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What is a Remortgage in a Nutshell?

Remortgaging is a process that involves making changes to your existing mortgage on your current property. This can be done by either switching to a new mortgage lender or adjusting the terms with your current lender, also known as a product transfer. It is important to note that remortgaging pertains only to staying at your current property, with the mortgage remaining secured against it. By remortgaging, homeowners can often save money by securing a better interest rate or changing the payment terms to better suit their financial situation. However, it is important to carefully consider the costs and benefits of remortgaging before proceeding with this option.

Reasons why you May Want to Remortgage

Saving Money via Remortgaging

One of the primary reasons to remortgage is to save money. By reassessing your mortgage deal, you may be able to secure a lower interest rate, resulting in reduced monthly mortgage payments. Here are some key points to consider when it comes to saving money through remortgaging:

  • Lower interest rate: By remortgaging, you can take advantage of lower interest rates in the market, allowing you to reduce your monthly mortgage payments and potentially save thousands of pounds over the term of the mortgage.
  • Better rate: If your current mortgage deal has a variable interest rate that has increased over time, remortgaging to a better rate can provide stability and peace of mind, knowing exactly how much you need to pay each month.
  • Fixed rate remortgages: A fixed rate remortgage offers a set interest rate for a fixed term, typically two to five years. This provides you with financial predictability and protects you against potential interest rate rises.
Saving Money via Remortgaging

Borrowing More on Your Mortgage

Remortgaging also offers an opportunity to borrow additional money against your property, which can be particularly useful for home improvements or other financial needs. Here are some key points to consider when it comes to borrowing more on your mortgage:

  • Remortgage for home improvements: If you're looking to invest in home improvements, remortgage can be a good way to release equity from your property to fund these projects. By remortgaging, you can potentially secure additional funds for renovations, extensions, or other improvements.
  • Additional money: Remortgaging gives you the option to release equity for various financial needs. Whether it's to fund education expenses, start a business, or consolidate debt, borrowing more on your mortgage can provide the financial flexibility you need.

Equity Release

If you need to raise a lump sum to pay off debts or making home improvements, you have the option to leverage the equity in your current property. This may increase your mortgage loan, but if your property's value has risen due to long-term ownership, the loan-to-value ratio may remain unchanged, allowing you to access favourable interest rates.

Making Overpayments on your Mortgage

You may find a different mortgage lender that permits higher overpayments than your current lender, which can save you thousands on your mortgage by reducing the overall interest paid over a shorter borrowing period. The standard is typically overpayments of 10% of your remaining balance per year.

Property Value

Remortgaging can be advantageous if your property's value has risen because it would lower the LTV (loan-to-value) and potentially result in better interest rates. The same applies if you have been making repayments on the property for several years, as the LTV would decrease since you would no longer require the original loan amount. Understanding how the LTV of your property affects remortgaging is crucial in finding the best deals and saving money in the long run.

Your Current Mortgage Deal is Ending Soon

When your existing mortgage deal expires, you will be moved onto the lender's standard variable rate, which is usually more costly, so refinancing can assist you in securing improved mortgage interest rates.

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What Remortgage Deal Should You Get?

When remortgaging, it's crucial to understand the different types of remortgage deals available in the market. From fixed rate remortgages to tracker remortgages, each option offers unique benefits and considerations. In the following sections, we will explore the different types of remortgage deals to help you determine which one is the right choice for you.

Fixed Rate Remortgages

A fixed rate remortgage offers stability by providing a fixed interest rate for a set period of time, typically two to five years. Here are some key points to consider when it comes to fixed rate remortgages:

  • Fixed rate: A fixed rate remortgage means that your interest rate remains the same for the duration of the fixed term, regardless of any fluctuations in the base rate or market conditions. This allows for predictability in your monthly mortgage payments.
  • Interest rate: By securing a fixed interest rate, you protect yourself against potential rate rises, providing financial security and peace of mind.

Tracker Remortgages

Tracker remortgages, on the other hand, offer variable interest rates that track an external rate, typically the Bank of England base rate. Here are some key points to consider when it comes to tracker remortgages:

  • Variable rate: With a tracker remortgage, your interest rate will change in line with the chosen rate, typically the base rate set by the Bank of England. This means that your monthly mortgage payments may fluctuate based on changes in the base rate.
  • Bank of England base rate: The base rate set by the Bank of England is influenced by various economic factors, including inflation, employment rates, and market conditions. It's important to understand how changes in the base rate can impact your monthly mortgage payments.

Capped Rate Remortgages

Capped rate remortgages combine elements of both fixed rate remortgages and tracker remortgages. Here are some key points to consider when it comes to capped rate remortgages:

  • Capped rate remortgages: With a capped rate remortgage, your interest rate is variable, but it cannot go above a certain level, or cap, for a set period of time. This offers a balance of flexibility and interest rate protection.
  • Rate of interest: The rate of interest on a capped rate remortgage varies based on the chosen rate, which is typically linked to the base rate or another variable rate. It's important to understand how changes in the rate of interest can impact your monthly mortgage payments.

Discount Remortgages

Discount remortgages offer lower initial rates, providing a discount for a set period of time. Here are some key points to consider when it comes to discount remortgages:

  • Discount remortgages: With a discount remortgage, you receive a reduction in the lender's standard variable rate for a specific period, typically two to three years. This results in lower initial monthly mortgage payments.
  • Monthly payments: The discounted rate on a discount remortgage provides initial cost savings, potentially freeing up cash flow for other financial needs. It's important to assess the long-term affordability of the mortgage once the discount period ends.

Offset Remortgages

Offset remortgages allow you to offset your mortgage balance with savings held in a linked savings account, potentially reducing the amount of interest you pay. Here are some key points to consider when it comes to offset remortgages:

  • Offset mortgage: With an offset remortgage, the balance of your savings account is offset against your mortgage balance, reducing the amount of interest you pay. This can result in lower monthly mortgage payments or a shorter mortgage term.
  • Savings account: The offset savings account is typically linked to your mortgage and operates as a regular savings account, allowing you to access your money whenever needed. However, it's important to note that any interest earned on your savings may be lower compared to standalone savings accounts.

Deciding When to Remortgage

Now that we've explored the different types of remortgage deals, it's essential to understand the timing of when to remortgage. The ideal time to remortgage is typically before your current mortgage deal ends, as this allows you to avoid being switched to the lender's standard variable rate. By remortgaging early, you can take advantage of better rates, potentially saving money on your monthly payments. However, it's generally a good idea to start looking for a remortgage around three months before your current mortgage deal ends. This should give you enough time to research the different options available and complete the application process to ensure your remortgage deal begins alongside your previous deal ending.

Ideal Time to Remortgage

The ideal time to remortgage is typically the end of your initial deal, which could be a fixed rate, discounted rate, or tracker rate period. Remortgaging at this point enables you to secure a new deal, ensuring you're not automatically switched to your lender's standard variable rate, which can result in higher mortgage payments. Here are some key points to consider when it comes to the ideal time to remortgage:

Ideal Time to Remortgage
  • Interest rate rises - If you're on a variable rate and see multiple increases to the Bank of England base rate you may begin to crave more stability. Remortgaging to a fixed-rate mortgage in the short term can offer this - even if they are slightly higher initially, they cannot increase until the deal period is over.
  • End date: Knowing the end date of your current mortgage deal allows you to plan ahead and explore the remortgage options available to you.
  • Initial deal: Remortgaging before your initial deal ends ensures a seamless transition to a new mortgage deal with potentially better rates or terms. It also provides an opportunity to reassess your financial circumstances and financial goals.

Market Trends Impacting Remortgage Decisions

When deciding to remortgage, it's crucial to consider current market trends and how they may impact your remortgage decisions. Here are some key points to consider when it comes to market trends:

  • Market trends: Interest rates, lender offers, and overall mortgage market conditions can fluctuate over time. Keeping an eye on market trends allows you to identify potential opportunities for better rates or offers.
  • Financial Conduct Authority (FCA): The FCA regulates mortgage lenders and sets standards for mortgage advice. Staying informed about any changes or updates from the FCA is essential to make informed remortgage decisions.

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How to Remortgage

Now that we've covered the different types of remortgage deals, let's explore the process of remortgaging step-by-step. Understanding how to remortgage will help you navigate the application process and find the best remortgage deal for your needs, be it saving money, releasing equity, or borrowing more on your mortgage.

Step-by-Step Guide to Remortgage

Remortgaging can seem daunting, but with a step-by-step guide, you'll be better equipped to navigate the process. Here are the key steps to remortgage your property:

  1. Compare current remortgage rates: Start by researching current remortgage rates to identify potential savings compared to your current mortgage rate.
  2. Gather necessary documents: Prepare the documentation required for the remortgage application, such as pay stubs, bank statements, and property valuations.
  3. Assess fees and costs: Understand the fees and costs involved in remortgaging, such as arrangement fees, legal fees, and product fees. Compare different remortgage deals to ensure the overall costs align with your financial circumstances.
  4. Consider different remortgage deals: Explore the different types of remortgage deals, such as fixed rate, variable rate, or offset remortgages, to find the best option for your financial goals.
  5. Apply for remortgage online and speak to a qualified advisor who will offer advice: Depending on your preference, you can apply for a remortgage deal online, use remortgage calculators, or complete our form to seek advice from mortgage experts to find the best remortgage deal for your needs.
  6. Review new remortgage deal: Before signing the agreement, carefully review the terms of the new remortgage deal, ensuring you understand the interest rate, repayment period, and any additional features or costs.
  7. complete the remortgage application: Once you're satisfied with the new remortgage deal, complete the application, providing all the necessary documentation. Be prepared for a credit check to assess your eligibility for the remortgage.

Navigating Remortgage Applications

When applying for a remortgage, it's crucial to understand the application process and navigate it smoothly. Here are some key points to consider when it comes to remortgage applications:

  • Gather necessary documents: Before starting the application, gather all the necessary documents, such as proof of income, bank statements, and property valuations. This ensures you have everything ready to complete the application accurately.
  • Credit score: Lenders assess your credit score as part of the remortgage application process to determine your creditworthiness. It's important to maintain a good credit score by making timely payments and managing your debts responsibly.
  • Apply online or seek assistance: Some lenders offer online remortgage applications, allowing you to complete the process from the comfort of your home. Alternatively, you can seek assistance from mortgage experts who can guide you through the application process and provide personalised advice.
  • Affordability requirements: Lenders assess your affordability to determine if you can comfortably meet the monthly mortgage payments. They consider factors such as income, existing debts, and overall financial commitments.
  • Review new remortgage terms: Before finalising the application, carefully review the terms of the new remortgage, paying attention to interest rates, repayment periods, additional fees, and any other features of the deal.

Eligibility for a Remortgage Deal

Now that we've explored the application process, let's delve into remortgage eligibility. It's important to assess your eligibility before applying for a remortgage deal to increase your chances of approval and find the best mortgage for your financial circumstances.

Assessing Your Remortgage Eligibility

Assessing your remortgage eligibility involves evaluating various factors, such as your credit rating and financial circumstances. Here are some key points to consider when it comes to remortgage eligibility:

  • Credit rating: Lenders assess your credit rating to determine your creditworthiness. Maintaining a good credit score can increase your chances of remortgage approval and potentially secure better interest rates.
  • Financial circumstances: Lenders evaluate your financial circumstances, including income, existing debts, and overall affordability, to determine if you can comfortably meet mortgage payments. It's essential to have a stable financial situation to demonstrate your ability to repay the remortgage.
  • Mortgage balance: The outstanding balance on your mortgage plays a role in remortgage eligibility. Lenders consider the loan-to-value ratio, which compares the value of your property to the amount you owe, to assess the risk associated with the remortgage.
  • Property value: The current value of your property is another important factor that lenders consider when assessing remortgage eligibility. Evaluating your property's value can help determine the amount you may be able to remortgage.
  • Range of mortgage types: Understanding the range of remortgage deals available can help you identify the right option for your financial circumstances.
Assessing Your Remortgage Eligibility

Factors Affecting Remortgage Approvals

When it comes to remortgage approvals, several factors come into play. Lenders evaluate various aspects to assess the risk associated with the remortgage. Here are some key points to consider when it comes to factors affecting remortgage approvals:

  • Property's current value: The current value of your property impacts remortgage approvals, as lenders use it to determine the loan-to-value ratio. The loan-to-value ratio compares the outstanding mortgage balance to the property value and influences the interest rates and loan amount you may be eligible for.
  • Affordability requirements: Lenders evaluate your affordability to ensure you can comfortably meet the monthly mortgage payments. They assess your income, expenses, and overall financial commitments to determine your ability to repay the remortgage.
  • Credit rating: A good credit rating is crucial for remortgage approvals. Lenders use your credit score to assess your creditworthiness and determine the interest rates, loan terms, and repayment options they offer.
  • Financial circumstances: Lenders consider your overall financial circumstances, including income, existing debts, and financial commitments, to evaluate the risks associated with the remortgage and determine your eligibility.
  • Mortgage lender requirements: Each mortgage lender has specific criteria and requirements for remortgage approvals. Understanding the lender's guidelines can help you increase your chances of approval.

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Comparing Remortgage Rates

Current Remortgage Rates in the UK

To make an informed decision, it's crucial to stay informed about current remortgaging rates in the UK. Here are some key points to consider when it comes to current remortgage rates:

  • Remortgaging rates: Remortgage rates, also known as interest rates, vary depending on factors such as base rates, lender offers, and overall market conditions. Evaluating current remortgaging rates allows you to identify potential savings compared to your current mortgage rates.
  • Best mortgage deals for remortgaging: To find the best remortgage deals, it's important to compare rates and offers from different lenders. Explore lenders, mortgage brokers, and online resources to identify competitive offers that align with your financial circumstances.

Finding the Best Remortgage Deals

Finding the best remortgage deals requires a comprehensive assessment of lenders, rates, and loan terms. Here are some key tips for finding the best remortgage deals:

  • Compare remortgages: Use online comparison tools to compare remortgage rates, offers, and features from different lenders. These tools provide a convenient way to assess different remortgage deals side by side.
  • Best remortgage offers: Look for lenders offering competitive rates, flexible repayment options, and favorable terms. Consider both fixed rate and variable rate remortgages to find the right balance of stability and financial benefits.
  • Seek advice: Consulting a mortgage advisor can help you explore different remortgage offers, navigate the application process, and ensure you find the best remortgage deal for your financial circumstances.

Fees Involved in Remortgaging

Up next, let's explore the fees involved in remortgaging. Understanding these fees is crucial to accurately assess the overall cost of remortgaging and avoid any financial surprises.

Understanding Remortgage Fees

Remortgaging involves several fees that contribute to the overall cost of the process. Here are some key points to consider when it comes to remortgage fees:

Understanding Remortgage Fees
  • Remortgage fees: Remortgaging fees typically include arrangement fees, legal fees, property valuation fees, and potential product fees. It's important to understand the fees associated with your remortgage deal to accurately assess its affordability.
  • Early repayment charge: If you're remortgaging before the end of your initial mortgage deal, your current lender may charge an early repayment fee. This fee is designed to compensate the lender for interest payments they lose when you remortgage.

While remortgaging involves fees, there are ways to lower costs and make the process more financially manageable. Here are some key points to consider when it comes to reducing remortgage costs:

  • Negotiate legal fees: When choosing a solicitor for your remortgage, consider negotiating lower legal fees to reduce overall costs. Compare different solicitors or conveyancers to find the best deal for your needs.
  • Consider product fees: Some remortgage deals may have additional product fees, which are charges for specific features or benefits included in the remortgage. Assess these fees and evaluate if the benefits outweigh the costs.
  • Evaluate overall costs: When assessing remortgage costs, consider the impact of fees, interest rates, and monthly payments over the term of the remortgage. Compare different remortgage options to find the best balance between costs and benefits.

Potential Downsides of Remortgaging

While remortgaging offers several advantages, it's important to consider the potential downsides associated with the process. Understanding these risks can help you make an informed decision about whether remortgaging is right for you.

Risks Involved in Remortgaging

Remortgaging carries certain financial risks that need to be carefully considered. Here are some key points to consider when it comes to risks involved in remortgaging:

  • Financial risk: Remortgaging may involve additional costs, such as fees, higher interest rates, or potential early repayment charges. It's important to assess these costs against the financial benefits of remortgaging to ensure it suits your overall financial goals.
  • Early repayment charge: If you're remortgaging before the end of your current mortgage deal, your current lender may charge an early repayment fee. Assess the impact of this charge on your overall remortgage costs to ensure that the benefits outweigh the costs.

Evaluating if Remortgaging is Right for You

Before making the decision to remortgage, it's crucial to evaluate your current financial situation. Consider how remortgaging aligns with your credit rating and credit check, as this can significantly impact your eligibility for new deals. Evaluate if remortgaging provides lower interest rates based on current base rates, and whether it can release equity for home improvements. Understanding the affordability requirements for new deals is essential to determine if remortgaging is the best way forward.

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Remortgaging Frequently Asked Questions

Yes, it is possible to remortgage with a different lender. Switching lenders can potentially help you secure a better mortgage deal. However, you will need to fulfill the new lender's criteria and go through their application process. Keep in mind that there might be fees involved, such as exit fees or arrangement fees, so it is important to carefully review your mortgage documents and understand the costs associated with remortgaging.

Remortgaging can temporarily lower your credit score. Applying for multiple deals in a short period can further hurt it. However, responsible management and timely payments on the new mortgage can improve your credit score in the long run.

When remortgaging, a property valuation is usually required by the lender to assess the current market value. This valuation can also help negotiate better rates and terms. The cost of the valuation is typically borne by the borrower.

Yes, it is possible to remortgage if you are self-employed. However, lenders may require additional documentation to verify your income and affordability. Make sure to have proof of stable income and a good credit history.

  1. The cost of mortgage booking fees can vary based on the borrowed amount.
  2. Remortgage legal fees depend on the solicitor you choose, so it's crucial to agree on the price before they start any legal work.
  3. When remortgaging, a new lender will appoint a property valuer or surveyor to conduct a property valuation. You might be required to pay a fee for this valuation, which can range from £250 to £1500, unless it's included as part of the mortgage deal.
  4. The mortgage exit fee, also known as the mortgage completion fee, covers administrative charges when switching to another lender and typically ranges from £300 to £1000.

  • If the mortgage interest rates are lower than your current rate
  • When your fixed-term mortgage agreement expires
  • When you have accumulated sufficient equity to take advantage of LTV and the interest rates.

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Page last updated on: 18/06/2024

Page reviewed by: Shay Ramani

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