Leaving a Fixed-Rate Mortgage Early

In this article we’ll explain whether you can leave a fixed-rate mortgage early, what the potential implications could be of doing this and why it’s important to speak with an experienced mortgage broker before making any final decisions.

Can you leave a fixed-rate mortgage early?

Yes. It’s possible to get out of a fixed-rate mortgage during the introductory rates period under a number of different circumstances, but the vast majority of the time, leaving a fixed agreement early could mean paying quite costly early repayment charges (ERCs) and sometimes other fees. Since leaving a fixed-rate mortgage during the initial rates period usually means being hit with fees, it’s a good idea to seek professional advice from a broker before pressing ahead.

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

How to get out of a fixed-rate mortgage early

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

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:

• 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 required: Coming out of a fixed-rate mortgage early will need certain documentation and a specific process to be followed. Your mortgage broker can provide all the guidance you need to do this correctly and make sure you avoid paying any unnecessary costs as a result.
• 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 rates period, the main consequence would usually be having to pay an early repayment charge. This is normally a percentage of the loan amount, typically somewhere 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 got left, the higher the fee is likely to be. So, as a general rule, two-year fixes are cheaper to sever early than mortgages with five-year fixes or higher.

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 your plan is to pay off your entire mortgage balance to own the property outright, there might be an extra fee to close your account and remove the lender’s charge from your home. This is typically charged at between £50 and £200.
• Legal fees: Remortgages can call for a solicitor in some circumstances, such as moving to a new lender, and their services can mean paying an extra fee on top of the ERC.
• Valuation fees: Sometimes payable if you’re leaving 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 up 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 some sort of fee to pay 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 you out – 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’re free to explore all other remortgage offers available across the market. 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)
• Paying off your full mortgage balance (if funds are available)

You may already have an idea of the type of offer you want to pursue but it’s always best to consult with a mortgage broker before making any final decisions. They have access to the entire market, including offers not readily advertised online.