Can You Remortgage Early?

Changing the Number of Years Your Remortgage Is Repaid Over

When you remortgage your house, you’ll be asked by the remortgage adviser or the bank how many years you need to borrow money over, which can be tricky to answer. It’s for that reason that some people forget that you can reduce the years and pay your remortgage off early. 

As your remortgage adviser will explain, though, it’s important to understand that decreasing the number of years you repay your remortgage over will increase your monthly repayment and affects something called ‘affordability’. If the decrease in years pushes monthly repayments above your affordability level, you might get turned down for your remortgage, so make sure you jot your expenditure down on a spreadsheet to check first.

Affordability refers to how much you can afford to pay for your remortgage after all of your other financial obligations, such as your gas bill are paid -- you need enough money to afford the increase in monthly repayments. 

That being said, paying your remortgage off early will also save you interest (cost of borrowing) as you won’t be paying to borrow money for as long.

Make Remortgage Overpayments

Can you afford to pay a little extra each month for your remortgage payments? If so, then you can pay your mortgage off early. If you’re not ready to decrease the number of years you borrow money over and want to keep your remortgage payments low, then making mortgage overpayments might be for you. 

Remember, though, that some companies only allow you to pay 10% of the loan back early before you incur an early repayment charge.  You can check this with your lender.

Most people choose to pay just £50 or £100 extra by direct debit, but over time this can shave years off your mortgage -- so retirement can happen early. 

Remortgage Using a Cash Sum from Your Pension

If you’ve recently started or are due to start receiving your pension, then you might be considering a cash sum to pay off your mortgage -- a remortgage is a perfect time to do this. 

It’s vital to understand what your options are when it comes to your pension, as taking a cash lump sum can reduce your monthly pension payments moving forward. Not all pensions provide a cash lump sum, so it’s certainly worth asking a financial adviser to check for you. 

Whether you’re paying off your mortgage in full or using the cash sum to pay down a chunk of what you owe as part of your remortgage process, it’s best to do this at the end of your remortgage agreement. This is because you might have something called early repayment charges (ERCs), which state that you have to pay a fee if you want to pay your mortgage off early.

You might still wish to proceed to pay off your mortgage early or pay down your mortgage as part of your remortgage, but it’s important to understand the consequences.

Remortgage Using Your Savings

The same is true of using your savings to pay off your mortgage or pay off a lump sum as part of your remortgage review -- you need to understand or avoid ERCs. 

When using your savings, it’s also crucial to ensure that you have access to funds should you need to pay for a repair or have an emergency bill, so consider how much of your savings you need to leave. 

There are also other options available for investing your savings, which your financial adviser can discuss with you -- they might include investments or high-rate savings bonds. These types of investments can go up or down, though, and often don’t give you access to funds within a period of time, so it’s important to speak with a financial adviser. Get in touch today on 0330 433 2927 or enquire online.