I’m in a five-year mortgage deal – what if I decide to move?

Sold and For Sale signs

There are plenty of fee-free mortgage deals available with interest rates well below 3.5%. Photograph: Andrew Matthews/PA

Q I am hoping you can offer some advice regarding my situation. I am currently four years into a five-year fixed-rate mortgage with an interest rate of 3.5% and an early repayment charge of £6,000. We currently owe £115,000 and our house is worth around £210,000 to £220,000.

I am keen to remortgage next year but at the same time, or shortly after, I am hoping to sell this house and buy another one. I think our budget could be up to £280,000 for the next house.

I am unsure what the process would be with the remortgaging if: (a) we wanted to move at the same time, ie next year; or (b) we decide to wait a year before selling our current home – would we need to apply for another mortgage at that point?

A If you decided to move next year after the end of your five-year fixed-rate period, you would pay off the mortgage on your current home and take out a new mortgage on your next property which could be with your current lender or a different one. Remortgaging on your current property wouldn’t come into it. On the other hand, if you decided to wait until the year after next before moving, when the five-year fixed rate period came to an end, you would have a choice. You could choose to come off the fixed rate of 3.5% and go on to your lender’s standard variable rate (SVR) – typically between 4.24% and 5.24%. Alternatively, you could remortgage by switching to a new deal either with your current lender or a different one. The problem with doing that is that if you went for a fixed-rate mortgage again you would face an early repayment charge if you moved after a year of taking it out because the shortest fixed rate you can get is two years. If you do decide to wait until the year after next to move, when you remortgage next year, you would be better off going for a mortgage deal with no fee for paying it off early. The good news is that there are plenty of fee-free deals available with interest rates well below the 3.5% you are paying now.