Remortgaging means you are changing your existing mortgage at your current property, either with a new mortgage lender or changing the terms with your current mortgage lender. This also means you are not moving to a new property and the mortgage is still secured against your current property.
Reasons why you may want to remortgage
Your current mortgage deal is ending soon
If your current mortgage agreement ends, you’ll be automatically transferred onto the lender's standard variable rate, which are typically more expensive so remortgaging can help you find better mortgage interest rates.
You are paying high interest rates
If you are currently on a standard variable rate mortgage and affected by a raise in the Bank of England’s base rate, you can find better fixed rate mortgage by remortgaging and also have peace of mind that your rates are locked in for a fixed period of time
You can take equity from your existing property if you are looking to raise a lump sum for paying other debts or home improvements. This will increase your mortgage loan, but if you have lived in your property a long time the value could have increased so the LTV may not have changed so you can still get great rates
Making over payments on mortgage
You might be able to find another mortgage lender who allowes you to make over payments at a greater rate than yout current lender, this can help you save thousands on your mortgage because the interest that you pay on the overall mortgage will be cut because you will borrowing over a shorter period of time. Typically overpayments of 10% of your remaining balance per year is standard.
By remortgaging you can benefit if your property value has increased as the LTV (loan-to-value) would go down you and can get better interest rates. Equally this is the same if you have been making repayments on the property for a number of years, the LTV will be reduced as you wouldn’t need the original amount you borrowed
Remortgaging Frequently asked questions
Switching a to new mortgage deal when your current one comes to an end is know as remortgaging. You can switch to a new lender or stay with the same lender on a new mortgage deal with the same property.
It will depend on your own financial situation and the lenders criteria. Mortgage lenders usually look at your expenditure, income and credit history to decide how much they can lend you.
1. Mortgage booking fees – Mortgage booking fees can range depending on the amount you are borrowing.
2. Remortgage legal fees - It will depend on solicitor you work with. It is important to get a price agreed before getting them to do any legal work required.
3. Remortgage Valuation fees - A new lender will appoint a property valuer or surveyor to carry out a property valuation in order to find out how much the property is worth. The Lender might expect you to pay a fee for the valuation unless it is stated that there is a free valuation as part of agreeing the mortgage deal. Valuation fees can range from £250 to £1500.
4. Mortgage exit fee – Widely known as a mortgage completion fee. These are fees applied to cover admin related charges when remortgaging to another lender. This is typically £300 - £1000
When mortgage interest rates are lower compared to your existing rate
When your fixed term mortgage deal ends
When you have built up good equity to benefit from LTV and the interest rates.
1. Repayment remortgage - Repayment remortgage means you pay off some of the initial loan and the interest every month. At the end of agreed terms (Typically 25 years), you would have paid of the whole mortgage and the interest. And you’ll own your property outright.
2. Interest only remortgage – Interest only remortgage means you are only paying off the interest on the borrowed amount. At the end of the mortgage terms, you’ll still have whole mortgage outstanding and will need to show provisions of how you will repay this money.
3. Variable remortgage – Variable Remortgage means your mortgage interest rates will vary depending on the Bank of England base rate. Your lender can also decide when to change the rates. Variable rate mortgages are also known as tracker mortgages.
4. Fixed rate remortgage – fixed rate mortgage means your mortgage interest rate and monthly payment are fixed for an agreed period. Fixed rate mortgages can range from 1 to 10 years, typically 2 years being most popular.