Can You Remortgage Early?
Estimated reading time 6 minutes
The news has been filled with coverage of mortgages for months now and the recent announcements of reduced interest rates has been welcomed by some. However, affordability is still at a rather dangerous tipping point with many homeowners concerned that even with lower interest rates in place, whether their home will remain theirs.
As a result, countless borrowers are looking for ways to get out of costly mortgage deals and find something that makes their property more affordable. When can you do this though? Many mortgages are for set terms of 2, 3, or 5 years, and if you are in the early days of a new agreement, could you remortgage early if a new deal looks more favourable elsewhere?
The simple answer is yes, you can remortgage early in your fixed term mortgage, you just need to be careful and conduct some research. And in this edition of our blog, that is what we are going to look at.
How early can you remortgage?
It may be surprising to some people, but you can remortgage at any time if you think it stands to put you in a better position. Some people do it to enhance their borrowing, others do it to find a better rate. Regardless of the reason, you can remortgage at any time. Lenders may not be too keen though. If you have bought the property within the past six months, they are less likely to be willing to offer you a new deal or allow you to find one elsewhere this early on into your mortgage. Some lenders may not pass judgement on the move from one mortgage to another so quickly, but you may find that after the six months have passed, many more options become available to you.
When is the best time to remortgage early?
Despite being able to remortgage at any time, you need to consider the impact of the possible early repayment charges you could face. These ERC’s can cost significant sums if you are looking to remortgage too early in the agreement. Such charges could see you worse off than if you took the cheaper mortgage deal. You’d be having to pay out a substantial sum to cover the fee the lender deems appropriate for the ERC and pay your new mortgage. For reference, a lender could charge as much a 5% of the outstanding mortgage balance for your early exit. When you add on the remortgaging fees too, it suddenly becomes very expensive.
As a result, it can be best to wait for your fixed term to get closer to its end. Unless of course, the ERC can be absorbed by the saving you make on the new deal. With mortgage offers being valid for six months, it is often best to secure your remortgage half a year before your current deal ends. That way your better rate is locked in and ready to go the moment your original deal expires.
Why remortgage early?
We touched upon it a little earlier, but the reasons people wish to remortgage early can vary. The most common reasons would include:
- Better deals found elsewhere.
- Your current introductory rate is ending.
- You have built up substantial equity.
- You are on a variable mortgage and are concerned about volatile interest rates.
- You have found more favourable payment terms such as payment holidays or overpayments.
- You want to borrow more money for upgrades to your home.
Are there benefits to remortgaging early?
Aside from being able to take advantage of better rates or getting more advantageous terms and conditions, remortgaging early can mean locking in a deal that may no longer exist when your current terms come to an end. You can start shopping for a new mortgage deal six months before your current one expires, and with the agreement in place for six months, simply move onto this new deal as the old one concludes. Many homeowners prefer this way of remortgaging early as it helps you get the deal that could be here today and gone tomorrow.
Can I remortgage early multiple times?
You can but each time will require the same level of thought as the first time you remortgaged. This means, potentially paying ERC’s definitely paying the standard fees and legal costs, and potentially paying an exit fee regardless of whether you are leaving the deal early or not. You’ll also need to make sure you meet the criteria of the lenders each time, and this can vary.
What is the process to remortgage early?
Similar to how you would approach any other mortgage it takes time, research and thought. Begin by looking at your current circumstances and see whether an ERC could hinder your finances significantly. Then look at your current outgoings and see if a new mortgage would make a difference to them. Check and double check your current mortgage terms too. There may be some items that complicate the process.
Once you are happy that remortgaging could be the best option, investigate the available deals from a host of lenders, you can even choose your current lender if you wish. Once a deal seems to tick all the right boxes, complete your application. The lender will then assess the property value and your suitability. If approved, your existing mortgage will be paid off and you’ll be tied into your new deal.
If affordability is proving difficult and you are concerned about the potential of large early repayment charges, you could speak to the team at Bettermove. We can help you sell your house fast, in just a matter of days if needed. We present two fluid, free, and efficient routes to sale. We can either buy your property ourselves or present it to a selection of cash house buyers. Our fully managed process ensures that the stress of moving house is removed and with our fee-free service, you can sell your house for free too. Contact our property experts today to find out more and see how we can sell your house and free you from the costly mortgage or ERC’s.
