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How much will it cost to break my fixed rate mortgage?

Should break my fixed rate mortgage and how would I go about this? Get the right advice here

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 20, 2021

When you buy a property with the help of a loan, it’s up to you to decide which type of mortgage is right for you. Each carries varying degrees of risk, so to discuss which is most suitable for your circumstances, contact us to speak to an expert advisor.

Fixed rate mortgages are when lenders give you an initial short-term “incentive” rate (usually two-five years, although longer fixed rate deals are on the increase), which remains fixed for the agreed term, regardless of any base rate fluctuations.

But what happens if you change your mind during this incentive period? This article will be covering when it may be wise to break a fixed rate plan and how much it would cost to get out of a fixed rate mortgage:

How to break a fixed rate mortgage

Recently, mortgage providers have been making their rates more and more competitive to help encourage more buyers onto the property ladder.

While this is great news if you’re currently in the process of buying a home or remortgaging, it can be extremely frustrating if you agreed to a fixed-rate deal a couple of years ago – especially for longer-term fixes.

Understandably, it stands to reason that some current homeowners are unhappy with their current financial arrangements. If you’re considering trying to get out of your fixed rate deal, it’s a simple matter of contacting your lender.

But there are implications of breaking a fixed-rate mortgage. While most lenders allow you to get out of your plan, there are costs and other factors to consider, which we’re going to cover next.

What is the penalty for breaking a fixed rate mortgage?

Because some of the new offers popping up onto the market are so affordable, trying to get out of your fixed-rate deal and switching to one of them can be very tempting – but is it worth it?

Almost every fixed-rate and tracker mortgage lender imposes an early repayment charge (ERC) if you want to get out of a deal early – and this can be pricey. Exactly how much it will cost to break your fixed plan is very much lender-dependent.

In some cases the ERC will be fixed, meaning you’ll pay the same even if you’ve already completed three years of your five-year plan – for example. Other lenders take a “tiered approach”, meaning the fee will decrease as each year of the deal passes, there are some lenders who offer mortgages with no early repayment charges so it’s worth speaking to an advisor to work out what charges you may face.

The basis on how lenders charge ERCs may also vary. Some will charge depending on how much loan you have outstanding, whereas others may base it on the original loan amount.

Should I break my fixed rate mortgage?

Given that ERCs could potentially cost you thousands of pounds, it can be very difficult to weigh up whether the savings you’d make by switching providers will be financially worthwhile, or just a waste of time.

Before you make any hasty decisions, it’s important to consider all the above factors to ascertain how much you’re liable to be paying out in relation to what you’ll be saving by moving to a new lender.

For assistance with this, make an online enquiry and we’ll refer you to a specialist.

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Speak to an expert for advice on your fixed-rate mortgage plan

As we’ve established, if you’re considering breaking your fixed-rate mortgage it’s extremely important to check your agreement to see how your ERC is calculated, as well as any other associated penalties.

If you’re having trouble doing this, don’t panic – we work with ERC specialists who are at hand to do all the hard work on your behalf!

They can assess your situation and provide you with advice on what they feel your next move should be.

So, what are you waiting for? Give us a call on 0808 189 2301 or submit an online enquiry and we’ll be in touch as soon as we can. We only work with 5* accredited advisors, we don’t charge a fee, and there’s absolutely no obligation on your part.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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