Remortgaging is the process of securing a new mortgage deal on the home you already own, which you usually do either when your fixed-term rate is coming to an end, or in order to switch to a cheaper deal.
When you don’t opt to remortgage and your fixed-term deal comes to an end, your lender will usually move you onto a standard variable rate (SVR) mortgage, on which your payments can go up or down each month. For more certainty, many people opt instead to secure a new fixed-term deal if they can.
You could also remortgage well before the end of your fixed term if you want to move to a better deal. But be warned – this can come with additional costs.
How early can you remortgage?
“Lenders will typically invite borrowers, who are not in arrears to switch to an alternative mortgage products 3 to 6 months prior to current their deal expiring,” explains James Briggs, head of intermediary sales at Together.
“At this stage it is a good idea to engage with a mortgage broker who, early on who can unpick the product transfer offer from your existing lender compared to what’s available from the rest of the market ahead of time.”
In theory, you can switch to a new mortgage deal earlier, but this may incur an early repayment charge (ERC). The exact amount of the charge will depend on how early you are in your term, with the cost going down the closer you are to the end of the period.
When is the best time to remortgage?
It might be tempting to see if you can get out of your current mortgage early and secure a better deal, especially if you’ve had to sign up to a deal with a high interest rate as mortgage rates have risen over the past year.
But experts have broadly agreed that there is not likely to be much immediate change in rates this year or next, meaning you likely won’t be able to find a better deal for a while. And if you’re still on a deal from a couple of years ago, when rates were much lower, you’d be better off sticking with it until the end of the term.
Most people will therefore find it easiest to follow the standard timetable of looking at deals 3 to 6 months before the end of their current fixed-rate mortgage.
An additional advantage, brought in by the Government’s mortgage charter earlier this year, is that you can lock in a rate six months before the end of your term, but then switch to a better rate with the same lender any time before your new mortgage begins if one becomes available. That means you shouldn’t lose out by planning early.
