Written by Clive Ringrose, Senior Mortgage Broker, The Mortgage Broker.
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Introduction
Many homeowners wonder, can you remortgage early, especially when they notice interest rates have dropped or they wish to release funds tied up in their property. Remortgaging means switching your current mortgage deal, which can either be with your existing lender or a completely new one. If you want to understand more about what a remortgage is, please read our blog on “How does a remortgage work” here.
However, when it comes to doing this early, there are important things you must consider, and we always recommend that you speak with a mortgage broker to guarantee you get the right deal for your circumstances.
This guide will help you understand whether you can remortgage early, what the process involves, and whether it could be the right decision for you.
Your property may be repossessed if you do not keep up repayments on your mortgage.
This article is general information only and is not tax, legal or investment advice. Always speak to a qualified accountant or tax adviser before acting.
What Does It Mean to Remortgage Early?
To remortgage early simply means switching your mortgage deal before the agreed end date of your current arrangement. Most mortgages start with an initial fixed or discounted period, often lasting between two and five years. However, given the unpredictability of the market, we have seen an increasing number of 1 year fixed rates.
If you decide to change your mortgage during this time, you are breaking that original contract with the mortgage lender and therefore, could incur additional charges, known as early repayment charges (ERCs). These are always outlined in your mortgage agreement, and it is important to understand these terms before making a decision to avoid unexpected costs.
Why Would You Consider Remortgaging Early?
There are several reasons why homeowners need to remortgage or think about remortgaging early. For many of our customers at The Mortgage Broker, securing a lower interest rate is the main motivation, especially given the rate hikes in recent years, and with rates recently showing signs of improvement, we can try and lock in a better deal.
However, there are many reasons our customers remortgage and these have included a remortgage to release equity from their home, providing funds for home improvements, large purchases, or personal projects.
You may also wish to move from a variable rate to a fixed rate mortgage to gain more certainty over your future monthly payments.
Some homeowners look to consolidate existing debts in this manner by releasing funds and consolidating debts into one affordable payment through their mortgage.
Financial circumstances can change quickly, and the mortgage deal you arranged a few years ago might no longer suit your needs, and it is always worth reviewing your options in the market, not just with your current lender.
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How to Calculate If Early Remortgaging Is Worth It
Before you decide whether to remortgage early, it is essential to work out whether the potential savings will outweigh the costs. The Mortgage Broker can of course quickly establish this with you, but if you are looking to do this yourself, then you need to carefully consider:
- Your current interest rate with the new rate you are being offered.
- The total cost of early repayment charges against the savings you would make from a lower rate.
It is always best to look at the overall cost of the mortgage, not just the difference in monthly payments. Online tools, such as our remortgage calculator available on our Mortgage Broker website, can help you run the numbers. However, we always recommend speaking to a remortgage broker who can quickly establish your needs, financial position and compare it to the thousands of remortgage rate that can be accessed by a mortgage adviser. This will always give you a clearer picture tailored to your specific situation and ensure you make an education and financially smart decision.
The right remortgage isn’t just cheaper, it’s the one that matches your plans, your risk level and your financial future.
Steps to Take If You Want to Remortgage Early
We would always advise that you speak to a mortgage broker. However, if you are thinking about remortgaging early, you are the key steps you should follow:
- Carefully review your existing mortgage terms, paying close attention to any early repayment charges.
- Check your credit score and financial position to understand what deals you may qualify for.
- Speak to an experienced mortgage broker, such as our team at The Mortgage Broker, to explore your best options.
- Make a fully informed decision based on expert advice and a complete comparison of costs.
Taking these steps will help ensure you avoid unexpected fees and find the most suitable deal.
A mistake we see by customers here, is upon receiving a letter from their current mortgage lender, the decision is made to simply move rate with them. However, the market offers many more products, and potentially much better rates than what the current mortgage lender may be able to offer. Especially, if any circumstances have changed.
In summary, yes, you can remortgage early, but it is very important to balance the potential benefits with any costs involved. For some homeowners, the savings make it worthwhile, while for others, waiting may be the better option.
If you are considering remortgaging early, contact The Mortgage Broker today. Our friendly advisers will offer you clear, personal advice to help you find the right solution for your circumstances.
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Quick fire FAQs with Clive Ringrose, Senior Mortgage Adviser
Yes. You can remortgage early, but you may face Early Repayment Charges (ERCs). Whether it’s worthwhile depends on your current rate, new rate, and the size of the ERC.
Possibly. Most fixed and discounted deals include ERCs if you exit early, typically 1-5% of the remaining mortgage balance. Some lenders also charge admin or valuation fees.
Yes, in certain scenarios. If your new mortgage rate is significantly lower, the long-term savings may outweigh the ERC. A broker can calculate this quickly and accurately.
Sometimes. This depends on your mortgage terms. Some lenders offer flexible products, allow a certain level of overpayments, or let you port your rate to a new property without penalties.
You need to compare the total cost of staying on your current deal versus switching now. Factors include your rate, new rate, ERCs, credit score and long-term plans.
Most lenders allow you to secure a new rate up to six months early. This means you can lock in a future deal without triggering ERCs until your current term expires.
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Author: Clive Ringrose, Senior Mortgage Broker
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