If you’re interested in remortgaging, you might assume that you need to wait until you’re existing deal ends before you can even get the ball rolling, which isn’t necessarily true. If your current mortgage deal is going to end within the next six months, or you’re worried about rates increasing and want to secure a new deal now, it is possible to lock in a deal even if you’re currently wrapped up in your existing mortgage.
However, there is a key factor to consider, if you’re tied in to your current rate you will have to pay an early repayment charge if you decide to switch before your deal ends. As a remortgage specialist, we can help you determine whether remortgaging early is worth it for you and whether the cost is covered by the saving you will make by changing to a new deal.
How early can you remortgage?
You can technically remortgage at any point, but there is no point in doing it if it won’t financially benefit you in the long term. It will be most beneficial to choose a time when there’s a strong compelling benefit to moving you mortgage. This could be when:
- You’ve reached the end of a fixed rate mortgage deal
- You have built up more equity in your property
- The interest rates are less than what you’re currently paying
In the past, people stayed with the same lender for the entire period of their mortgage, but often this is no longer the case. You can change mortgages as easily as switching energy providers, thanks to experts in the remortgage conveyancing process like Toomey Legal. Alternatively, you can opt to remortgage early sticking with the same lender.
At the end of a fixed rate deal
Fixed rate mortgages are put in place for a set term, usually between 2 and 10 years, at the end of which you are put onto the lender’s standard variable rate of interest (SVR). The SVR is nearly always higher than a fixed rate, so you’ll need to remortgage at the end of your term if you don’t want to be put onto the standard variable rate.
Whether the interest rate on a new deal is more or less than what you’ve been paying comes down to what’s happening with rates at the time you’re looking to move. You don’t have to stay with the same lender when you remortgage and should definitely shop around to see what’s out there.
When you’ve built up more equity in your property
Equity is the term used to describe the difference between the value of your property and how much you owe on your mortgage. The balance of the two is known as the loan to value ratio (LTV). If the price of your house has increased, your mortgage will be a smaller percentage of the property’s value than it was when you first got your mortgage. The more equity you have in your property and the lower your LTV, the better remortgage deal you can get.
If your mortgage is currently 75% of the property’s value, you have the equivalent of a 25% deposit in the house. This means that when you come to remortgage, you may get better terms than if you had to take an 85% mortgage when you purchased it. When you get to less than 50% LTV you should be able to access pretty much any deal on the market, subject to you meeting the rest of the criteria set out by the lender.
Interest rates are less than what you’re paying now
Mortgage lenders regularly come out with new deals, so you may find there are cheaper deals around which could save you a lot of money. You could lock in to a fixed rate mortgage and feel assured that your repayments will remain the same for a specific period of time, regardless of what happens to other rates.
If you are part way through your fixed rate but still decide to complete the remortgage, you could be required to make early repayment charges. These can be fairly large, but you should think about it if interest rates have dropped considerably since you took out your fixed rate mortgage.
When you should you think about remortgaging?
Generally, it is a good idea to start looking around at the deals available up to six months before your current mortgage is due to finish, especially if you are concerned about rising interest rates in the upcoming months. A lot of remortgage offers will stay valid for between three and six months from the date they are issued.
So, even if you have six months left on your mortgage, you can apply for your new deal and secure your new rate. As long as your application is accepted, you can organise with your lender for the new mortgage to start as soon as the old one ends.
The benefit of planning which deal you want to switch to in advance is that you can move directly from one deal to another without going onto your lender’s SVR. Standard variable rates are typically much higher than other rates, meaning the sooner you change to a new deal, the more money you could potentially save.
Keep in mind that even though planning in advance can be useful, the further away you are from the end of your deal, the more limited the choice of lenders and deals might be.
Should you remortgage early?
If you’re considering remortgaging early, it’s best to seek help from expert conveyancing solicitors Newcastle like Toomey Legal. We can provide useful advice and guide you through the entire remortgaging process and make sure you get onto the best deal possible for your circumstances. Contact us today to get started.