Last reviewed on 25th October 2023 by Martin Alexander (Mortgage Advisor)
Deciding whether to remortgage early on a fixed rate is a common dilemma. You’ll be pleased to know you can remortgage before your current deal ends. However, you’ll need to pay an early repayment charge, so you’ll need to check whether it’s worth switching deals.
It’s important to note that the conditions will vary each time you remortgage, as will the early repayment charges involved. Securing a lower interest rate isn’t always worth doing. On the other hand, paying an early repayment charge to switch deals could be worthwhile. We’ll explore each option in this guide.
How early can I remortgage?
You can remortgage anytime, but you’ll only want to if you have good reason to, such as:
- Finding a better rate – It might be worth switching deals if you can beat your current rate. You’ll have to assess all the costs involved before remortgaging.
- Once your fixed-term deal ends – When your fixed rate ends, your interest rate moves to a standard variable rate (SVR), which can be very expensive. Switching to a lower rate before a deal ends is recommended.
- To release equity in your home – You may want to release capital tied up in your home. If you need to do this before your deal ends, you’ll have to assess whether it’s worth doing.
If you remortgage before your deal ends, it would be classed as an ‘early remortgage’. There’s nothing wrong with remortgaging early, but you could be liable to pay an early repayment charge (ERC).
Each mortgage is unique, so switching deals could save you money, even when paying an ERC. It all depends on your current deal and the new deal you’re offered.
Can I remortgage before my fixed rate ends?
You can remortgage before your fixed rate ends, but you’ll need to decide whether the cost of paying an ERC and remortgage fees are worth switching deals for.
Calculating the cost of your overall mortgage and comparing it to a new deal is always a great place to start. Once you’ve calculated your mortgage, it will become clear whether you should switch or keep your existing deal. Your current lender may also have better deals than your current mortgage.
What is an early repayment charge (ERC)?
Many lenders will have an early repayment charge (ERC). You’ll need to pay this if you leave your mortgage early. An ERC applies to fixed-rate, capped-rate and cash-back mortgages but can also apply to other mortgage types.
Early repayment charges are put in place by lenders and are legally binding mortgage terms. Lenders do this to protect themselves against financial loss from mortgages ending early. Lenders calculate their rates based on an entire mortgage term, making lending viable. An ERC can recoup any losses as a protection measure of a mortgage ending sooner than anticipated.
How much is an early repayment charge?
An early repayment charge is usually between 1% and 5% of what you owe your mortgage lender. Ultimately, the amount of your ERC depends on your lender and the conditions of your particular mortgage.
Can I remortgage without an early repayment charge?
If you’re approaching the end of your fixed mortgage term, you can secure a rate six months in advance. This way, you can agree on a new rate and remortgage when you decide to. The incentive here is that you should be able to remortgage without any early repayment charges.
Some lenders only allow rates to be secured three months in advance, so check with each lender beforehand. Our advisors can also help you with this. Securing a mortgage rate in advance can be useful, especially if rates are low or you think interest rates may rise.
Lenders typically charge a booking or administration fee to reserve a mortgage deal. In doing so, you risk losing the fees you’ve paid if you withdraw at a later stage. This can happen if better rates emerge after you’ve paid a fee to secure a now unfavourable deal. Furthermore, you’ll likely be charged cancellation fees if you decide to ditch the deal you’ve paid for.
Can I remortgage early with the same lender?
You can remortgage with your current lender. This is a much faster process known as a product transfer.
Some lenders will still charge you an ERC for carrying out a product transfer during your mortgage term. However, there’s a chance they won’t if you’re approaching the end of your term. If you’re in the middle of your term, you can speak to your lender to check their options and whether they’ll still charge you.
Remember, by switching with your current lender, you’ll miss out on all the other rates on the market. With hundreds of lenders available, there’s a high chance that there’s a better rate with a different lender.
Should I remortgage early?
As each mortgage varies, speak to an advisor before making a decision. We’ll compare the cost of your current deal to other deals you’re eligible for while factoring in any early repayment charges. This will show us whether remortgaging before your deal ends is viable.
If you’re paying an ERC to switch early, you’ll also want to find the best deal to make it worthwhile. Our advisors can compare rates across hundreds of lenders to give you a complete picture of what’s available.
About the author
Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.