With house prices exhaustingly high, and both the cost of living and interest rates on the rise, locking in an affordable mortgage rate is potentially a more pressing task than ever.
While the cost of UK mortgages has also been climbing this year, there are still some very reasonably-priced fixed rate deals available over two, five and even 10 year periods.
But what happens if you’re tied into your current mortgage deal? Forking out early repayment charges (ERCs) – which can easily run into thousands of pounds – can prove a false economy.
The good news is you don’t have to wait for your current mortgage deal to end before locking in a new one – even if that’s with a different lender. You can start searching for a better deal, or grab one you’ve already seen, up to six months before you need it to start funding your current home.
We contacted some of the UK’s biggest mortgage lenders (as defined by trade association, UK Finance) to find out their policies around booking in a mortgage deal ahead of time. Their responses to the key points are outlined in the table below, while you’ll find more detail further down with our FAQs.
We surveyed the UK’s largest mortgage lenders (as defined by trade association, UK Finance). All of them issue mortgage offers that last for six months.
When ranking the lenders, we also considered the following factors:
It’s important to note that our research into ‘the best lenders for remortgaging’ is based on the process of remortgaging (ie, how early you can book in a mortgage, and the potential implications of doing so). It does not consider in any way the mortgage deals the lenders have on offer.
Remortgaging is when you refinance a property you already own. Technically it refers to actually changing mortgage lenders – moving onto a different deal with the same lender is known as a ‘product transfer’.
When you are looking for a new mortgage though, don’t forget to check what your existing lender is offering too.
You can start the search for your next mortgage deal up to six months before your current one expires. Give yourself at least two to three months though, as if you don’t have another deal lined up you’ll drop onto your lender’s expensive standard variable rate (SVR).
Mortgage offers from lenders tend to be valid for either three or six months – but as you can see from our table, the biggest lenders all offer six.
There could be variations on either timeframe, though. With some lenders for example, the clock starts ticking from the date the mortgage offer is issued, while for others it’s from the date your application is received. With some more complex applications taking weeks to reach offer stage, this variation in lender policy can actually make a big difference to your validity period.
Some mortgage offers – usually in the case of fixed rate deals – also come with a set completion date.
Finally, as we’ve flagged on our table with an asterix, some lenders state ‘up to’ six or three months. So, while it’s likely this is what you would get, they are not beholden to it.
If unforeseen circumstances cause a delay, you may be able to extend your mortgage offer. Although, this could mean a fresh credit search, up-to-date affordability checks and even another valuation on the property.
Mortgage rates are rising, so booking your next deal now means you can effectively ‘freeze’ today’s rates and take advantage at a later date when they may well be higher.
Having your next deal lined up will also eliminate the risk of reverting onto your current lender’s SVR which, by comparison, will be much more expensive.
The sooner you book in, the narrower your choice of mortgage deals will be. This is because not all lenders’ mortgage offers are valid for as long as six months. You’ll only have the full scope of choice in the last three months before your offer expires.
If you jump too soon – you find a better deal, for example – you may have paid fees that you can’t get back. While arrangement fees (also known as booking or product fees and typically around £1,000) are often refundable if you do not reach completion, valuation fees (which check the property is worth enough for the loan) are not.
That said, many remortgage deals come with ‘free valuations and legal fees’, so look out for these.
If an arrangement fee is stated as non-refundable, one option is to add it to the loan at completion and then reduce the amount of mortgage you require which effectively means it’s been paid for, suggests David Hollingworth at broker, London and Country.
With some lenders, you can add the arrangement fee to the loan initially but pay it off interest-free after the mortgage has started. Santander allows 21 days, for example.
Finally, most mortgages also allow you to overpay up to 10% a year at no charge, so you could effectively repay the fee by upping your monthly repayments.
No. Once issued, your mortgage offer is a legally-binding document. This means that, with the exception of extreme cases – for example, your application is found to be fraudulent, or there’s a major change to the property value – the deal you are offered is valid until its expiry date, even if it’s no longer available.
While your lender is legally bound to your mortgage offer, you are not. If you don’t want to proceed, you can contact the lender or simply let the offer lapse.
When your mortgage offer reaches its expiry date, it will simply be cancelled. This means re-applying with the same or a different lender and going through identification, affordability and credit checks from scratch.
