Remortgaging can save you thousands of pounds on your mortgage and have other benefits too, so it’s a popular move.
Almost a third of new homeowner mortgages taken out at the start of 2024 were remortgages according to the Bank of England.
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What is remortgaging?
Remortgaging is technically switching your mortgage to a new lender without moving house.
However, the term is also often used to refer to switching to a new deal with your existing lender. This is known as a product transfer.
In both cases you’re swapping one mortgage deal for another – usually to pay less, borrow more or get terms that suit you better.
You might not always get the best deal by sticking with your current lender, so you should always shop around.
A product transfer tends to be more straightforward than a remortgage with a new lender though, as you don’t have to apply from scratch.
There are no affordability checks and there’s no valuation of your home. You won’t usually pay any set-up fees either.
Mortgage lenders offer deals specifically for remortgaging and there are thousands to choose from.
There are currently more than 3,400 available according to financial information website Moneyfactscompare.co.uk.
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How does remortgaging work?
When you take out a mortgage, there’s usually a discounted period at the start of the term of between two and five years. There are also 10-year deals.
The vast majority of borrowers take out fixed-rate mortgages, so the rate stays the same throughout the period of the initial deal.
At the end of this deal period, your rate changes to your lender’s usually higher standard variable rate (SVR).
This means that if you don’t switch to a new mortgage deal before this happens, your repayments could go up significantly.
What does it mean if you're on the Standard Variable Rate?
As the SVR is variable, it could go up or down, so you’ll also have no certainty about what your repayments will be going forward.
It's important to bear in the mind that your repayments could still go up if you remortgage at the end of your deal, as average rates are much higher now than they were a few years ago.
However, you’ll still usually save money by fixing your mortgage rather than paying the SVR.
Remortgaging with a different lender vs your existing lender
If you’re remortgaging with a different lender, you take out a new mortgage to pay off your old one.
You then make repayments to your new lender.
If you’re switching to a new deal with your existing lender, the terms of your mortgage simply change. You continue to make your repayments as before but at the new the amount if it’s gone up or down.
Early repayment charges
There are normally early repayment charges (ERCs) that need to be paid if you decide switch before the end of the initial mortgage deal period, both with fixed-rate deals and sometimes variable ones.
For this reason, it’s best to start the remortgage process just before your current deal ends. If everything goes smoothly, the new one will start as soon as the old one ends.
Benefits of remortgaging your home
People often remortgage to avoid moving onto the higher SVR at the end of their deal but there are other reasons for doing so:
To borrow more
You may be able to increase the size of your mortgage to release equity to pay for renovations to your home, for example. You can usually apply to borrow more from your lender at any time. However, if you do it when you remortgage you’ll be able to have all your borrowing in one loan on the same terms.
To borrow less
If you can afford to pay off some of your mortgage, once your deal ends you can pay off as much as you like without paying ERCs. This can allow you to either reduce your monthly repayments or – if you can afford to keep paying the same amount – pay your mortgage off earlier.
To reduce your mortgage term
If your repayments will be smaller as a result of remortgaging you could reduce the length of your mortgage to keep your payments the same but pay your mortgage off sooner. This will also save you money in interest. You can often change your mortgage term with your existing lender at any time.
To extend your mortgage term
If you’re struggling to afford your mortgage payments, you may be able to extend the term to reduce them. However, it will take you longer to pay off your mortgage and cost you more in interest overall.
To get more certainty
If you’re on a variable rate, such as a tracker, you may want to remortgage to a fixed rate. This means your rate won’t go up (or down) during the period of the deal so you know what you’ll be paying each month.
To get more flexibility
Some deals let you overpay by more than others, allow you to underpay or take payment holidays, or don’t have ERCs. Remortgaging could allow you to switch to one of these deals to take advantage of these features.
To get a better rate
If the value of your home has increased or you’ve paid off a significant amount of your mortgage since you took out your previous deal, your loan-to-value (LTV) will be smaller. This means you may be able to take advantage of better deals as the smaller your LTV the lower the interest rate you’ll usually pay. The best deals are available to those with a 60% LTV or less.
Your LTV is the percentage of the value of your home you’re borrowing. For example, if your home is worth £200,000 and you’re borrowing £180,000 your LTV is 90%.
To take advantage of lower rates
If rates have fallen in the market generally, you could save money by switching your mortgage before the end of your initial deal. The bigger your mortgage, the more likely you are to save. However, you need to factor in any ERCs and set-up fees you’ll have to pay to make sure it’s worth doing.
You can usually switch to a new product with the same lender up to four months before the end of your deal without paying ERCs. Some lenders let you do it even earlier.
If you’re remortgaging because you’re coming to the end of your deal, it’s a good time to review all aspects of your mortgage. You may be able to take advantage of some of the other potential benefits too.
Reasons not to remortgage
Remortgaging isn’t always worth doing or possible. Reasons why include:
Your mortgage is too small
If you’ve paid off most of your mortgage, any costs involved in remortgaging could wipe out any savings you would make.
Your term is too short
Most lenders won’t give you a new mortgage with a term of less than five years. This means that if you’re coming to the end of your term, you can’t usually remortgage.
You won’t save money
If interest rates have changed significantly since you took out your current deal, there’s a chance you won’t be paying much more when you revert to the SVR. This could mean that the set-up costs involved in remortgaging cancel out any savings.
Your financial situation has changed
A new lender might not grant you a mortgage based on your current circumstances if it thinks you can’t afford to pay it back. You’ll also pay a higher interest rate if you’ve had credit problems since you took out your current mortgage.
You’ll have to pay ERCs
If you switch your mortgage to a new lender before your current deal ends to take advantage of low rates, you may have to pay charges. These could eliminate any savings you would make.
You’re too old
You won’t be able to remortgage (or extend your term) if your mortgage won’t be paid off until you’re older than the lender’s maximum age. This varies by lender but is usually 70-85. Some lenders set a maximum for taking out a mortgage while others don’t have set age limits.
Your LTV has increased.
If the value of your home has gone down since you took out your current mortgage, your LTV could have grown. This means you won’t have access to the best deals, especially if you need to borrow 90% or more of your home’s value.
When is the best time to remortgage?
You can remortgage at any time but if you’ll have to pay ERCs it might not be worth it. It’s best to wait until you’re close to the end of your deal so you won’t have to pay them. The new deal can be set up to start as soon as your current one ends.
You should kick off the process at least three months before. However, it’s a good idea to make a start by looking into available deals and which ones you might be eligible for from six months before. This is particularly helpful if rates are likely to go up in the coming months as you can secure a deal before they do.
Compare the best remortgage rates and deals
How long does a remortgage take?
It usually takes one to two months to remortgage to a new lender. This depends on the lender and how straightforward your application is. A product transfer with the same lender is much quicker as you’re not making a new application. It could take as little as a few days.
How to remortgage
These are the steps you need to go through to remortgage:
Three to six months before your current deal ends, find out what deals you can switch to with your current lender. There will often be special deals available for existing customers. Then see what you could get elsewhere. Consider speaking to a mortgage broker, who can help you find and apply for the best deal for you. They may also have access to products not available directly from the lender.
Decide which is the best option for you. Make sure you take any ERCs into account and look at the total cost over the deal period to compare mortgages. This will factor in any arrangement and other set-up fees so you can see the true cost. It could be cheaper to pay a higher interest rate but no arrangement fee, for example, or vice versa. You should avoid adding any arrangement fee to your mortgage as you’ll pay interest on it.
If you’re switching to a new lender, around three months before your current deals ends submit your mortgage application along with the documents required. You can wait until closer to the end of your deal to request a product transfer with the same lender unless you want to move onto the new deal early.
Once you’ve received and accepted the mortgage offer, your solicitor or licensed conveyancer will carry out the legal work involved in transferring your mortgage to a new lender. This legal work is often included for free as part of a remortgage deal so you don’t usually have to find and pay for a solicitor or conveyancer yourself.
When the remortgage has been completed, you’ll start making your repayments to the new lender.
Visit our guide to find out how to work out your mortgage repayments.
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What to consider before remortgaging
Before you go ahead with your remortgage, you should ask yourself the following questions:
How much will it cost to leave your existing mortgage and set up a new one?
What are your reasons for remortgaging?
How are your mortgage needs and financial situation likely to change in the future?
How much will the new mortgage cost you and are you likely to be able to afford it throughout the period of the deal?
Are you likely to be granted a mortgage by a new lender based on your current circumstances or do you need to stick with your current one?
Do you need a remortgage deal designed for people with bad credit?
Remortgaging examples
The table below shows how much you could save by remortgaging to one of the cheapest two-year fixed-rate deals available throughout Great Britain in June 2024 versus paying the average SVR of 8.18%. This assumes the SVR doesn’t change throughout the two years.
SVR | Fixed-rate deal 90% LTV | Fixed-rate deal 60% LTV | |
Loan amount | £180,000 | £180,000 | £180,000 |
Mortgage term | 20 years | 20 years | 20 years |
Interest rate | 8.18% | 5.69% | 5.03% |
Product fees | £0 | £0 | £0 |
Total cost over two years | £36,600 | £30,462 | £28,962 |
Saving | - | £6,138 | £7,638 |
Table notes: Based on data from Moneyfactscompare.co.uk and Moneyfacts mortgage market analysis.
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