In this episode, Mike and James explored what to do if you can't refinance your mortgage. While changing banks isn't always possible, there are often practical steps you can take to improve your position without refinancing.
Can't Refinance Your Mortgage? Start by Understanding Why
Not being able to refinance doesn’t always mean you’ve run out of options.
Michael explains that the first step is understanding what’s preventing the refinance in the first place. In most cases, it comes down to one of three things: equity, affordability or break costs. You may not have enough equity in your property, your financial circumstances may have changed since taking out the loan, or the cost of breaking your fixed rate could outweigh any potential savings.
He also points out that many people focus on refinancing without first identifying why they want to move banks. Whether it’s a better interest rate, cashback, or simply dissatisfaction with their current bank, understanding the reason behind the move helps determine the best alternative.
Negotiating With Your Existing Bank Could Save You Thousands
If you can’t refinance your mortgage, your current bank may still be willing to offer a better deal.
Michael explains that one of the most overlooked options is negotiating a cash retention payment. If another bank would typically offer a cashback to win your business, your existing bank may offer an incentive to keep you instead. While it may not match the full amount available through refinancing, it can still provide meaningful savings without the time and paperwork involved in changing banks.
However, he also warns that it’s important to understand your position before opening those conversations. If your property’s value has fallen and your loan-to-value ratio has increased, asking the bank to reassess your lending could have unintended consequences, including the possibility of low-equity interest rate margins.
Don't Automatically Accept the Rate in Your Banking App
When a fixed mortgage rate is about to expire, many borrowers simply select the rate offered through their banking app and move on.
Michael says that’s not always the best approach. While some banks display their most competitive rates automatically, others may have lower rates available through negotiation. Taking a few minutes to compare rates or speaking with a mortgage adviser could result in a better outcome.
He also explains that banks are generally more competitive when attracting new customers than retaining existing ones, making it worthwhile to understand what other lenders are offering before entering negotiations.
When Does Breaking a Fixed Rate Make Sense?
Breaking a fixed mortgage isn’t always a bad idea.
According to Michael, the decision comes down to whether the savings from securing a lower interest rate outweigh the cost of breaking your current loan. Break costs depend on several factors, including how long remains on your fixed term, your current interest rate and market interest rates.
He notes that some borrowers have recently chosen to pay substantial break costs to move from higher-cost lending to lower interest rates because the long-term savings justified the upfront expense. Running the numbers is essential before making that decision.
Small Changes Can Still Make a Big Difference
Even if refinancing isn’t possible today, you may still have opportunities to improve your mortgage.
Michael explains that many banks allow borrowers to make additional repayments on fixed loans within certain limits each year. Some lenders also allow borrowers to partially break a loan, making lump-sum repayments while leaving the remainder of the mortgage on its existing fixed rate.
Many borrowers assume they can’t refinance or improve their mortgage because their circumstances have changed. Michael explains it’s worth checking what’s actually possible before ruling anything out, as there may be more options available than you expect.
Key Takeaways
- Not being able to refinance doesn’t mean you’ve run out of options.
- Equity, affordability and break costs are the three most common barriers to refinancing.
- Negotiating a cash retention payment with your existing bank could provide savings without changing lenders.
- Don’t assume the interest rate shown in your banking app is the best available.
- Breaking a fixed rate can make financial sense if the long-term savings outweigh the break costs.
- Many fixed mortgages still allow additional repayments or partial loan restructuring.
- Speaking to a mortgage adviser can help uncover options you may not have considered.
Next Steps
If you’re unsure whether refinancing is the right option or want to understand what alternatives are available, the Lighthouse Mortgages team can help you review your situation and explore your options.
If you’d like to watch more, check out these other episodes below.
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Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
