How to Remortgage Early Without Penalties

Smart Strategies to Switch Mortgage Deals Early Without Extra Costs

Introduction

Many UK homeowners consider remortgaging before their current deal ends to take advantage of better interest rates or change financial circumstances. However, early remortgaging can come with financial penalties—most commonly early repayment charges (ERCs). Understanding how to remortgage early without penalties can help you save money and gain flexibility in your mortgage arrangements. In this blog, we’ll explore strategies to avoid or reduce remortgage penalties, assess the benefits of switching deals early, and provide practical tips to navigate the process efficiently and compliantly.

Understanding Early Remortgaging in the UK

What is Early Remortgaging?

Early remortgaging refers to switching your mortgage deal before the end of your existing fixed, tracker, or discount rate period. While this move can offer better terms, it may come with costs depending on your lender’s terms.

Common Penalties: Early Repayment Charges (ERCs)

ERCs are fees charged by lenders when you exit a mortgage deal early. These can range from 1% to 5% of your outstanding mortgage balance, depending on how early in the term you remortgage.

Key Considerations:

• ERCs decrease over time in tiered deals (e.g., 5% in year one, 4% in year two, etc.).
• Some lenders allow overpayments or limited early exits without full ERCs.

How to Remortgage Early Without Penalties

1. Check Your Mortgage Terms

Your mortgage agreement will detail whether ERCs apply, and how much they are. Understanding this helps you time your remortgage effectively.

2. Remortgage During a Penalty-Free Period

Many mortgage deals include a window (often the final 3–6 months) before the end of the term when ERCs no longer apply. Planning to switch during this period can help you avoid penalties entirely.

3. Use a Lender That Offers Remortgage Flexibility

Some lenders offer deals with no ERCs or allow switching to a new deal early if rates improve. These are ideal for borrowers who value remortgage flexibility.

4. Consider Product Transfer Options

Instead of moving to a different lender, staying with your current lender and switching to a new product may avoid ERCs while still offering better terms.

5. Offset the Costs

If the savings from a new mortgage deal outweigh the ERCs, it may still make financial sense to remortgage early. A broker can help calculate this.

Practical Tips for Remortgaging Early

1. Your Current Deal: Understand when your fixed term ends and what charges apply if you exit early.
2. Consult a Mortgage Broker: An FCA-regulated broker can provide tailored advice on remortgaging strategies and recommend flexible products.
3. Consider Timing: Plan 3–6 months in advance of your deal expiring to explore options within penalty-free periods.
4. Calculate the True Cost: Weigh up ERCs against potential savings from a lower interest rate to make a financially sound decision.
5. Explore Product Transfers: Ask your current lender about internal switch options that don’t involve ERCs.

Our firm offers expert remortgage guidance and helps clients navigate early switches with minimal cost and full compliance. As an FCA-regulated broker, we provide all services without charging any broker fees.

Frequently Asked Questions (FAQs)

Yes, but it may involve paying an early repayment charge depending on your lender’s terms.

It’s a fee charged by your lender if you repay your mortgage or switch deals before the end of your fixed or discount period.

Yes, some lenders offer ERC-free products or allow flexibility in switching, but they may come with slightly higher interest rates.

Possibly. Product transfers with your current lender may offer new terms without ERCs or legal fees.

A mortgage advisor can compare potential savings from a new deal against any ERCs to determine if remortgaging early is worthwhile.

As a mortgage is secured against your home, it may be repossessed if you do not keep up the mortgage repayments.