If you’re thinking about remortgaging early, you’ve come to the right place. Spoiler alert - it’s probably doable — but you’ll want to make sure it’s the right time.
Let’s talk about the best time to remortgage, and run through a few reasons why it might be better to sit tight.
How early can you remortgage?
So, how early are we talking? You can remortgage before the end of your fixed term, but whether or not you should is another question.
It depends on why you want to remortgage early in the first place. Are you doing it to save money? Or do you want to release equity in your property for home improvements?
To save money
You’ll need to take a look at the agreement with your lender and get to grips with any early repayment charges (ERC) you might owe. This is usually a percentage of the remaining mortgage amount, which lenders charge for leaving early and can make things expensive. If you want to switch and save, you’ll need to weigh up the ERC plus any setup fees for the new mortgage against the potential savings made on your new monthly repayments.
To release money
Remortgaging to unlock the cash tied up in your property is a popular way of funding renovations — but it does mean borrowing more against the value of your property. The knock-on effect is that your monthly repayments will go up to pay back the extra money you’ve borrowed.
This could mean paying back more over 20-30 years than you would when paying back a home improvement loan with a higher interest rate over 5 years. If you can afford the higher repayments short-term, a loan could save you more money overall.
Note: In both situations, the advice of a remortgage expert is key. They’ll help you run the numbers and figure out if remortgaging early makes financial sense for your situation.
What are the advantages of remortgaging early?
Remortgaging early doesn’t always mean leaving your current deal before it ends. Often, it’s about being proactive to save money on your next mortgage — a bit like shopping around for a better broadband deal or mobile phone contract. Here are a couple of ways you can make savings:
- Avoid an SVR: importantly, remortgaging early keeps you from being moved onto your lender’s standard variable rate (SVR). Being on an SVR can mean paying up to double the interest rate you were paying before. (Ouch!)
- Get ahead of rising interest rates: lock into a favourable rate in advance of your current deal ending. That way, if rates start to increase, you’ll be safe in the knowledge that your new mortgage won’t be affected.
When is the best time to remortgage?
If you want to take advantage of the benefits mentioned above, the best time to look for a new mortgage deal is around six months before your current deal ends. This avoids rushing to accept the first deal you find.
And when a lender offers you a mortgage, you’ll typically have between three and six months to accept it. This means you can time it so your new mortgage starts when your current deal ends.
So, how long does it take to remortgage?
In the right hands, remortgaging can be a smooth process. Finding and applying for a new mortgage is often the easy part, but everything that follows can depend on whether you stay with your current lender or switch to a new one.
If you stick with your existing lender
It probably won’t involve any additional legal work or fees. You’ll simply move onto your new deal at the start of the fixed term and pay your new monthly fee going forward. Easy as that.
If you switch lenders
You’ll need to gather up-to-date personal and financial information, proof of earnings, credit card statements — pretty much everything you had to submit the first time you got a mortgage. Here’s a reminder of what you’ll need.
Your new lender will then check your credit file and arrange a property valuation. You’ll need legal help for this part - some lenders offer free legal work with their remortgage deals, others ask you to sort it yourself.
Once you’ve signed on the dotted line, your new lender will pay off your old mortgage, and you’ll start making your new monthly repayments.
The entire process can take between 4 and 8 weeks (sometimes longer), so it’s always a good idea to give yourself plenty of time to remortgage before your deal ends.
When does remortgaging early not make sense?
There are a few scenarios where remortgaging early is trickier — or maybe not worth it.
These can include:
- When you need to pay early repayment charges: As we mentioned earlier, if you end your deal prematurely, you may need to pay an early repayment charge. Depending on how much this is, it could offset any savings you had hoped to make by switching.
- If you’re remortgaging to repay debt: Consolidating debt with a remortgage will often mean paying back more in the long run than if you were to clear your debt with a loan on a higher interest rate. Also remember that you’re switching unsecured debt to secured debt (secured against your property) - this means your home is at risk if you can’t afford to make the higher monthly mortgage repayments.
Need a hand getting to grips with debt? Check out the Money Advice Service.
- If your employment status has changed: If you’ve recently started a new job, qualifying for a new mortgage can be difficult, even if you’re now earning more than before. This is because many lenders see change as risk, and they know that new jobs can come with probationary periods.
- If you’ve got a poor credit history: Trying to remortgage with a bad credit score can harm your chances of getting a good deal (or any deal). Before applying, check your score with Experian, Equifax, and TransUnion. This will give you an idea of your current situation and what you need to do to improve your credit score.
Note: These scenarios don’t mean you can’t remortgage early, but they can make it harder. Always make sure you get the right advice before remortgaging.
Can Habito help me remortgage early?
Yes, we can! When you remortgage with Habito, we help you find the best deal for your situation. If you want to remortgage early, you can chat with one of our experts for free to get the ball rolling. Simply answer a few quick questions to get started.