Myth Buster - Early Repayment Charges!
We speak to customers regularly about fixed mortgage products and the implications of leaving or redeeming the mortgage early. Lenders impose what's called an early repayment charge onto fixed rate mortgages. Some fixed tracker products may not carry a charge, but there are inherent risks associated to this type of mortgage.
If you decide to move house within the fixed period of your mortgage, your broker should explore porting your mortgage before looking at any other options. This is where you move your current mortgage onto another property. Some lenders don't allow this in certain circumstances, but the majority do and this should mean you avoid paying any penalty charges.
If, like a lot of people at the moment, you are concerned about your fixed rate ending in 2023/24, and how high the rate might be, you can look to remortgage early. Unfortunately, this means you will have to pay the penalty. However, there is a common mis-conception that you have to pay the penalty out of your own pocket. This isn't the case. The penalty, or early repayment charge is simply added to the new mortgage. You can choose to pay it of course, but very few people do. You will pay interest on the fee of course and your borrowing will increase of course. In current economic times, the question you need to be askign yourselves is, will the saving outweigh the penalty? In the majority of cases at the moment, the answer to this questions is, yes.
In all situations, the best thing to do is speak to a broker. They will go through your options and can run simulations to show the potential impact of waiting until your fixed rate comes to an end. Your lender will only be able to discuss a rate switch or product transfer to one of their own products, something can generally only be done 3-4 months before the rate ends. A broker can access a wide range of lenders, some of whom issue mortgage offers that last for up to 6 months.
Our advice is you're worried, speak to a broker as soon as possible.