Are you nearing the end of your mortgage’s fixed-rate period and wondering if it’s time to remortgage? The answer to how soon you should start the remortgage process isn’t a simple one, as there are many factors that come into play; from what your existing terms look like to how financially sound you currently are and even which lender policies may apply.
In our detailed guide, you will discover the full process of remortgaging before your fixed-rate period ends. We’ll discuss the benefits and drawbacks, what factors to take into account, plus all the steps necessary for a successful outcome. Whether you’re seeking out a reduced interest rate or wanting to access equity in your home or consolidate debt – understanding how it works is essential when deciding if this option is right for you.
Leaving your fixed-rate mortgage deal early
Are you thinking about leaving your fixed-rate mortgage early and remortgaging earlier than planned? It can be a tough decision, but with the right information, you can make an informed choice. In this guide, we’ll examine the benefits and drawbacks of prematurely remortgaging during an existing deal to help you decide if it’s suitable for your situation. A fixed-rate mortgage provides security by locking in interest rates over a set period of time so that you know exactly how much money needs to be paid each month – however, sometimes early termination of a current deal away from your existing deal may prove beneficial. We provide all the data required here to assist with making such decisions!
What is a fixed-rate mortgage?
Do you want to know exactly how much you will pay in interest for your mortgage over a set period of time? A fixed-rate is the perfect solution. This type of loan comes with an interest rate that remains static for two to five years, or potentially longer! With this option, borrowers can feel confident they won’t have any unwelcome surprises when it comes time to make their payments.
Take, for instance, a homeowner who takes out a mortgage of £150,000 on a house valued at £200,000 with 5% fixed interest to be repaid within 25 years. The approximate monthly payments in this case? Just shy of £792!
You can have complete confidence that your mortgage repayments won’t be affected by any fluctuations in interest rates throughout the fixed rate term. When this time is up, you may choose to switch to a new lender’s standard variable rate (SVR) or remortgage and take advantage of fresh terms.
Why you might decide to remortgage early
If you want to reduce your monthly mortgage repayments or invest in a new property, remortgaging might be worth considering. Especially if you’ve found a more attractive mortgage product with an improved rate than what you currently have. Additionally, if the value of your buy-to-let property has increased and you would like to borrow money against it for another investment opportunity; then this may also demonstrate the benefit of switching early from your current fixed-rate deal.
Can you remortgage early on a fixed rate?
Absolutely, you can remortgage early on a fixed-rate mortgage with no legal limitations. However, it’s necessary to be mindful of potential associated costs like an exit fee and early repayment charge which may apply. It is recommended that you review all the details before deciding if this is the right course of action for you. Remortgaging may be less attractive if these fees become too expensive, depending on the length of your fixed rate. Ultimately, whether it is beneficial to remortgage early or not depends heavily on personal circumstances and should only be done after carefully considering all relevant factors associated with it.
Remortgaging on a 2-Year Fixed Rate
Prior to deciding whether or not remortgaging before the conclusion of a fixed rate is ideal for you, it is important to be mindful of potential costs such as early repayment charge (ERC) and exit fee. Generally, ERCs are calculated based on how much longer your current fixed-rate mortgage has left until completion; thus, if you are close to finishing off a 2-year term then the fee may be higher than with one that runs for an extended timeframe.
To give an example, if your mortgage debt is £150,000 and you opt to remortgage six months into a two-year fixed rate term, it could cost you up to 2% of the total amount. In this case that would be £3,000! So make sure to consider potential early repayment charges before deciding on a new mortgage deal.
Remortgaging on a 5-Year Fixed Rate
When you finish remortgaging before the completion of a 5-year fixed rate term, it is similar to that of a 2-year fixed rate. In this instance, your ERC may be higher for the initial few years and then decrease as time progresses. For example, if you opt to refinance six months into a 5-year term agreement period with an interest charge of 5% (5%, 4%, 3%, 2% and 1%), respectively), your Early Repayment Charge would total £7,500 on top of the mortgage being £150k.
Remortgaging Before the End of the Fixed Term
Deciding whether or not to remortgage before the end of a fixed-rate mortgage term is dependent on multiple components. One component to keep in mind while contemplating this decision is the Early Repayment Charge (ERC). This fee, which can be fairly high if you leave your current mortgage before its expiration date, typically calculates as a percentage of the remaining time left on that particular fixed rate process. Thus ERC’s are usually higher for mortgages with shorter terms.
Considering the potential cost savings from a new mortgage with lower interest, remortgaging before your fixed period ends could be an opportune decision. However, it may not be practical for everyone; those who have opted for shorter terms of two years or less usually choose to wait until their current fixed rate is over.
Should I Remortgage Early?
While considering your individual finances and the associated costs and advantages, it is essential to determine if remortgaging prematurely would be a wise choice. If you think that obtaining a lower interest rate on your new loan will save more than what you’d spend for Early Repayment Charges or other fees, then possibly getting an early refinance could be advantageous. Ultimately though, make sure to contemplate each element before making any decisions.
Fees to Consider While Remortgaging
If you are considering remortgaging, there are a few fees that may come into play. These include:
- Early Repayment Charge (ERC): An early repayment fee is a penalty that you must pay if you decide to terminate your mortgage before the period ends. It’s usually calculated as a certain percentage of the remaining time left on your fixed-rate.
- Exit Fees: When you terminate your mortgage prematurely, regardless if it is within or after the designated Fixed payment period, you may be subject to a costly exit fee.
- Valuation Fees: Many lenders apply a fee to appraise the worth of your home, whereas others are willing to offer this service for free. This valuation can range considerably in expense – generally between £600 and £1,250.
- Arrangement Fees: Also known as a product fee, this charge relates to your current deal and can be added to the mortgage repayment amount or paid upfront. With either option, you are able to conveniently pay it off monthly in tandem with the borrowed sum.
- Broker Fees: If you enlist the aid of a mortgage broker or advisor, there may be an expense involved. Luckily, certain brokers such as YesCanDo offer their services free of charge; therefore, it is essential to confirm beforehand if any fees will be charged for using them.
How to Remortgage Before Your Fixed Rate Ends
If you are considering remortgaging before the end of your current deal, be sure to research and compare mortgage interest rates from various lending sources. Utilise comparison websites or contact lenders directly for their updated rate information. Additionally, confirm with your existing lender if there will be any fees involved in terminating early. With all the facts now at hand, you can determine whether remortgaging is a beneficial decision for you.
Wondering How long does a remortgage take?
Why Don’t People Usually Remortgage Early?
Remortgaging before your current mortgage deal ends is often done to secure a lower rate of interest, but this can be difficult if the market rates are already low. Even with high-interest rates from lenders on top of base rates, it may not be enough to make remortgaging worthwhile. Furthermore, Early Repayment Charges (ERCs) and other fees that come along with remortgaging could also have a huge impact on your finances – especially for shorter fixed-rate mortgages – making remortgage deals even more unattractive.
Remortgaging with the Same Lender
When you choose to remortgage with your existing lender, the process can be much simpler. Not only does it have all of your details on record and may remind you about available mortgage deals before the close of your current rate period, but some fees such as legal costs and valuation charges could also be circumvented. It is worth mentioning however that affordability assessments will likely still take place in case there have been a few years since taking out the original mortgage loan.
Remortgaging with a New Lender
If you’re dissatisfied with your existing lender’s rates, consider remortgaging to acquire a better deal. You have the option of conducting research and finding an ideal solution on your own or enlisting the help of a broker. There are additional expenses that come along with switching lenders (i.e., legal costs, broker fees), but some institutions offer digital mortgages which not only simplify this process but can save money as well!
How does remortgaging work? < Here is further information on the remortgage process.
Remortgaging with help from a mortgage broker such as YesCanDo
Ready to remortgage? At YesCanDo, we have an assortment of products for both our current customers and those looking to switch from their current mortgage lender. Our process is made easy with a multitude of options available – seek out a lower rate, borrow more capital or change your mortgage product altogether! The team at YesCanDo are here to field any queries you may have and guide you through the entire journey. With us, securing the right solution has never been simpler.
Conclusion
In essence, establishing if you should remortgage prior to the lapse of your fixed-term can be a difficult choice necessitating precise scrutiny of both your financial standing and ambitions. Despite gaining access to remortgaging before the expiry date on a fixed-rate deal, it is important that one takes into consideration various expenses such as early repayment charges and exit fees which may render prepayment undesirable, particularly in cases where you still have quite some time until the end of your term.
When deciding whether to remortgage your home, you must contemplate if that action would lead to monetary savings. This could be through a lower interest rate or accessing the equity in your house. If you do choose to go ahead and remortgage early, make sure that you browse for fixed-rate deals with the lowest rates available; also bear in mind any applicable fees or charges associated with it. Ultimately, this is an individual decision based on one’s financial objectives so take all considerations into account before proceeding further.
FAQs
Can I remortgage before my fixed rate ends?
Remortgaging before the fixed rate ends is an option. There’s nothing in legal terms that prevents you from leaving fixed rate mortgage early and seeking a different one. That said, it’s essential to take into account possible costs related to remortgaging, such as early repayment fees and exit charges which are contingent on how long you had initially locked down your mortgage for. If these prices are too steep, then remortgaging may not be worth considering at all. Ultimately, the choice to refinance your mortgage earlier than expected is a very personal one and must be weighed carefully against your own financial position as well as any potential advantages or disadvantages of doing so.
How far ahead can I start a remortgage?
If you are someone who is looking to remortgage after a fixed-rate mortgage period, it is essential that you wait at least six months before initiating the process. Although this may seem like an eternity, once those six months have finally passed and you haven’t been transferred onto your lender’s standard variable rate yet – now is the time to start searching for new deals! You can do this entirely on your own or use a broker as they often know where to find the best options.
At what point can you remortgage?
After you have crossed the six-month mark of your fixed rate period, it is time to begin remortgaging. You can either embark on this journey yourself or use a mortgage broker to find the best new deal for you. Shopping around and comparing rates from different lenders for a new remortgage deal will help save money in the long run as some mortgages offer better deals than others! Don’t forget that there may be fees associated which include legal costs and possibly broker fees (some charge; others are free). Remortgaging soon could save you hundreds down the road, so don’t delay – start searching today! You may also need to pay an early repayment fee and exit fee if you are leaving your current mortgage before the existing mortgage deal ends.
