Leaving a Fixed-Rate Mortgage Early

Why somebody might want to leave a fixed-rate mortgage includes…

How to get out of a fixed-rate mortgage early

Whatever your reason for wanting to get out of your mortgage before the fixed-rate period is up, your first step should be to contact a mortgage broker with experience helping people in similar circumstances.

Using our service, you can speak directly with the right broker by simply making an enquiry online.

They’ll be able to help with:

• Finding out how much you’d have to pay in fees: This is important as any fees will need to be factored into the overall cost of your plans. You can find out how much you will have to pay to exit your mortgage by contacting your lender or checking your paperwork.
• Gathering all the necessary paperwork: To exit a fixed-rate mortgage early, you will need certain documentation and a specific process to follow. Your mortgage broker can provide all the guidance you need to do this correctly and avoid unnecessary costs.
• Considering all the alternatives: Whatever the reason for coming out of a fixed-rate early – maybe you’re looking to remortgage, get a home mover’s mortgage or remove yourself from a joint fixed-rate agreement following a separation – a broker can help you through the process and potentially save you time, money and marks on your credit report along the way.

Possible consequences of leaving early

If you were to exit your fixed-rate mortgage while locked into an introductory rate period, the main consequence would usually be paying an early repayment charge. This charge is normally a percentage of the loan amount, typically between 1% and 5%.

The exact amount you’re charged can also vary depending on how far into the initial rates period you are. The longer you’ve left, the higher the fee will likely be. So, as a general rule, two-year fixes are cheaper to sever early than mortgages with five-year fixes or higher.

If you incur ERCs on a remortgage, you can often add them to the loan, so they aren’t payable as a lump sum. Speak to your lender about this to ensure you can do this before you remortgage.

If you know you might potentially leave your fixed-rate deal early, you can arrange to have no ERCs with your lender. This is something a broker can help you with. Speak to one of the brokers we work with to see how they can help you in this regard.

There could also be additional costs to factor in, depending on why you want to exit your fixed-rate mortgage early, and they can include the following…

• Completion fees: If you plan to pay off your entire mortgage balance to own the property outright, you might have to pay an extra fee to close your account and remove the lender’s charge from your home. This is typically charged between £50 and £200.
• Legal fees: In some circumstances, remortgages require a solicitor, such as moving to a new lender, and their services can mean paying an extra fee on top of the ERC.
• Valuation fees are sometimes payable if you leave a fixed-rate mortgage to move to another lender, as the new mortgage provider will want to assess the property’s value.

One of the main benefits of using a mortgage broker is that they can help you avoid any unnecessary fees. They can flag any financial penalties you may face and offer advice on how to avoid them. For example, if you’re refinancing, your broker could find you a lender who offers free legal and valuations as part of a remortgage package deal.

Refinancing during a fixed-rate period

It’s sometimes possible to refinance a fixed-rate mortgage early and lock yourself into a new deal with your current mortgage lender without penalty, depending on the terms and conditions you agreed to (this is typically only available if you have six months or less left on your current term). But there would usually be a fee if you want to remortgage and switch mortgage providers or refinance your agreement significantly early.

You can read more about this, including how to refinance a fixed-rate mortgage and how a broker can help, in our dedicated article on remortgaging a fixed-rate mortgage early.

What Are Your Options Once You Break Your Fixed-Rate Mortgage?

Once you’ve come out of a fixed-rate deal, you can explore all other remortgage offers available.

So, that could be:

• Tracker mortgage
• Discounted or other variable rate deal
• Another fixed-rate option with a new lender (or the same)
• Remain on your current lender’s standard variable rate (SVR)
• A further advance or secured loan
• Paying off your full mortgage balance (if funds are available)

You may already know the type of offer you want to pursue, but it’s always best to consult a mortgage broker before making final decisions, especially if you’re considering a further advance or secured loan, as a broker can advise whether this is a good idea based on your circumstances.