Can I remortgage before the end of my fixed term?

If you're a homeowner in the UK considering remortgaging before the end of your fixed term, you're not alone. The idea of potentially reducing your monthly payments or unlocking equity can be enticing, but it's important to understand the implications before making a decision. In this article, we'll explore the pros and cons of remortgaging before the end of your fixed term, discuss the options of staying with the same lender or switching to a new one, and offer valuable advice for making an informed choice.

Understanding remortgaging before the fixed term ends

Remortgaging involves switching your existing mortgage to a new deal, often with a different lender. While it's common for homeowners to consider remortgaging when their current fixed term is about to end, some may wonder if it's possible to remortgage before their fixed term expires. The answer is yes, but you should consider the advantages and drawbacks.

The advantages of remortgaging early

You could save money

Remortgaging could allow you to secure a lower interest rate, potentially reducing your monthly payments and overall mortgage costs.

You could access equity

If your property has increased in value, remortgaging can provide an opportunity to release equity for home improvements, investments, or other financial needs.

Gain financial flexibility

Switching to a new mortgage deal might offer more flexible terms, such as overpayment options, underpayment periods, or payment holidays.

Things to consider when leaving a mortgage deal early

You may need to pay an Early Repayment Charge

Many fixed-rate mortgages come with ERCs if you repay your mortgage early. These charges can end up costing you more than what you may save from a lower interest rate.

The costs involved in remortgaging

Remortgaging involves various costs, including arrangement fees, valuation fees, legal fees, and more. It's important to calculate whether the savings outweigh these expenses.

The credit checks and affordability assessments

A new lender will assess your creditworthiness and affordability, which could lead to a declined application if your circumstances have changed since the initial mortgage.

Staying with the same lender vs. switching to a new lender

If you want to remortgage before the end of your fixed term, you should consider whether you want to stay with your current lender or switch to a new one, as this decision can cost you money.

Staying with your current lender may not only involve less paperwork and a smoother transition, but it can also save you from paying various fees.

Some lenders offer remortgaging deals with reduced or no fees for existing customers. They might not charge you valuation fees or conveyancing and you may even have the ERC waived when you’re already their customer.

But, you may miss out on better deals elsewhere…

Keep in mind that staying with your lender means you miss out on potentially better deals available from other lenders. It can be a good idea to compare what the whole market has to offer, and this is something only a mortgage broker can offer.

As well as that, there may be fewer negotiation opportunities with your existing lender. Your current lender might be less inclined to negotiate on terms compared to a new lender looking to gain a new customer.

So what should you do?

Before you opt to remortgage before the end of your fixed term, carefully assess your financial situation and objectives. Calculate the potential savings against the costs, including ERCs and fees. Consider whether your circumstances have changed since your initial mortgage application, as this could affect your eligibility with a new lender.

If you're considering staying with your current lender, don't hesitate to negotiate for better terms or reduced fees. However, if switching to a new lender seems more beneficial, be prepared for a more complex process and higher initial costs.

Ultimately, seeking advice from a mortgage broker or financial advisor can provide personalised insights based on your situation. Remember that remortgaging is a significant financial decision, and taking the time to thoroughly research and analyze your options will help you make the right choice for your long-term financial well-being.