There are many reasons why you might want to refinance a fixed-rate mortgage before the end of the introductory rates period:
- Are you thinking about remortgaging before the end of your current mortgage term?
- Has recent energy prices and cost of living made you look at your finances?
- Do you want to switch lenders or take advantage of lower interest rates that might be available?
Whatever the reason, we’re here to help!
Read on to find out if it’s possible to remortgage your current agreement early, what the implications of doing this are likely to be, and how to get the best remortgage deal.
Can you remortgage a fixed-rate mortgage early?
Yes, and by ‘early’ we mean during the introductory rates period of a fixed-rate mortgage, which would usually last between two and five years, sometimes longer. It’s possible to refinance with your existing mortgage lender or switch to a new one, but there are implications to remortgaging during a fixed-rate term to be aware of before pressing ahead with your plans.
Implications of refinancing before a fixed rate ends
The main consequence is having to pay fees for leaving your existing deal early.
There are several charges that you might be liable for and they are as follows…
- Early exit fees: By remortgaging you’d be ending your mortgage contract early, which often means there are fees equal to a percentage of the loan amount to pay. The longer you have left to go in your fixed rate period, the higher the fee is likely to be.
- Legal fees: There are circumstances where you might need to find a solicitor to oversee the remortgaging process, such as moving to a new lender, for example. Many mortgage lenders do, however, offer free legals and/or cashback deals to cover these costs.
- Valuation fees: If you’re moving to a new lender, the new mortgage provider will want to see evidence of the value of the house, so you might need to pay for a valuation survey. Many mortgage lenders offer free valuations on remortgages as an incentive.
Be sure to find out whether any of these fees might apply before you go ahead with a remortgage so you can factor them into the overall cost.
Don’t forget that as Lifetime member, one of the main benefits of using our Mortgage Services is that we can make sure you’re aware of every potential cost involved and help you keep these charges to a minimum by matching you with a mortgage lender who waives certain fees as an incentive. Oh and remember - our advice is FREE!
Common misconceptions about remortgages
- Sticking with your current lender is the best option: Bank loyalty is one of the main reasons people fail to get the best deal available. Many homeowners who are remortgaging think they’ll get preferential treatment or special rates for sticking with the same lender, when in fact there’s no guarantee you won’t get a better deal elsewhere.
- You shouldn’t remortgage if it means paying exit fees: Learning that they have to pay exit fees to leave a fixed-rate mortgage often puts people off remortgaging, but don’t think of them as an automatic deal-breaker. Exit fees should be factored into the overall cost of a remortgage. If there’s a deal out there with a better rate, the long-term savings you make might still leave you in pocket, even with the exit fee included in the equation.
- You don’t need a mortgage advisor to remortgage: This is another misconception that can cost people a lot of money. Some believe that using a mortgage advisor to refinance is overkill, but our knowledge, expertise and panel lender access is often the difference between landing the best deal available with another lender than and having to settle for high rates with your current lender or one you’ve selected at random on the high street through a quick Google search.
- Finding a remortgage yourself is quicker: Again, not strictly true and why would you want to - you’re a Lifetime Member, which means that our advice to you is FREE*! We will save you the legwork of having to search for the best deal, help you complete the paperwork and make sure there are no unexpected setbacks by introducing you to the right lender, first time.
How to remortgage during a fixed-rate term.
Here are the steps to take if you want to remortgage during a fixed-rate term…
- Find out whether any exit fees apply: Speak to your mortgage lender or check your paperwork to find out whether your current deal has exit fees. Most do, but you should find out exactly how much you’ll need to pay so it can be factored into the overall cost.
- Let us do the work for you: We will offer you advice throughout the remortgage process and will start by making sure you’re aware of the implications of refinancing early. We will also search our panel of high-street lenders so that we track down the best deal that you qualify for, one that will leave you better off financially with any exit fees and other charges factored in. We have deep working relationships with our panel of lenders and can research 1000s of interest rates to find the best deal on your behalf. Remember, the best mortgage you qualify for might only be available through a lender you’ve never heard of, or a mortgage provider who is only approachable through us!
- Why wait? Get in contact today to find out if there is a more financially better deal out there for you!
*AN ADMINISTRATION FEE WILL APPLY ON ALL MORTGAGE APPLICATIONS. THE TOTAL FEE PAYABLE WILL DEPEND ON YOUR CIRCUMSTANCES. YOUR MORTGAGE CONSULTANT WILL EXPLAIN ANY FEES APPLICABLE IN YOUR INITIAL APPOINTMENT.
When it comes to taking time off because you feel ill, a lot can depend on your employment. Some people enjoy the luxury of a work-initiated sick pay scheme, often so comprehensive that a few days off here and there means nothing to their monthly salary and everything ticks on just the same.
Others, however, are faced with the horrible choice of forcing themselves to work while their body is screaming at them to stay in bed, or simply not getting paid.
With many household budgets already stretched to the maximum, a day or two off sick can mean a significant tightening of the belt – a more serious illness that lasts weeks or even months would be completely financially debilitating.
Statutory Sick Pay (SSP) is the government’s way of doing something to mitigate the situation. Under the SSP scheme, all employers must cover their employees for a basic standard of living if they are ill and unable to work. Conceptually, it’s a good idea, but in reality it often falls short.
How much is statutory sick pay?
The statutory sick pay entitlement for people working full time is £99.35 per week. If it doesn’t sound like a lot, that’s because it’s not!
£99.35 per week is £19.81 per working day, and SSP pay is calculated pro-rata, which means if you only do sixteen hours a week you’re likely to see less than half of that! Ninety nine quid a week isn’t going to cover even the most basic bills, let alone handle food, rent or a mortgage and any of the other expenses that form day-to-day life in the UK.
And if you have a family to look after, the SSP amount starts to look even more ineffective.
Can’t afford to stay off work? Why living off sick pay is impossible for most
Unless you have planned in advance, you may find yourself struggling with only the statutory sick pay entitlement. £99.35 represents an annual salary of about £5,100 per year.
With 2021’s average income for a full time working adult in the UK being a little less than £26,000 a year**, it’s easy to see how losing 80% of your income is going to cause problems!
Unfortunately, unless your company sick pay scheme provides more than their minimal legal obligation, there’s little you can do about it.
It’s important to plan ahead if you are going to need more than SSP.
So, how can you get more money than the SSP allowance?
Income protection insurance is the answer, but what is it and how much can I get?
Income protection is an insurance policy that is completely independent of your employer and SSP. With an IP policy, you can set your own terms on a level of cover that is designed specifically for you.
Unlike some other forms of insurance such as critical illness cover or life insurance itself, income protection insurance doesn’t pay out a lump sum but instead replaces your regular monthly salary, making sure there is money in the bank to cover your expenses in the normal way.
How much is income protection?
Income protection is tied to your salary and is typically set to pay 65%+ of your gross monthly income. As a form of insurance, IP is tax-free so 65% is often a lot closer to your full cleared monthly funds, though it won’t ever provide as much as you would do going to work – ultimately, that would be a system rife for misuse.
Income protection doesn’t interfere with your statutory sick pay either, allowing you to claim both during the first 28 weeks of your illness.
At brown & merry, we offer a full range of insurance packages, from income protection through to life insurance.
We know that full cover involves looking at the specific family situation and choosing options to suit. Our advisors will talk with you and help you choose not only a suitable income protection policy, but options for critical illness cover (to provide in the case of a serious injury or life-changing illness) and life insurance.
Why not give us a call and speak to one of our advisors directly? Our advice is FREE* and without obligation!
+ We have used 65% as the example for this article as it is the standard term offered by most insurers, but it is possible to get IP for 70% or greater amounts. If you need a higher level of income protection, let us know!