What is remortgaging?
Remortgaging is when you replace your current mortgage deal with a new deal, often with a different lender or terms.
While the term of your loan can be up to 40 years, you have an initial period of your deal that lasts 2-5 years. For many homeowners in the UK, your rate for this period is fixed, meaning the interest rate is locked at the rate you first accepted the deal.
When your deal ends, it’s often wise to remortgage to avoid being placed on your lender’s standard variable rate (SVR).
Can I remortgage with the same lender?
You can switch from your existing mortgage to another mortgage product with your current lender, called a Product Transfer.
There can be benefits to sticking with your current provider and switching deals, but it’s still worth checking other lenders’ remortgage rates with an adviser to ensure you’re getting a competitive rate.
Why would I remortgage?
There are plenty of reasons you may choose to remortgage. You may want to take advantage of better interest rates if the market has improved since you first got your deal, or your deal has ended and you’re trying to avoid being put on your lender’s SVR. You may want to remortgage to free up some equity for home refurbishments or to consolidate debt.
Often, remortgaging can be a lifeline for those whose circumstances have changed. For example; if your income has been reduced since you took out your mortgage, you can potentially extend the term with a remortgage, resulting in lower monthly repayments
New lenders can also offer competitive introductory deals, making them attractive to remortgagers.
Should I remortgage?
We suggest always speaking to a mortgage adviser to consider whether remortgaging is in your best interest. You don’t have to remortgage or switch deals, standard variable rates tend to be more expensive than other deals on the market so it’s wise to explore your options.
Some of the reasons why you should remortgage include:
You could get lower interest rates
If market conditions have improved since you first took out your mortgage, you may be able to secure a better rate with a new lender, potentially saving you thousands of pounds over the lifetime of your loan.
Take advantage of the competitive deals
Since 2022, rates have been increasing considerably. Recently the market has been stabilising, with the Bank of England maintaining the base rate at 5.25% and rates have begun to decrease.
If this is a big jump from your original fixed interest rate, remortgaging can often help you find the competitive deals, and avoid defaulting to your lender’s SVR. You may also find deals with lower fees or more flexible terms.
Access money in your home
Remortgaging can help you access the equity built up in your home, which can be useful for funding home improvement projects, consolidating debt, or even investing in another property or financial product.
Extend your mortgage term to save money
Remortgaging provides an opportunity to get a longer term, which can result in lower monthly payments. However, it’s worth noting an extension on your term often means you’ll pay more interest.
Switch your mortgage type
Some homeowners may want to switch from a variable to a fixed rate to get more stability with payments. Others may want to switch to a tracker mortgage that follows the Bank of England base rate because you want to fix your rate in case the base rate goes down. Both types of mortgages can offer benefits and are worth exploring with the advice of a mortgage adviser.
In most cases, the cost of remortgaging can be outweighed by the potential savings over the lifetime of your new mortgage deal.
Can I remortgage before the end of my fixed term?
You can often remortgage before the end of your fixed-term deal. Be aware that a remortgage during a fixed-rate period may incur an early repayment charge from your current lender, so it’s important to weigh the costs of a new remortgage product compared to your current deal.
How Do I Remortgage?
The process of remortgaging is relatively simple. We’ve outlined below the usual steps of the remortgaging process.
1. Research and Compare Lenders
Your mortgage advisor will compare different lenders’ deals to find the best option for your needs and circumstances.
2. Provide documents
You’ll need to provide your potential new lender with various documents, such as proof of income, proof of identity, statements showing your current mortgage balance and details of any other credit commitments like loans or credit cards. Your adviser will explain what paperwork is required.
3. Submit Your Application
Once your advisor has found the right remortgage deal for you, they will submit your mortgage application to the new lender. This will involve an assessment of your credit score, outgoings, deposit and the value of your property.
4. Property Valuation and Conveyancing
Your new lender will arrange for a valuation survey of your property. You’ll also need to speak with a conveyancing solicitor to handle the legal work and fees associated with transferring the mortgage to the new lender.
5. Mortgage Offer and Completion
If your remortgage application is approved, your new lender will issue a mortgage offer. Once you have accepted it, you’ll complete the remortgaging process, and your new lender will pay off your existing mortgage balance, transferring the loan to their mortgage product and terms.
Costs to Consider When Remortgaging
While remortgaging can save you money in the long run, there are some upfront costs to factor in:
Valuation Fee
Your new lender will charge a fee (typically £200-£600) to have a surveyor value your property.
Arrangement Fees
Some lenders charge arrangement/booking fees when setting up a new mortgage, which can be £1,000+ your mortgage advisor will explain if there are any fees.
Legal/Conveyancing Fees
You’ll need a solicitor/conveyancer to handle the legal transfer, which can cost around £500-£1,000+.
Exit Fees
Your current lender may charge an exit fee (typically £50-£300) when you remortgage to another lender.
Early Repayment Charges
If you remortgage during a fixed-rate period, you may face early repayment charges, potentially running into thousands.
Broker Fees
We are fee-free and don’t charge our customers fees for our services. Fees from third parties might apply.
Preparing for the Remortgage Process
To give yourself the best chance of being approved for a competitive remortgage deal, it’s wise to Check Your Credit Report and obtain copies of your credit report from major agencies and correct any errors before applying.
Reduce Other Debts
Try to pay down existing loans, credit cards and overdrafts. This is a great way to show you are a responsible borrower.
Proof of Income
Gather payslips, tax returns, accounts and other proof of income documents ready for your application.
Consider Government Schemes
Check if you’re eligible for any remortgage or home-mover schemes by the government.
Research the Market
Using a mortgage broker like Newhomes we compare the entire market to find the lenders offering the most suitable remortgage rates and deals for your needs.
Being prepared and presenting yourself as a low-risk borrower will increase your chances of being approved for the most competitive remortgage deals available. Use an online credit score tool to check how you’re positioned today.
Conclusion
Remortgaging can be a smart financial move if the timing and circumstances are right. Whether you’re looking to take advantage of lower interest rates, access equity in your home, consolidate debts, or find a product that better suits your current needs. Remortgaging can potentially save money and improve your financial situation.
However, it’s crucial to evaluate the costs and fees associated with remortgaging. As well as the long-term implications of any new deal you’re considering. Your adviser will search and compare offers from multiple lenders to ensure you’re getting the right deal for you.
