Can You Remortgage Early?

Market trends dictate the different aspects of a mortgage, including the interest rate, borrowing amount, deposit requirements and so on. 

However, market trends keep changing all the time, which is why remortgages have become a necessary tool for property owners to keep up. 

Recent estimates show that remortgage advances have registered a 5.8 percentage point increase over the last year. This essentially demonstrates the rise in demand for refinancing to find the best deal on the market. 

So, the question that many new property owners ask is – can you remortgage early? That’s what we have discussed in this guide, so read on!

Why Should You Remortgage?

As suggested previously, the different aspects of a mortgage plan depend on the prevailing market conditions. 

These market conditions often change as a result of fluctuations in the global and domestic economy.

Let’s say that you have a mortgage from a couple of years ago that is still within the initial fixed rate period.

However, due to the economic fluctuations in the market, the interest rate at which you got the mortgage may no longer be attractive enough or your fixed rate is coming to an end and you will need to look into new products in order to avoid going on to the lenders Standard Variable Rate as this could prove more costly. 

So, instead of continuing with the same mortgage, you can consider looking into a remortgage that may be much more cost-effective for you.

With this in mind, here are a few plausible advantages of considering a remortgage plan for your property:

• A remortgage may help you find a new mortgage plan with better interest rates than your current lender is offering
• It may help increase the flexibility of your mortgage payment plan
• Remortgages can be beneficial for reducing or extending the term of your mortgage to suit your budget.
• You may be able to release equity by remortgaging, which helps clear any existing debt or could be used for home improvements.

When Should You Consider A Remortgage?

Ideally, you should start looking at your remortgage options when your current fixed-rate mortgage is about to end. 

Generally, most lenders allow their customers to seek out a remortgage plan six months before the current mortgage ends. 

If you don’t get a refinancing plan after the term ends, then you will be put on the bank’s standard variable rate (SVR).

The SVR is a variable rate of interest that is wholly determined by the bank. Although, in most cases, it tends to follow the base rate set by the Bank Of England. 

On that note, according to recent statistics, the average SVR in the UK at present is sitting at 8.09%. 

This is higher than the Bank of England base rate, which is currently 5.25%. Do remember that these rates can change regularly all the time, which means that your monthly payments will fluctuate which makes it difficult to budget effectively.

Naturally, SVR interest rates are quite high, which is why homeowners may find it financially challenging to continue a mortgage under SVR. 

Fortunately, a new remortgage plan can help them bypass this concern before the term ends, which is why it is a favourable practice for property owners.

Can You Remortgage Early?

A first-time buyer may naturally wonder whether it is possible to remortgage early during the mortgage term. 

And when we say early, we are referring to the time before the six-month period that is provided at the end of the term.

On that note, there is no strict guideline on when you can get a remortgage. In other words, you may be able to remortgage at any time during your mortgage term.

That being said, many lenders may not allow you to get a remortgage within the first six months of getting a new mortgage plan. 

But once you cross the introductory six-month mark, you are free to refinance your property. 

However, you should know that if you decide to refinance early, then it may come at a cost. Dropping out of a mortgage early usually incurs early repayment charges or ERC. 

The ERC that you need to pay depends on the length of the term left on your current fixed rate mortgage as usually lenders will charge more in the early years but it will reduce each year of your fixed rate period. 

For instance, let’s say that you have taken a five-year mortgage deal. If you decide to remortgage after completing four years, then the ERC will generally be lower. 

In contrast, if you decide to remortgage only after completing one year, then the ERC will usually be higher.

Of course, there are other fees involved as well, such as legal, arrangement and valuation fees. Therefore, you need to carefully examine the financial advantages of remortgaging early. 

If you find that the costs outweigh the benefits of getting an early remortgage, then it may be beneficial to wait.

Many borrowers currently in fixed rate periods are considering looking at their remortgage options 6 months before their fixed rate ends so they can lock in a new interest rate for when their current deal ends.

If interest rates increase over time then they will have locked in a lower rate. On the other hand, if interest rates reduce then you can switch the mortgage to the lower mortgage product (if eligible) before your current fixed rate ends. 

This way you will avoid any Early Repayment Charges that may be incurred by remortgaging early. 

How Can You Remortgage Early?

We would recommend talking to a mortgage advisor who can look into all options and weigh up the benefits of remortgaging early. Once decided you will need the to follow these steps:

Step 1: Arrange Your Documentation

You will need to arrange all the necessary documentation to apply for a remortgage. This includes your credit reports, financial records, information about your current mortgage and other relevant documents like identification and address proof. 

Make sure that the information on the documents are up to date to complete the process smoothly.

Step 2: Search For A Suitable Lender And Apply For The Remortgage

Look into the different lenders offering remortgage deals. Make sure to conduct thorough research, as that will help you find the most suitable lender and best deals. 

After you have found a lender, you can apply for a remortgage, the procedure for which is the same as applying for a regular mortgage.

We would recommend you consult a mortgage advisor who can check any deals with your current lender and compare them to any new products that may be available across the market. 

Conclusion

To sum up, getting an early remortgage on your property is definitely possible. The process for getting one is usually straightforward in comparison to a purchase application.

Remortgaging early is only worthwhile if the benefits outweigh the negatives such as Early Repayment Charges, fees, etc.

Remortgaging early to lock in a new mortgage product for when your current fixed rate ends is advisable as it can protect you from any interest rates increases whilst also giving you the benefit of time if interest rates reduce and you are eligible for a better deal.

If you are feeling unsure, though, you can always seek help from our qualified mortgage advisors.

We can analyse your current deal and compare with other lenders from across the market to determine the best possible solution for your personal circumstances.

Your home may be repossessed if you do not keep up repayments on your mortgage.

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.