When you took out your mortgage, you likely entered into a fixed-rate period of 2, 3 or 5 years. After this period you’ll be put onto a higher variable rate. The majority of people look to remortgage at the end of their fixed-rate period so they continue to pay a lower interest rate. However, you may want to remortgage before your fixed-rate period ends, and the good news is you can! But whether it’s the most cost-effective choice for you depends on your circumstances.
Will I have to Pay an Early Repayment Fee?
Most lenders don’t charge a fee when you remortgage after your fixed-rate period ends. However, many do charge a fee to remortgage during the fixed-rate period, and this is called an early repayment fee, which is typically between 1-5% of the outstanding mortgage balance. Often this is done as a tiered system, for example, you may have to pay 5% to remortgage within the first year of a 5 year fixed-rate period, but only 4% in the 2nd year, 3% in the 3rd year, 2% in the 4th year, and 1% in the 5th year.
Your mortgage may not have an early repayment fee at all, so be sure to check your contract to determine whether you’ll need to pay anything and if you do, how much.
Is it ever the right choice to remortgage early if you have to pay a fee?
There are circumstances where remortgaging early is the right choice even if you have to pay an early repayment fee. Perhaps when you took out your mortgage, your situation meant you could only get a high-interest rate, but now, after improving your credit score, your situation is better and you are eligible for a lower interest rate elsewhere. In this instance, we would need to calculate the cost of paying the early repayment fee and any other fees involved with the remortgage, versus the amount of money you could save by switching to a better rate. If you could save a considerable amount even when taking into account the early repayment fee, then we would advise you to remortgage early.
The Bottom Line
There are situations where remortgaging early is the most cost-effective choice, and you could save thousands even if you have to pay an early repayment fee. But this is very much down to your current situation, including how much it would cost you to remortgage early and what mortgage products are now available to you.
If you’re thinking about going down this route, then the first step is to book in for your FREE consultation. We’ll assess your circumstances, find a mortgage product that’s right for
your situation, and then crunch some numbers. The choice should be fairly simple to make – if we find it’ll cost you more to switch to a new deal than the amount you’ll save, we’ll recommend you don’t look to remortgage early unless there are other factors involved. But if we see that you could save money by remortgaging early, and you decide it’s enough of a saving to take action, then we can help you secure the right product and make the switch easy and smooth for you.
Book your FREE no-obligation consultation. We look forward to helping you!
