Ever wondered when to remortgage and how it works? In short, remortgaging simply means switching mortgages to a new lender or different home loan with your current lender. Homeowners usually remortgage to either get a cheaper mortgage deal or to increase their borrowing against their home.
To get the best idea of your mortgage options and what mortgage is right for you it’s always worth speaking to a mortgage adviser. Our preferred mortgage advisers offer fee-free advice for most customers.
Always remember: Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage.
What is remortgaging?
Remortgaging is where you take out a new mortgage deal to pay off the existing mortgage on a property you own. It doesn’t involve moving home.
When you remortgage, your home may need to be valued by your new lender, and you’ll need a conveyancer to do the legal work. Sometimes the lender will offer this for free or will pay cashback towards the cost of this.
Will I save money by remortgaging?
If you remortgage to a lower interest rate and borrow the same amount of money and keep the same term, you’ll normally save money by remortgaging.
You might be able to remortgage to a lower interest rate if your home has risen in value since you bought it, meaning you can borrow at a lower loan-to-value (LTV).
For example, if you had a £100,000 mortgage at an interest rate of 2% over 20 years, you’d pay £506 a month. If you remortgage to a deal at 1.5%, your payments will fall to £483 a month.
Always remember: Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage.
Should I think about when to remortgage?
Most people remortgage when their fixed rate mortgage comes to an end, and they want to avoid being moved to their lender’s standard variable rate (SVR) as this is usually more expensive. ‘It’s usually a good idea to start looking at this 6 months before the end of your current deal.
Other homeowners’ remortgage when a rise in the value of their home makes them eligible for a cheaper mortgage rate.
Some homeowners remortgage when they want to borrow more money. If your home has gone up in value since you bought it, your mortgage can be a more cost-efficient way to borrow cash. This is known as ‘releasing equity’ from your home.
You’ll also need to remortgage if you are removing someone, such as an ex-partner, from your mortgage.
How much does remortgaging cost?
Remortgaging may come with fees including:
- product fee
- arrangement fee
- valuation fee
- solicitor’s fees
There might also be a cost for leaving your current mortgage deal – this is called an early repayment charge (ERC). ERCs usually apply for the length of a fixed rate mortgage (e.g. two, three, five or 10 years). If you are liable for ERCs, remortgaging might not save you money so you’ll need to do the sums or seek advice from a qualified mortgage adviser who can do this for you.
Always remember: Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage.
Is a remortgage different from a standard mortgage?
Some lenders offer specific mortgage deals for remortgage customers.
However, the affordability assessment and credit checks they carry out when deciding whether to offer you a mortgage will be the same.
Should I remortgage with the same lender?
It’s best to compare all the mortgage deals available when remortgaging. This will ensure you get the best deal, and a broker can help you do this.
Remortgaging with the same lender can be quicker and easier than a remortgage. When switching to another deal with the same lender is known as a ‘product transfer’.
If you need to borrow more money, another option is to keep your mortgage in place and borrow more money from your current lender. This is known as a ‘further advance’.
Always remember: Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage.
Do I need a solicitor to remortgage?
Yes, you need a solicitor or conveyancer to remortgage. Your solicitor will do all the legal work necessary to change the property’s title at the Land Registry to reflect the change in lender.
Some mortgage deals offer ‘free legals’. This is where the mortgage lender will pay for your legal work and use a legal firm it has a partnership with to do the legal work on the remortgage.
Can I borrow more money when I remortgage?
If your home has gone up in value, you can borrow more money when you remortgage.
For example, if you had a £150,000 mortgage on a house initially worth £160,000 and the property rose in value to £200,000. You could potentially borrow close to this amount when you remortgage.
It’s worth remembering that if you increase the mortgage amount when you remortgage, your payments are likely to go up unless the new interest rate is considerably cheaper than your old rate.
Always remember: Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage.
Last Updated: December 15th, 2022
