What to consider when remortgaging mid-deal
Yes, remortgaging during an existing mortgage deal is possible, and sometimes it’s even beneficial, depending on your circumstances. You might consider remortgaging partway through a deal for several reasons, such as consolidating debt, securing a better interest rate, or releasing equity from your home for renovations or other financial needs.
While it may seem like an appealing option, it’s essential to carefully consider the financial and practical implications before making a decision. Remortgaging during a deal can incur additional costs and complexities. Below, we explore the options and considerations, with examples, to help you better understand the potential benefits and challenges.
Early repayment charges explained
The first major factor to consider is whether early repayment charges (ERCs) will apply if you leave your current mortgage deal before it concludes. These charges are typically associated with fixed-rate and discounted variable mortgages and can range from 1% to 5% of your outstanding balance. For instance, if you have a £200,000 mortgage with an ERC of 3%, you would need to pay £6,000 to exit early.
However, there are cases where remortgaging might still make sense. Imagine you have 2 years left on your fixed-rate mortgage at 5%, but you’re eligible for a new deal at 3%. If this new rate saves you £250 per month or £6,000 over two years, the savings could offset the ERC. Our highly experienced team can help you run these calculations and determine whether it’s financially worthwhile.
How new mortgage rates compare to your current deal
Another critical consideration is the rate you could secure on a new deal compared to the rate on your current one. Interest rates are constantly shifting, and there may be an opportunity to switch to a lower rate to reduce your monthly repayments. For example, if you’re currently paying £1,000 a month at 4%, switching to a 3% rate could lower your payments to £800, saving you £200 a month.
However, you must also account for associated costs such as arrangement fees, which can range from £500 to £2,000. If these upfront costs outweigh the savings, it might not be the right time to remortgage. Brokers are invaluable in guiding you through these comparisons, ensuring all costs are factored into your decision.
Remortgaging to borrow additional funds
Some homeowners may choose to remortgage mid-deal to unlock equity for specific needs, such as renovating their kitchen, building an extension, or consolidating high-interest debt. For example, if your home is worth £300,000 and your outstanding mortgage balance is £150,000, you might be able to access up to £60,000 in equity by remortgaging (depending on the lender’s criteria).
However, borrowing more will increase your debt and monthly repayments. Taking out an additional £60,000 could mean your repayments rise by £300 to £400 per month, depending on the interest rate and term. It’s important to ensure any additional borrowing aligns with your long-term financial goals and remains manageable within your household budget.
When porting your mortgage is a better option
If early repayment charges make remortgaging impractical, another option is to consider porting your mortgage. This allows you to transfer your existing deal to a new property, so you can move without incurring significant financial penalties. For instance, if you’re relocating due to a job change or need more space, porting could provide a seamless solution.
However, porting isn’t always straightforward. Lenders may require you to reapply for the mortgage under current affordability criteria, which could be challenging if your financial situation has changed. Before making any plans, we can check your lender’s terms and conditions and discuss your options.
How brokers access exclusive remortgage deals
One compelling reason to seek professional mortgage advice is to access products that aren’t readily available to the general public. Lenders often reserve their best rates for borrowers working with mortgage brokers, meaning you might secure a deal that’s not listed on comparison sites or advertised directly.
For example, if you’re looking for a five-year fixed rate, we might find you one at 3.2%, while the best deal you can find online is 3.5%. Over the term of your mortgage, this difference could save you thousands of pounds. We also handle much of the paperwork, saving you time and effort during the remortgaging process.
Examples of when remortgaging early makes sense
Timing plays a crucial role in deciding whether to remortgage mid-deal. Imagine you’re 18 months into a five-year fixed-rate deal, but interest rates have dropped significantly, and your financial situation has improved. By making accurate calculations, you might find that switching now saves you thousands, even after factoring in any ERCs and fees. Alternatively, if rates are rising and your fixed deal ends in six months, it might make sense to wait to avoid unnecessary costs.
Conversely, if you need funds urgently, for instance, to cover unexpected major home repairs or to consolidate high-interest loans that are stretching your budget, that urgency might justify making the move sooner rather than later.
When to get expert advice before remortgaging
Deciding whether to remortgage during an ongoing mortgage deal is rarely straightforward. It pays to consult a mortgage broker. We can assess your circumstances, explore every angle, and provide tailored advice. Additionally, we can help you understand all the costs involved, source the best deals, and guide you through the application process.
If you’re feeling unsure, remember that we specialise in helping people make sense of situations exactly like these. Our expertise will ensure you’re making a well-informed choice, whether you remortgage now, wait, or consider alternative options.
