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What is a remortgage?
A remortgage is when you move your mortgage to a new provider or switch deals with your current lender. If you’re just switching rates with your existing lender, it’s called a product transfer.
You might want to remortgage:
- To save money by securing a lower rate of interest than the deal you are on.
- To avoid going on to your lender’s higher standard variable rate once your initial rate ends.
- To make changes to your mortgage, such as releasing equity from your property, borrowing more, consolidating debts, or to get more flexible terms.
A mortgage term is how long it will take you to pay back your mortgage – 25 years, for example. Remortgage deals are the initial rate of interest you pay for a specific length of time during that period, such as a five-year fixed-rate deal.
How does remortgaging work?
The process of remortgaging will depend on whether you are remortgaging with a new lender or switching to a new deal with your current lender.
Applying for a remortgage with another lender is similar to applying for your original mortgage. The lender will run affordability checks and your property will be valued. How much equity you have in your property will affect the deals you can access and the interest rate you will be offered.
If you’re staying with your current lender and only changing the rate you are on, it’s likely to be more straightforward and happen more swiftly, involve less paperwork and cost less – if anything at all – in product and arrangement fees. But even if you’ve been offered a great follow-on deal, checking deals across providers may open up lower rates, and be worth the extra effort.
If you are looking to borrow more when you remortgage, lenders will run affordability checks to make sure the repayments would be affordable for you. When you use our remortgage comparison tool, you can add this to how much you want to borrow, if this is something you’re considering. This will then be factored into the deal you are matched with. You can then apply directly with the lender or through a mortgage broker.
Is remortgaging a good idea?
Remortgaging isn’t always right for everyone’s situation. For some, remortgaging might save money in interest over time and mean lower monthly payments. For others, it could be financially more sensible to sit tight. In short, it’s a case of doing the maths and picking the right time.
That’s because, as important as how much interest you are charged is, you will also need to factor in any charges or fees for leaving your current provider if you are leaving the deal before it’s due to end. You will also need to bear in mind any set-up charges for your new mortgage, such as product and valuation fees.
If you are staying with your current lender and just moving to a different rate, you may pay less in fees than if you change providers, or even no fees at all. And your lender may waive its early repayment charge towards the end of the initial rate deal.
Some deals with your current lender may have an arrangement fee for setting up the new product, though, so check the features of the offer carefully.
Even with fees deducted, you may find that what you save in interest more than covers them. And if you get a remortgage deal that suits you better, such as an offset mortgage or one that allows overpayments, you might decide it’s worth it over time.
Whether remortgaging to borrow more is a good idea is down to your finances, and if there are alternative ways of borrowing that might be cheaper, such as a credit card or personal loan. The low interest rate might appeal, but you’ll be paying interest on that amount for the lifetime of the mortgage, which can really add up.
If you want to increase your loan amount, or just aren’t sure if remortgaging is right for you, talk to a mortgage broker.
When shouldn’t you remortgage?
You can usually remortgage whenever you like, but there are times when remortgaging with another lender might not be the best move.
If your financial circumstances have changed for the worse since you took out your mortgage, you may benefit from waiting until things have improved. This could be because:
- your credit rating isn’t as good as it was
- your house is worth less then it was when you bought it
- your income has reduced
When you change lenders, there will be affordability checks and a full property valuation. Less favourable circumstances may mean the lowest rates aren’t available to you, and you may find it hard to remortgage.
If you are remortgaging with your current lender and making no changes other than moving to a new initial rate, you won’t usually have affordability checks. Lenders often offer follow-on deals to keep customers, which may not be the lowest across the market, but could be better than ending up on the lender’s SVR.
If you’ve only just agreed to a mortgage deal, penalties for leaving your deal early may be at their highest, and remortgaging may not stack up financially just yet.
If you only have a small mortgage loan amount, perhaps because you’re nearing the end of the full repayment mortgage term, the fees and charges may make it less cost-effective to switch. Also, some lenders have a minimum threshold for lending and may not agree to take on a smaller loan.
What are the benefits of remortgaging?
There are a few ways remortgaging might benefit a homeowner, including:
- Saving money by securing a lower interest rate than your current deal or the lender’s SVR.
- Fixing a rate for a specific number of years to get predictable monthly payments.
- Switching from a fixed deal to a variable interest rate without an early repayment charge if you are considering moving home in the near future.
- Benefiting from a lower loan-to-value (LTV) ratio, which opens up more competitive interest rates. This could be since the market value of your home has gone up over time or you’ve paid off a good amount of capital (or both).
- Borrowing more when you need a lump sum, perhaps for renovations – though you will be increasing your debt and paying more in interest.
- Getting a more flexible type of mortgage, where overpayments allow you to pay off the loan sooner, or one that lets you port your mortgage to another property if you move.
Are there any downsides to remortgaging?
When you remortgage, you may need to pay the same type of fees you paid when you first applied for a mortgage. This can include an arrangement fee, booking fee, valuation fee and legal fees, though some lenders offer fee-free switches.
If you remortgage before the end of your current deal you could face an early repayment charge. This is usually between 1% and 5% of what is left to pay on the mortgage loan. You may also pay an exit fee for closing the account during the tie-in period.
The lender’s tie-in period should be detailed in your mortgage documents. It’s possible for it to stretch beyond the end of the deal’s term, known as an overhang clause.
If you need to pay an early repayment charge, you can pay it up front or it can usually be added to your mortgage loan with your new provider. If you take the latter option, you will pay interest on a larger amount.
There will also be some form-filling and other admin, though this may be minimal if you are remortgaging with your current lender and only changing the rate you are on.
How do I get the best remortgage deal?
Searching across a number of mortgage lenders will give you a wider picture of the rates and remortgage types available to you. To run a search across the whole market, you can use our comparison tool to compare the fees, rates and features of deals matched to you.
It also makes sense to check what your current provider can offer you. If you’re nearing the end of your initial rate, your provider will usually get in touch in advance and explain the deals on offer. Ideally, start looking into your options around six months before you plan to switch.
If your current deal has no early repayment charge, you might want to check the market annually, so you can take advantage of new, competitive deals on the market that might save you money.
Why should I remortgage?
There are all sorts of reasons for remortgaging. The most obvious is to save money and get a better rate, but to be more specific:
- Your current deal is due to end, and you want to avoid being moved to your lender’s standard rate, which is usually higher.
- There are better rates available than the rate you are currently paying. This is where reviewing your mortgage regularly may reap rewards.
- You’re concerned about possible future interest rate rises and want to secure a fixed deal.
If you’re looking to remortgage to borrow more, or extend your mortgage term to get lower monthly payments, look beyond the rate of interest offered. Even if the interest rate is lower than for some credit card or personal loans, if you extend your mortgage term, you’ll be paying the loan off for longer and will pay more in interest over time. So always look at the total cost over time, and check if there are cheaper ways to borrow.
You can use a remortgage calculator and personal loan calculator to compare the overall cost of each option.
Consider talking to a mortgage adviser if you’re not sure if remortgaging might work for you.
How to remortgage
Before you go ahead, do some quick preparations. Make sure you know these details about your current agreement, including:
- What rate of interest are you on, and what are your monthly payments?
- How long is left on your mortgage term, and how much of your loan is left to pay off?
- If there is a lock-in period, when does it end, and how much would the early repayment charge when you’re looking to switch?
The remortgage process depends on if you are simply switching rates with your current lender, making other changes, or are moving your mortgage to another lender.
If you’re staying with the same lender, you may be able to make the switch in the final few months of your current deal with no exit or set-up fees to pay. Your lender will usually contact you to outline your options, and how to apply, a few months ahead of time.
For a straightforward product transfer where you’re only changing the rate you won’t usually have affordability checks and the admin should be minimal. You won’t usually need to use a solicitor for a simple, internal switch.
If you’re changing lenders, or changing the terms of your deal such as borrowing more, you’ll likely need to provide the same information as when you bought your property. The process will also usually take a little longer, due to the extra admin and checks, but if the sums add up it may be worth it.
What is a remortgage?
A remortgage is when you move your mortgage to a new lender or move deals with your current provider. If you’re staying with your existing lender and just changing the rate you are on, it’s called a product transfer.
Most people remortgage to save money when their initial rate is due to end, when they would otherwise be moved on to their lender’s usually more expensive standard variable rate.
What do I need to do to remortgage?
Applying for a remortgage with a new lender is a similar process to applying for your original mortgage. The new lender pays off your old mortgage and your debt transfers over to them.
Your new lender will usually run affordability checks, and your property will need a full valuation. Your deposit this time around will typically be in the form of the equity you have in your home.
You may need to produce recent financial information, such as payslips, tax returns if you’re self-employed, bank statements and your latest P60 tax form.
If you’re simply moving to another rate with your existing lender and not making any other changes, you may not need to provide paperwork or have affordability checks. This means the switch could be relatively quick and simple.
How long does a remortgage take?
The whole process of remortgaging with a new lender can take around two months, but it may take longer, depending on whether or not all the paperwork is in order.
A product transfer is quicker. You’ll usually be able to make the application online or by phone and it may be in place just 10 working days or less after you've applied.
With this in mind, try to start researching your remortgage options around six months before your existing deal is due to expire. For product transfers, you may even be able to apply for a new deal six months ahead of time, but always check before going ahead and be clear when any offers expire.
Can I remortgage early?
You can usually remortgage when you like, but that doesn’t mean it’s always the right time. You will want to make sure you don’t end up paying more in fees and charges than you save through securing a lower interest rate.
With many fixed-rate deals, you will need to pay a penalty charge for remortgaging before a deal’s tie-in period ends, which could cost you thousands of pounds in charges. Variable mortgages tend not to have an early repayment charge, though you may pay a higher rate of interest for the privilege.
How much you pay to leave a deal early will depend on your mortgage arrangement. It may be a fixed fee or a tiered amount with a higher percentage in the first year of the deal, reducing as time goes on. So switching in year two of a five-year deal would cost more than switching in year five.
Do I need a solicitor to remortgage?
Not always. You won’t usually need to use a solicitor or conveyancer for a product transfer. There isn’t legal work involved if you’re just moving to a different rate. If you are borrowing more with your current lender, there shouldn’t be legal charges either, though other charges will likely apply for increasing your borrowing amount.
For some changes, such as adding or removing a name on the mortgage, or moving to a new lender, you will need a solicitor to manage the transfer of your home. Your provider may cover legal fees for you, though. You can check if this is the case when you compare deals.
How do I remortgage to release equity?
If you’re looking to remortgage to release equity in your home, you will be increasing the size of your loan.
You ask the lender to add the amount you want to release to your current mortgage loan when you apply for a remortgage. You will need to explain what you plan to use the money for.
Before you go ahead, consider if you could raise the cash in other ways, which may cost you less in interest.
Do I have to remortgage at the end of my mortgage deal?
No, there’s no obligation to remortgage. You can stay on your lender's default standard variable rate (SVR), but this will probably be higher than the initial rate you were on and mean higher monthly payments.
You don’t have to remortgage with a new lender, you can move to another deal with your current lender. If you’re simply moving to another rate with your provider when your current deal ends, it’s called a product transfer.
Most people switch a few times during the lifetime of their mortgage to get a more competitive deal.
How many times can I remortgage?
There is no limit to the amount of times you can remortgage, and it can save you money to shop around and access the latest, most competitive deals.
But it's worth bearing in mind the costs involved each time you switch to make sure savings you make in interest aren’t cancelled out by fees charged.
What fees will I pay to remortgage?
The fees for remortgaging will depend on the type of remortgage you are applying for, and whether you are moving to a new lender or staying with your current lender.
You might be looking at a property valuation fee, arrangement fee, booking fee and legal fees, along with an early repayment charge and exit fees if you are moving to a new lender. Not all fees apply to all mortgages, and there are some fee-free switches available, but it’s important to factor them in when you’re comparing the total cost.
Can I remortgage with bad credit?
There are remortgage deals that are open to people who have credit issues. Just note that you might not be able to get the lowest interest rates and will likely have fewer lenders to choose from. You will also usually need to have a larger deposit than if you had a good credit history. In some cases, it may not be possible to remortgage at all.
But if you’re just looking for a follow-on deal when your current mortgage deal ends, and not asking to borrow more, you could consider a product transfer with your current lender. If you’ve kept up your mortgage repayments and aren’t in arrears, this won’t usually involve a credit check. A product transfer may not get you the most competitive rate on the market, but it can prevent you going onto the lender’s usually higher standard variable rate once your current deal ends.
Before remortgaging, one option is to wait until you’ve improved your credit score, so you can access better rates, have more choice, and increase your chances of being accepted for a remortgage. However, you have to consider the risk of rates changing and potentially increasing while you are waiting for your credit score to improve.
» COMPARE: Bad credit mortgages
What are my options if I can't remortgage?
If you haven’t been able to remortgage with a new lender, perhaps because you aren’t able to pass affordability checks, you will go on to your lender's SVR.
If you are worried that you won’t be able to afford the payments when that happens, talk to your lender as soon as possible. Your lender may be able to offer you another deal with a different rate that is more affordable.
How can I find the right remortgage option for me?
A quick and easy way to compare deals is to use our remortgage comparison tool. Just answer a few questions and you’ll see deals across the market, matched to you.
You can then compare the all-important fees and rates on offer. So look at the initial monthly payment amount, total cost over the term, if there are any upfront fees and if legal fees are covered. Look out for the Annual Percentage Rate of Charge, or APRC, listed next to these deals. This will give you an idea of the rate you would pay over the entire term of the mortgage including any fees and incentives.
As well as looking at the cost of new deals, keep in mind that you may need to pay an early repayment charge and exit fee for changing your mortgage lender. Check the terms of your current mortgage deal, so you can factor possible penalties in, too.
Also consider what deals your current lender can offer you. You may be offered a competitive follow-on deal, which you can use as a benchmark to compare with deals from new lenders.
Holly champions clear, jargon-free writing. She’s been creating finance content for leading organisations for over 10 years. Read more
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