Can I fix my mortgage if I’m in an early repayment charge period?
When you take out a new mortgage the chances are the lender will impose a charge for at least the benefit period, so for example if you took a two year discounted rate it is likely that the early repayment charge period is for two years also.
Early repayment charges are the lenders way of ensuring your custom for a given period as setting up a mortgage is costly to them. The amount is dependent on the lender, product and may be on how far you are into the benefit period.
Can I fix my mortgage if I’m in an early repayment charge period?
The short answer is ‘yes’ the lender cannot prevent you from leaving them, however they can charge you for the privilege.
It is fair to say most Lenders on new mortgages limit the early repayment charge to 3% of the amount repaid (but it could be much less) in the product benefit period. So if the mortgage is £100,000 you will have to pay £3,000 to leave. However, some historic mortgages may have greater charges, and 6% was not uncommon.
So the first thing you need to establish is how much you will need to pay to exit your current mortgage. Early repayment charges would have been specified in your Mortgage Offer document.
Once you have this figure you need to make a decision as to whether you are willing to wait until the early repayment period expires or whether you are prepared to bite the bullet for the security of a long term fix.
When you remortgage the new lender will probably allow you to add the early repayment charge from your previous mortgage to their balance. This will of course incur interest but might help you if you are short of cash.
It may be possible to absorb this cost and pay a lower monthly amount than you’re currently on as there are some very good long term fix deals available right now, including https://www.nicheadvice.co.uk/remortgage-free-valuation-legals/
Niche Advice offers appropriate advice to mortgage holders in early repayment charge periods. To find out more please complete the online Contact Form or call T: 020 7993 2044.
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines. To get in contact with him please click here.
