For those on a fixed-rate mortgage, remortgaging early can be a beneficial way of saving costs in the long-term. However, leaving before your fixed term ends may incur charges that homeowners should prepare for.
Can you remortgage early on a fixed-rate mortgage?
Leaving your mortgage deal before your term has ended can mean you’ll be given an Early Repayment Charge (ERC), which is usually calculated as a percentage of your remaining mortgage balance. Therefore, the earlier you leave your agreement, the higher the ERC will likely be.
Some fixed-rate mortgages have ERCs that expire before the end of the fixed period, meaning that you can leave without paying the fee. If you are not sure if a fee would apply, speak to a mortgage broker or your lender before making any decisions.
In some cases, paying the ERC is worth it if the rate you’ve secured is considerably lower than your current one.
How soon can you remortgage before a fixed-term ends?
It’s recommended that all homeowners on a fixed-rate mortgage start looking for a better deal around six months before their current deal ends. This allows you to search for a competitive deal and lock it in to start immediately after your term ends.
If you don’t secure a better deal in time, you may be switched to a Standard Variable Rate (SVR), which could result in considerably higher monthly costs.
Benefits of remortgaging early on a fixed rate
- Interest rates may have fallen since you first took out your mortgage. Remortgaging lets you lock in a lower rate
- You may be able to reduce your monthly payments or obtain mortgage terms that benefit you better than your previous agreement
- Remortgaging can allow you to release a certain amount of equity from your home to pay for renovations or repay any outstanding debt
- Your current mortgage agreement may not suit your current circumstances, so moving to different terms can prove more advantageous
Disadvantages of remortgaging early on a fixed rate
- Leaving your fixed rate too early can incur an Early Repayment Charge. Depending on how soon you leave, the charge may be significantly higher than the savings you were going to make upon leaving
- There are other costs to be considered when you move providers, such as valuation fees, legal costs or product charges.
Remortgaging can be beneficial to those on a fixed-term mortgage, saving you money on your monthly repayments and providing better, long-term value for money. But leaving too early could mean you’re generating unnecessary costs. It’s important to weigh up the financial costs, as well as keep an eye on the market value, to make sure you have the best deal for your circumstances.
If you’re unsure about whether you should remortgage before your fixed term ends, speak to one of our friendly team today. We can guide you through the remortgaging process and advise when the best time is, what rates are available, and what would work best for you in the long run.