Correct at 31/12/2023
Looking to remortgage? Don’t assume you have to wait until your existing deal finishes before you can start the ball rolling.
If your current mortgage deal ends within the next 6 months, or you’re concerned that rates are edging up and want to lock into a new deal now, it is possible to secure a deal even if you’re currently tied into your existing mortgage. We take a look at everything you need to know to help you determine the answer to that all-important question “is it worth remortgaging early?”.
There's one risk to watch out for: you might be tied in to your current rate and have to pay an Early Repayment Charge if you switch before the end of the deal. Read on to find out more and you can also check our Early Repayment Charge calculator to help work out whether the cost is covered by the saving made switching to a new deal.
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You can remortgage at any time but there's no point doing it if it’s not likely to benefit you in the long run. You want to choose a time when there's a positive benefit to moving your mortgage.
This may be when:
It used to be that people stayed with the same lender for the whole period of their mortgage. This is no longer the case. You can switch mortgages just as you can move from one energy provider to another, or you can even choose to remortgage early with the same lender.
Fixed rate mortgages run for a set term, typically between 2 and 10 years, and then usually move on to the lender's standard variable rate of interest (SVR) which is often higher. If you have a fixed rate mortgage at the moment, when you get to the end of the period you'll need to remortgage if you don't want to go onto the standard variable rate.
Whether the interest rate on the new deal is higher or lower than you've been paying depends on what's happening to rates at the time. You don’t have to stay with the same lender and should certainly shop around to see what is on offer.
Equity is the difference between what your property is worth and the amount you owe on your mortgage. The proportion of the two is called the loan to value ratio (LTV). If the price of your house has gone up, your mortgage will be a smaller percentage of the property's value than it was when you started.
The more equity you have and the lower the LTV, the better remortgage deal you could get.
If your mortgage is now 75% of the property’s value, you now have the equivalent of a 25% deposit in the property, so when you remortgage you might get better terms than you got if you had to take an 85% mortgage when you bought it. Once you get to below 50% LTV you should have access to almost all of the deals on the market, subject to you meeting the rest of the lender’s criteria.
Lenders are continually coming out with new mortgage deals and you might find there are cheaper deals around. This could save you a lot of money.
You can lock in to a fixed rate mortgage and know that your repayments will stay the same for however long you’ve fixed for, regardless of what happens to other rates.
If you are mid way into your fixed rate but still decide to remortgage, Early Repayment Charges might apply to your current deal. These can be quite large amounts but you should consider it if interest rates have dropped since you took out your fixed rate mortgage.
Our Early Repayment Charges calculator can help you work out if it's worth remortgaging before your current mortgage comes to an end.
Yes, there’s no reason why you can’t leave your fixed rate mortgage early and switch to another lender - but you’ll need to consider whether the total sum of your Early Repayment Charges, exit fees and other rates outweigh the benefits of switching, as you may find yourself worse off than before.
You can remortgage early with the same lender, although technically this is often called a ‘product transfer’ rather than a remortgage. If you do choose to come out of your deal early you may be subject to Early Repayment Charges in just the same way as if you were to switch to a new lender although sometimes, provided you’re within the last few months of your current deal, your lender might allow you to start your new deal early and not apply the Early Repayment Charge. However in this case you’d be limited to the mortgage products offered by your current lender, which may not be the best deal for your circumstances.
As a general rule, it’s a good idea to start investigating which deals are available up to six months before the end of your mortgage deal is due to finish, particularly if you are worried about rates rising in months to come.
Many remortgage offers are valid for between three and six months from the date they are issued. That means even if you’ve got six months left to run on your existing deal, you can apply for your new mortgage now to secure your new rate. Provided your application is accepted, you can arrange with the lender for it to begin as soon as your current deal finishes.
The advantage of working out which deal you want to move to in advance is that you can then go straight from one deal to another, without having to move onto your lender’s standard variable rate. Standard variable rates tend to be much higher than other mortgage rates, so the sooner you switch to a different deal, the more money you could save.
The other main benefit is that you can lock into a particular rate now, so that even if rates start to increase as you approach the end of your current deal, you’ll have peace of mind that you’ve already secured the rate you’re going to move onto.
Remember that although forward planning can be useful, the further away from the end of your deal you are, the more limited the choice of lender might be, which could impact on the number of deals that are available to you.
If you’re thinking about remortgaging early it’s worth getting advice and help from a mortgage broker who will be familiar with how long various lenders’ offer periods are, and can recommend which deals are likely to suit your individual circumstances.
Get in touch with us here at L&C today for free, expert advice on your early remortgage.
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