What is remortgaging and how does it work?
You may well have heard of remortgaging but never fully understood what it means. Essentially, remortgaging is when you look to move from one mortgage deal to another, either sticking with the same lender or moving to a new one.
A mortgage is likely to be your largest financial commitment, but you don’t necessarily have to stay on the same mortgage as the one you initially took out, as your personal circumstances may change over the years, giving you a reason to remortgage.
Just as you did when you took out your first mortgage, it’s important to revaluate your finances every now and then, and consider all your options in order to know you’ve got a mortgage that is right for you at that moment in time. Now, just how does remortgaging work?
How does remortgaging work?
Remortgaging involves taking out a new mortgage on your existing property, either with your current lender for a new deal or with a different lender altogether. This can save you money by securing a lower interest rate, or allow you to borrow more money if your home's value has increased. The new lender pays off your existing mortgage, and you restart your repayment term under the new loan's terms.
When and why do most people remortgage?
There are various different reasons why people choose to remortgage. Some of these might include :
- Take advantage of low interest rates.
- Your current fixed deal is up for renewal.
- You want to move from interest-only to repayment.
- You want to be on a better rate than you're currently on.
- You want to be able to make overpayments.
- You want to borrow more money.
For instance, you may have initially taken out a fixed rate mortgage where you pay the same amount every month and the interest rate stays the same. However, once this initial period has ended (it could have been a 2, 3, or 5 year fixed) you will fall onto a standard variable rate (SVR) where you could end up paying a higher interest rate than you were previously. This is usually the time when many homeowners look to remortgage in order to switch to a better mortgage deal.
Get in touch with us today to speak to an adviser about your remortgage options.
Things to consider
Before you decide to go ahead and switch onto a new mortgage deal, it’s worth weighing up a few things first:
- Check if your new lender is offering a fee-free mortgage (many lenders will write to you near the end of your current mortgage term and offer you a new deal to switch to), or if there is a product fee involved as this could counteract the savings you could have made by remortgaging.
- There may be an early repayment charge on your current mortgage that you have to pay off before you can switch to a new deal. Again, this could outweigh the benefits of switching.
- The lower your loan-to-value (LTV), the more mortgage deals that may be available to you. You can work out your LTV by dividing your outstanding mortgage balance by your property’s current value.
Make sure you're mortgage ready
Just because you have a mortgage already, doesn’t mean the same checks won’t be carried out when you apply for another one. Make sure your credit score is healthy as the lender will still perform the same affordability checks.
Speak to a mortgage adviser
Our mortgage advisers understand the criteria that lenders are looking for and can compare mortgage deals to help find the right one for you. We have access to over 90 lenders and can search 12,000 mortgages, saving you time and taking the hassle out of doing it yourself.
Remortgaging is the process of moving the mortgage on your current property to a new deal. This can either be with the same lender or a different one.
There are a number of reasons as to why it may be time to remortgage, including but not limited to:
- Your current fixed rate deal is ending
- You're assessing your finances and believe remortgaging could save you money
- You're on a standard variable rate and want to switch to a fixed-rate mortgage
- You're planning on releasing equity from your property to pay for home improvements
If your discounted term is coming to an end, it's recommended that you start the remortgaging process six months beforehand. You can remortgage at any time, but bear in mind that you may need to pay an early repayment fee to do so.
Our team of mortgage advisers can support you throughout the entire remortgaging process from start to finish. With access to thousands of deals - many of which aren't available on the high street - they'll be able to source a product that suits your individual circumstances.
Remortgaging can be a good idea if it allows you to secure a lower interest rate, reduce monthly payments, or release equity from your property for other uses. It can also be beneficial if your current mortgage deal is coming to an end and you want to avoid reverting to a higher standard variable rate. However, it’s important to consider the potential costs associated with remortgaging, such as early repayment charges and arrangement fees, and to assess your financial situation and future plans before making a decision.
Depending on your circumstances, there are a number of costs you'll need to take into account when remortgaging:
- Early repayment fee (depending on when you choose to remortgage)
- Possible product fee to a new lender
- Conveyancing and valuation fees
- Potential mortgage adviser fee
If you've changed roles or increased your earnings in full-time employment, you'll need to provide your current employer's details on your mortgage application.
However, if you've moved to part-time work or your wages have decreased in a new role, the amount you can borrow will be impacted. There are also different rules for those who are self-employed or on maternity leave when remortgaging.
Talk to your mortgage adviser about any changes in circumstances, so they can assess your finances and offer guidance on the options available to you.
On average, the remortgaging process takes between four to eight weeks. However, just as everyone's financial circumstances are different, there is no set time that it will take to remortgage, so this timeframe isn't guaranteed.
This depends on whether you remortgage with your current lender or a new one. Remortgaging with your existing lender is known as a product transfer, so no additional legal work is needed.
Meanwhile, remortgaging with a new lender will require a conveyancer. Certain mortgage products will cover the cost of the legal fees as part of the deal, so check with your adviser if this applies to you.
When you remortgage, you essentially switch your existing mortgage to a new deal, either with your current lender or a new one. This process involves a valuation of your property and a review of your financial situation to ensure you qualify for the new mortgage terms. Once approved, the new lender pays off your existing mortgage, and you start making payments under the new terms.
Want to know if there's a better deal for you?
Let us monitor your current mortgage, giving you peace of mind you’re on the right deal, every month. This monitoring can be extra handy during a period in which interest rates change frequently.
- We’ll compare your mortgage against thousands of deals
- Send you a monthly home report
- We’ll notify when a better deal is available
The best part? You don’t need to pay anything.
Please note: This mortgage monitor does not constitute mortgage advice.
Related Articles
How to remortgage: our top 7 tips
Should you use extra money to pay off your mortgage early?
Can I change the term of my mortgage?
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.
You may have to pay an early repayment charge to your existing lender if you remortgage.