Most mortgage contracts begin with a deal that lasts for a fixed term, usually 2 or 5 years. While many people start to look at new mortgage deals up to 6 months before their current deal expires, some may question whether they can remortgage early and how the process works. In this article, we explain how the remortgage process works, how early you can remortgage and the things you should consider when remortgaging early.
What is a remortgage?
A remortgage is when you switch your mortgage over to a new mortgage contract without moving home.
You can remortgage with your existing lender so that you simply move your existing mortgage balance to a new mortgage product offered by the same lender - this is called a product transfer. Alternatively, you may wish to remortgage to a better mortgage deal offered by a different lender and this will require a new mortgage application. Typically, a product transfer is quicker than a new mortgage application. You can compare mortgage deals using our mortgage deal comparison tool.
Why should you remortgage?
Mortgage customers whose existing deal is coming to an end will usually look to remortgage in order to avoid going onto their lender's standard variable rate (SVR). The SVR is usually higher than the interest rate that you could secure by remortgaging. So, if you can get a better deal in the form of a lower interest rate on your mortgage, you should look to remortgage in order to save money on your monthly mortgage repayments as well as the eventual overall cost of your mortgage.
Switching deals may mean you can arrange a new fixed-rate period or you may decide to change products and go for a discounted or tracker rate mortgage.
How early can you remortgage?
Practically speaking, you can remortgage at any time but you may need to pay early repayment charges and exit fees as a consequence and so it is wise to check the terms of your current mortgage deal before proceeding. We explain more about early repayment charges in our article, "When is it worth paying an early repayment charge to remortgage early?".
How early can you remortgage without a penalty?
If you wish to remortgage before your fixed mortgage deal ends, it is likely you'll have to pay an early repayment charge and/or exit fee, however, this will depend on the conditions of your current mortgage contract. Early repayment charges can be as much as 1% to 5% of your mortgage balance and so it is rarely worthwhile switching mortgage deals where a charge will apply.
Often, however, lenders will allow you to lock in the terms of a new mortgage deal up to 6 months before your current mortgage deal ends, meaning you simply switch over when your current deal ends. It can be sensible to start preparing for a remortgage as early as 7 or 8 months before your mortgage deal is due to expire, giving you time to search the market for a new mortgage deal and get your paperwork in order.
Remortgaging early - what are your options?
The optimum point to remortgage is dependent on the reason for your remortgage. Below, we explain some common remortgage scenarios and when you should start the process for each.
Can you remortgage early and switch to a new deal?
Yes. For the best outcome, you should start engaging with the remortgage process around 7 to 8 months before your current deal expires. This will give you ample time to evaluate the mortgage deals that are available to you.
Remember that switching to a new lender will require a new application and this can take some time and so you should allow at least 4 to 8 weeks for processing as any new lender will likely ask for evidence of earnings, outgoings as well as a copy of your credit report. Additionally, you can expect the legal conveyancing to take some time as they do all the checks to determine your mortgage balance and property information again. An arrangement fee is quite commonly charged for this type of remortgage too.
Some lenders will allow you to lock in a mortgage deal up to 6 months before you are due to remortgage while others may allow this around 3 months before you switch.
Can you remortgage early to release equity in your home?
Yes. Although most people remortgage to move to a new deal with improved terms, some people choose to remortgage in order to release equity in their home. You may wish to remortgage to release the equity in your home to pay for home improvements, fund university/school fees or to consolidate other debts that you have.
This process is best started a few months ahead of when you require the funds to be released to you. Again, you will find that remortgaging by way of a product transfer will be simpler and quicker than if you remortgage to a new lender. It is worth checking the turnaround times with your chosen lender as these can vary from time to time. Also, factor in the time it will take to complete conveyancing.
Can you remortgage early in order to change your mortgage type?
Switching mortgage types can be done at any time during your mortgage term but you may have to pay early repayment charges and exit fees to do so. Speak to your lender to see what options are available to you.
Can you remortgage early with the same lender?
In some cases, your lender may allow you to remortgage early via a product transfer. The process ensured that you can lock in a deal early and simply switch over when your current deal ends. Speak to your lender to see if this is a viable option for you.
Should you remortgage early?
It can be beneficial to remortgage early in certain situations, however, it would be wise to speak to an independent mortgage specialist* as they can weigh up the costs of doing so, ensuring it is the right decision for your circumstances. Here are some of the ways in which you can benefit by remortgaging early:
- Save money on your monthly mortgage payments if your interest rate is reduced
- Fix your interest rate so that your affordability is more predictable
- Switch to a more flexible mortgage contract
- Pay off your mortgage sooner by changing the term
When should you remortgage to get the best deal?
Remortgaging early could be a good idea and if you wish to avoid the early repayment charges and exit fees, you should explore whether you can lock in a mortgage deal early. While it can be simpler to remortgage with the same lender, take the time to check if there is a better deal on the market that could save you more money. Speak to an independent mortgage broker about your remortgage options as they will be best placed to advise you whether you should remortgage early or not. They will be able to access every deal on the market ensuring you get the best remortgage deal for your circumstances. If you don't have a mortgage broker, you could try online specialists Habito*. It provides whole-of-market mortgage advice and is able to search mortgage deals from over 90 lenders different lenders. Alternatively, try VouchedFor* - where you can search for local mortgage brokers based on the real experiences of customers who have used them.
If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. The following link can be used if you do not wish to help Money to the Masses or take advantage of any exclusive offers - Habito, VouchedFor