A fixed rate mortgage is one of the most common ways to keep down the costs involved in buying a property. When you enter a fixed rate mortgage, you agree to pay a set interest rate for a specific duration, typically two, five or ten years. Because you know that your mortgage rate will not change, your monthly payments will be more predictable, and the arrangement also protects you from fluctuations in the lender's standard variable rate or increases in broader market interest rates.

However, financial circumstances can change significantly, even within one or two years. If interest rates fall during your fixed term or your financial position shifts, your current mortgage deal may turn out to be less cost-effective than you expected. That leads some people to the question of whether they can remortgage during the fixed term of their mortgage.

In many cases, the answer is that yes, you can remortgage. However, this is not the same as a standard remortgage outside the fixed term, and several key factors and costs may apply. For example, because the mortgage lender has committed to this rate, it will usually include clauses that penalise you for leaving the agreement early. This requires careful consideration before you decide to move to a new mortgage deal during a fixed term. Here, the expert remortgaging solicitors at JMW explain when you can remortgage, what you need to keep in mind before choosing a new deal, and the role a solicitor will play during the remortgaging process.

What Happens When You Remortgage During a Fixed Term?

If you decide to search for a better deal before your existing mortgage deal expires, you are effectively breaking a contract. Most mortgage providers allow you to remortgage during a fixed term, but they will likely apply early repayment charges (ERCs) and other possible penalties. Depending on the financial benefits on offer with a new deal and the costs of any fees, these potential benefits could be outweighed by the expenses associated with switching your deal. As such, it is important to consider your position carefully if you believe a remortgage is the right option.

In many cases, the savings might still be worthwhile over time compared with the ERCs you must pay. A fixed rate mortgage deal that seemed competitive years ago may no longer be the best option if interest rates have fallen or your property value has increased significantly. This is particularly true if your fixed term was due to last for five years or longer. ERCs are often calculated as a percentage of your outstanding mortgage balance, which also means that the closer you are to the end of the term, the lower any charges for withdrawing.

Many mortgage offers last for six months. As such, if you are close to the end of a fixed term and are concerned about moving to your lender's standard variable rate (which is often much higher), you can start to look for new deals at any time during the last six months of your deal and arrange for completion to take place after the fixed rate term has ended but before you must pay the standard variable rate.

What Are the Costs of Remortgaging Before a Fixed Rate Mortgage Deal Ends?

Before you proceed with a new mortgage application, calculate the total mortgage costs associated with an early exit. These can be substantial and require professional review to clarify that the move is financially beneficial.

Early repayment charges

The most significant cost when remortgaging early is the ERCs that lenders charge. Most lenders structure ERCs on a sliding percentage scale based on how many years remain in your fixed term. If you have a five-year fixed rate, the ERC might be five per cent of the remaining mortgage balance if you switch in the first year, four per cent in the second, and so on.

If you have an outstanding balance of £200,000 and a three per cent ERC, you would need to pay £6,000 to exit the deal, but this is just an example. Many mortgage providers offer an annual "overpayment allowance," usually 10 per cent of the balance, that you can clear without paying any unnecessary fees. However, remortgaging the entire balance triggers the full ERC percentage on the remaining mortgage balance. You can check your original mortgage offer for the exact percentages, and pass these to a financial advisor for support in exploring your options.

Mortgage lender exit fees

In addition to ERCs, your current lender may charge an administration fee to close your account, often referred to as a "deeds release fee" or "exit fees." These typically range between £50 and £300.

Other fees

When you move to a new lender, they will require a property valuation to ensure the asset provides sufficient security for the loan amount. Valuation fees for remortgaging typically range from £150 to £500, depending on the property size and location. Some mortgage providers offer free valuations as an incentive.

Legal fees are also necessary. You require a solicitor to handle the conveyancing work involved in moving the legal charge to the new mortgage lender. JMW offers fixed fee services for many aspects of conveyancing. Your new solicitor may charge an arrangement fee, which is an administrative charge for the time it takes to set up your account.

Is it Worth Remortgaging Before the End of a Fixed Term?

The decision to remortgage during a fixed term deal depends on potential savings. If interest rates have dropped significantly, the long-term savings on monthly payments might exceed the ERCs. Compare the total cost of staying on your current deal until it expires versus the cost of the new deal plus all exit fees. If the new mortgage agreement offers a much lower interest rate, you could save thousands over the duration of the new fixed rate term.

As well as calculating the financial impact, consider your reason for remortgaging early, as this could affect whether or not it is advantageous to do so, despite the associated costs. Some common reasons for remortgaging include:

Securing a lower interest rate

If you are currently on a high interest rate and market rates have fallen, switching could significantly reduce your monthly repayments. A lower interest rate reduces the amount of interest paid over the mortgage term and enables you to clear debt faster.

Releasing equity for home improvements

If your property has increased in value, your loan to value (LTV) ratio may have improved. Remortgaging provides an opportunity to release equity to fund home improvements. By accessing equity, you may secure a more competitive fixed rate deal than if you took out a separate personal loan. While this increases the loan amount, moving into a lower LTV bracket may result in a lower interest rate on the entire balance.

Consolidating debt or changing terms

Some homeowners remortgage to consolidate high-interest debts or to switch to a lender offering flexible terms, such as payment holidays or larger overpayment allowances. While consolidating debt can lower monthly outgoings, you are moving unsecured debt into a loan secured against your home.

In some cases, it may also be possible to borrow more from your existing mortgage lender, without the need to switch to a different lender or mortgage deal. For example, you can sometimes ask your existing lender for additional funds. This is often kept as a separate sub-account with its own interest rate, allowing you to avoid ERCs on your existing deal. Depending on your overall financial health, this may make more sense than a remortgage, but you should seek professional advice from a mortgage broker or financial advisor for guidance.

How Can a Solicitor Help With the Remortgaging Process?

JMW provides a streamlined service for homeowners moving to a new lender. If you are staying with the same lender for what is typically known as a product transfer, there may be no need for a solicitor. However, it is always best to seek legal advice and support during this process. In most cases, you will switch to a new lender, and this will require a thorough conveyancing process. The new lender will want to assess your financial situation and ability to repay the mortgage, whether during the fixed rate period or if interest rates ever go up.

Your solicitor will work to verify the value of the property, check your financial stability and represent your mortgage lender. In many ways, the new lender will treat the process as though you are buying the property for the first time, and will ask for your solicitor to carry out many of the same responsibilities as your original lender did when you first bought the property.

JMW's team reviews the terms of your new mortgage deal and explains any conditions your new lender has set. We work with a wide range of clients, from first-time homeowners to those with complex portfolios using specialist lenders, handling even the most complex legal structures with precision.