valuations and other types of survey, in our article “What are the different types of property survey?“
These types of fees are also called product fees and will generally be attached to a particular mortgage deal. Oftentimes you can just add this to your mortgage balance and pay it off monthly as normal, though paying it off upfront can still be an option.
The majority of mortgage deals, including fixed rates, will need to see that you are committed for at least 6 months, before you can remortgage.
As such, the likelihood of you being able to do so will be slim to none. Remortgaging afterwards is possible, though will see you with larger fees to pay, the earlier you do this.
Getting in touch with your mortgage lender to first see the fees that could be present, followed by speaking to a trusted and qualified mortgage advisor, is the best path to take before committing to something like this.
Book yourself in for a free remortgage review and a member of our remortgage advice team will discuss why you’re looking to remortgage early and whether it’s better for you to wait it out or make a move on your plans as hoped for.
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Registered Address: 10 Consort Court, Hull, HU9 1PU.
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UK Moneyman Limited is Registered in England, No. 6789312
Registered Address: 10 Consort Court, Hull, HU9 1PU.
Authorised and Regulated by the Financial Conduct Authority.
We are entered on the Financial Services Register No. 627742 at www.register.fca.org.uk
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