Remortgaging Before the End of a Fixed Rate Term
How soon can you remortgage before a fixed rate ends? Get the right advice to save time and money from a specialist remortgage expert
Firstly, what is the length of your current fixed rate deal?
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We explain how it’s possible for you to refinance a fixed-rate mortgage before the end of the original agreed term, what the pros and cons of doing this are and how a mortgage broker can help you find the best new remortgage deal.
Can you remortgage a fixed-rate mortgage early?
Yes, and by ‘early’ we mean during the introductory rates period of a fixed-rate mortgage, which would usually last between two and five years, sometimes longer. It’s possible to refinance with your existing mortgage lender or switch to a new one, but there are implications to remortgaging during a fixed-rate term to be aware of before pressing ahead with your plans, mainly the costs involved, such as:
- Early repayment charges
- Legal fees
- Valuation fees
As well as the potential implications, the long-term benefits of securing a much cheaper interest rate than what you have currently could far outweigh the costs involved. An experienced mortgage broker would be able to go through both aspects of any new remortgage deal so you can make a clear decision.
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How to remortgage during a fixed-rate term
Your first step should be to find a mortgage broker who has experience in this area as this will save you a lot of time and ensure you avoid paying any unnecessary costs during what could be quite a complicated process.
Using our free broker-matching service you can speak straight away to the right broker by simply making an enquiry online.
They’ll be able to help with:
- Assessing what the exact exit penalties will be for your specific mortgage situation and what other fees may apply if you switch providers before the end of your fixed-term
- Downloading your credit reports and reviewing your current credit history in order to identify any inaccuracies or outdated information before you apply
- Arranging all the necessary paperwork and documentary evidence required for this type of remortgage – this includes offering guidance through the process for coming out of one mortgage agreement into another
- Finding the right lender and securing a new remortgage deal that best suits your circumstances
Common misconceptions about remortgages
- Sticking with your current lender is the best option: Bank loyalty is one of the main reasons people fail to get the best deal available. Many homeowners who are remortgaging think they’ll get preferential treatment or special rates for sticking with the same lender, when in fact there’s no guarantee you won’t get a better deal elsewhere.
- You shouldn’t remortgage if it means paying exit fees: Learning that they have to pay exit fees to leave a fixed-rate mortgage often puts people off remortgaging, but don’t think of them as an automatic deal-breaker. Exit fees should be factored into the overall cost of a remortgage. If there’s a deal out there with a better rate, the long-term savings you make means this could be the best outcome, even with the exit fee included in the equation.
- You don’t need a broker to remortgage: This is another misconception that can cost people a lot of money. Some believe that using a broker to refinance is overkill, but their knowledge, expertise and whole-of-market access is often the difference between landing the best deal available and having to settle for high rates with your current lender or one you’ve selected at random on the high street or through a quick Google search.
- Finding a remortgage yourself is quicker: Whilst this may be true in certain cases, simply searching online won’t give you access to the entire market – particularly if you need a specialist lender – which means you may not have found the best deal available. This is where a whole-of-market mortgage broker can be so valuable. Our free broker-matching service will connect you to an advisor. They will save you the legwork of having to search for the best deal, help you complete the paperwork and make sure there are no unexpected setbacks by introducing you to the right lender, first time.
Implications of refinancing early
The main consequence is having to pay fees for leaving your existing deal early.
There are several charges that you might be liable for and they are as follows…
- Early exit fees: By remortgaging, you’d be ending your mortgage contract early, which often means there are fees equal to a percentage of the loan amount to pay. The longer you have left to go in your fixed rate period, the higher the fee is likely to be.
- Legal fees: There are circumstances where you might need to find a solicitor to oversee the remortgaging process, such as moving to a new lender, for example. Many mortgage lenders do, however, offer free legals and/or cashback deals to cover these costs.
- Valuation fees: If you’re moving to a new lender, the new mortgage provider will want to see evidence of the value of the house, so you might need to pay for a valuation survey. Many mortgage lenders offer free valuations on remortgages as an incentive.
Be sure to find out whether any of these fees might apply before you go ahead with a remortgage so you can factor them into the overall cost.
One of the main benefits of using a remortgage broker is that they can make sure you’re aware of every potential cost involved and help you keep these charges to a minimum by matching you with a mortgage lender who waives certain fees as an incentive.
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Can you extend your mortgage term during a fixed rate?
You can extend the length of your entire mortgage during a fixed-rate term, but it depends on your provider. Some will consider an application to extend the term at any stage, while others only will if your fixed-rate period has expired.
If you are simply looking to extend the term of your current fixed-rate deal, with your existing rate then this isn’t usually allowed without incurring early repayment charges (ERCs). You would need to break from your current terms and agree to a new offer with either your existing lender or a new one.
Remortgaging a fixed-rate buy-to-let property
It’s possible to remortgage a buy-to-let property during the initial rates period of a fixed agreement, but this will be at the lender’s discretion. The interest you pay is usually higher than for residential properties and refinancing can be a way to find a better deal with less interest.
For buy-to-let mortgages, there’s normally a minimum of six months before you can remortgage. Exit fees are usually applied on a sliding scale, so the longer you leave it the less you’re likely to have to pay to get out of your current deal. The first thing you should do is speak to your lender and ask them if they will allow you to switch. If they agree they may offer you a new rate.
Depending on how far into the mortgage you are, the new rates you’ll be offered will vary, as explained below. If, on the other hand, they decline, you can approach another lender, but it’s a good idea to speak to a mortgage broker for expert advice before pressing ahead.
You can remortgage a fixed-rate mortgage early:But expect to pay exit fees and potentially foot other costs as well. This is likely to be the case regardless of whether you’re remortgaging with your current lender or hoping to switch to another one.
A remortgage broker can help you save time and money:The right advisor can help you avoid paying unnecessary fees and make sure you end up with the best remortgage deal you qualify for. In short, they can save you time, money and potential heartache.
We can match you with the right broker for free:Our free broker-matching service will pair you with the advisor who’s best placed to get you a great remortgage deal. After an assessment of your needs and circumstances, it will match you with a broker who specialises in helping people exit a fixed-rate mortgage and refinance onto a better deal.
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Ideally, you’ll want to make an enquiry about remortgaging several months before you’re due to revert to your lender’s standard variable rate, as this is likely to be more expensive. Most lenders contact their customers when their fixed rate is soon to expire to upsell a remortgage.
You can actually lock in a new fixed-rate six months before your current deal is due to expire – this ensures you don’t miss out on a deal that might not be available later.
But you can shop around for a better deal at any point during a two-year fixed-rate mortgage. Just be sure to check with your mortgage provider to find out how much you’ll need to pay in exit fees and factor that into the overall cost of refinancing.
Most mortgage lenders will at least consider allowing you to remortgage during a fixed-rate period, though not all will offer this if the deal is below a certain value or you’re less than six months into the agreement. Furthermore, many mortgage providers will charge you extra fees to exit your current fixed-rate mortgage. These fees can vary from lender to lender and the exact amount will likely depend on how long you have left in your initial rates period.
The key point to keep in mind is that you shouldn’t limit yourself to just one lender. Don’t take your current lender up on a remortgage that will lock you into a new fixed-rate with them without comparing the entire market first. For exactly the same reason, it isn’t advised to approach any other lenders direct – there could be a better deal available elsewhere.
Yes, you don’t need to still be in your fixed rate period to remortgage and some people choose to wait for a wide range of reasons. However, you need to be aware of the implications of waiting.
When your fixed rates period ends, you will move onto your mortgage lender’s standard variable rate (SVR), which is nearly always much higher than what you will have been paying while fixed in.
Some people choose to move onto the SVR when interest rates are low or because they want the flexibility to make additional overpayments. At the time of writing (October 2023), most SVRs will be higher than the rates available for customers who fix in.
If you have a certain amount of time (usually a period of between 3-6 months) before your existing mortgage deal comes to an end, your mortgage lender may let you ‘lock-in’ a new rate in advance in order to avoid losing that offer and having to accept a higher rate at a later stage.
If you’re struggling to meet your monthly repayments you should speak first with your existing lender to see if they can offer any other deal that avoids you missing any payments. One of these considerations could be to extend the current mortgage term, which would lower the repayments.
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