How early can I remortgage?

2023 is proving as a tumultuous year for many. August saw a fresh 15-year high for the UK base rate, implemented by the Bank of England, for the first time since 2008. This quarter-point increase to 5.25%, is the fourteenth consecutive rise from the BoE, in their effort to cool inflation.

With the base rate higher than ever and inflation remaining begrudgingly high (7.9% as of June 2023), more people than ever have been feeling the squeeze. None more so than homeowners.

As the base rate directly correlates to interest rates, it has seen banks raise mortgage rates over the course of the year. This is because as the base rate goes up the cost of borrowing increases, which leads to mortgage lenders charging more.

Tens of thousands of homeowners on fixed-rate mortgage deals will be dreading the jump in monthly repayments, once their current deal comes to an end.

With many homeowners worried about further price hikes, some will certainly be looking to remortgage early.

As homeowners across the country consider remortgaging early, to avoid further pain down the line, many people may be left in a state of confusion when prematurely switching to a new mortgage deal. But how does it work and can I remortgage early? These are just a few of the questions homeowners may be looking to be answered in the coming weeks and months.

To bring much-needed clarity to the topic surrounding remortgaging early, we explain the ins and outs of doing so, and everything in-between, within this article.

 

Can you remortgage early?

Yes, you are to remortgage early, at any time to be specific. However, it is important to consider whether it is worth doing so.

Remortgaging early can bring many associated costs and fees with it, so it is important to be mindful and decide which route will equate to the best financial option for you. For example, it may be the case upon further investigation, remortgaging early will lead to substantially high fees.

For the most part, when remortgaging early, you want to ensure it remains a positive financial benefit. Calculating all of the potential costs and implications when remortgaging early, will ensure your new mortgage deal puts you in good stead financially.

Some valid reasons for doing so are highlighted below.

You are coming to the end of your current fixed-rate mortgage deal

A fixed rate mortgage deal will run for a set term, which you can decide on. Most fixed rate mortgage deals come in the way of two, three, five and ten-year deals, although there is also the possibility of longer.

Upon your fixed rate mortgage deal coming to an end, you are likely to be placed on the lender’s standard variable rate of interest (SVR) which is usually higher.

Therefore, if you are currently on a fixed rate mortgage deal and are coming to the end of your term, you may wish to remortgage to a new fixed term to avoid going onto the lender’s standard variable rate.

It is important to note, the interest rate on your new mortgage deal will be dependent on what is happening with the rates at the time. In reference to today’s current rates, it is very much likely those remortgaging onto a new fixed rate mortgage, will be paying a lot more than before.

 

Interest rates are lower than what you are currently paying

Unfortunately, this is likely not something homeowners will currently have access to due to the state of the current market. However, during times of growth and stability within the housing market, mortgage lenders will continuously offer competitive mortgage deals, in a bid to attract new customers.

Accessing a new mortgage deal with highly competitive rates, even if it meant remortgaging early, could say you a lot of money in the long run.

However, it is important to remember, if you are far off from your current fixed rate mortgage ending and you decide to remortgage, you will be faced with fees and charges such as an early repayment charge.

Early repayment charges are often substantially large and can make early remortgaging not worthwhile. Although, in circumstances whereby interest rates have dropped considerably since taking out your fixed rate mortgage, it may be worth calculating to see if it is worth any consideration.

 

You have built up more equity within your home

In simple terms, equity equates to how much of your home you actually “own.” It relates to both your deposit and the total amount you’ve paid off from your mortgage. Also in circumstances whereby the value of your property has increased, your equity will also include the difference between the price you paid versus the new value of the property.

Talking about the difference between what your property is worth and the amount you owe on your mortgage is known as the loan-to-value ratio (LTV.) The more equity you have in your home leads to a lower loan-to-value ratio, which in turn leads to better mortgage deals.

For example, if your mortgage is now 70% of your property’s value, you now have the equivalent of a 30% deposit within the property. When it comes to remortgaging you would be expected to receive better deals than when you had to take out an 80-85% mortgage, when you initially bought it.

As you continue to lower your loan-to-value ratio you will gain access to better mortgage deals. Once you achieve a LTV of 50% or lower you should have access to nearly all of the deals within the market.

Therefore in circumstances where you have built up equity within your property, especially for those who have done so at a fast pace, it may be worth considering looking at a new mortgage deal. It may be the case that your existing mortgage deal is now far less competitive than many of the new offers on the market. Of course, you will still need to consider any early repayment charges and additional fees. So make sure to do your deliberations, to see if remortgaging early is actually a viable option.

 

Do you need to remortgage with the same lender?

No, you do not have to remortgage with the same lender. It is entirely your decision as to whether you remortgage with your current lender or switch to a new provider.

If anything, shopping around for the most competitive deals will often save you money in the long run. More often than not, you will find a better deal than what your current mortgage lender is able to provide.

One thing to note is that staying with your current provider can often be an easier process. So if you are unable to access more competitive mortgage deals, it may be simpler to stay with your current lender.

 

When should you look to remortgage?

If you are coming to the end of your fixed rate mortgage and want to avoid going onto your lender’s standard variable rate, it is recommended to start doing your due diligence six months before the end of your mortgage deal is due to finish. Doing so is especially important if you are concerned about rising rates in the months that follow.

Most of the mortgage offers will be valid for three to six months from the date they are issued. So even if you have six months left on your current deal, you will be able to apply for any new deals you are able to find and secure your fixed rate. Providing your application is accepted, you will be able to arrange for your new deal to start as soon as your current deal expires.

As we mentioned above, in certain circumstances it can also make sense to remortgage early. However, it is vital you weigh up the potential costs or implications to see if remortgaging early is the correct avenue to go down.

 

Unsure of whether to remortgage early – seek expert advice from a leading mortgage broker today!

At Eden Hawk, we are proud to be a leading protection and mortgage broker in South Wales. Our specialities lie in finding the most suitable mortgage solution to suit your individual requirements.

As a leading mortgage broker, we ensure to offer all of our clients the most competitive solutions on the market. Through our first-class service, our team of experts will work closely with you to ensure you receive the desired outcome.

If you are deliberating on whether to leave your fixed rate mortgage early, have questions regarding an early repayment charge or even just wish to find the best interest rate when it comes to a remortgage deal, the team at Eden Hawk will be on hand to help every step of the way.

At Eden Hawk, our goal remains simple: we want to assist as many house buyers, homeowners and property investors as possible. Helping to best plan your financial future.

If you a currently looking to remortgage early on a fixed rate mortgage and would like some mortgage advice, please contact us today for a free no-obligation initial consultation.