Homeowners have the opportunity to save money by changing their existing mortgage and seeing if they can get a better remortgage deal with a different mortgage lender. In this article we look at how to remortgage your home and ensure you secure the best rate on your new mortgage deal.
We are regularly encouraged to shop around for car insurance or holiday cover, but the same should also be true when it comes to your mortgage. A mortgage will be the biggest expense in most households so any opportunities to remortgage to get the best rate should be taken.
Now may be your best chance to seek remortgage advice to secure the best rates. If you don’t already have a mortgage adviser that you trust you can get a free mortgage review in 30 seconds* from a vetted FCA-regulated mortgage professional. Typically the free remortgage check saves people around £80 per month per £100,000 of mortgage.
What is remortgaging?
A remortgage provides a new product to cover the cost of your home loan. You can remortgage to a new mortgage product with your existing lender or you can shop around and arrange your new mortgage deal with a different lender. We explain the pros and cons of these options in our article, "What is a product transfer and is it better than remortgaging?".
The main reason most people remortgage is to lower their monthly mortgage repayments. This could also be because they are moving from a tracker deal to a fixed rate to lock into the best fixed rates or if they are coming to the end of a deal and want to avoid being stuck on a lender’s more pricey standard variable rate (SVR) that most mortgage products move to on expiry.
Many borrowers fail to shop around at the end of their deals, which can mean paying a lot more than necessary on an SVR. For example:
- a 30-year mortgage of £200,000 on an SVR of 7.99%, according to Bank of England data, would cost £1,466.14 a month.
- In comparison, a competitive mortgage rate of 4.5%, and the same mortgage would cost £1,013.37 a month using this price.
That is a saving of over £400 a month and it shows why it is important to get remortgage advice and shop around for the best deal.
Homeowners can also remortgage to release cash. This usually means taking advantage of the increased value of your home by releasing that extra equity and taking on a bigger loan. This will result in higher monthly repayments but you will then have some money that can be used to fund an extension or pay off debts.
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How long does it take to remortgage?
Remortgaging can be arranged in as little as a day or two if you switch to a different mortgage product with your existing lender (this is called a product transfer) and may take around 4 to 8 weeks if you remortgage to a different lender as the process requires a few extra checks. Many banks and mortgage brokers advise that it can take up to two months to get a remortgage granted so it is important to get the timing right so you can move from one deal to the other and not be placed onto a lender’s SVR.
You will need to get the most recent mortgage valuation statement from your current lender. This will tell you how much is owed on the home loan, what product you are on and how many years are left on the mortgage. You can then use this data when applying to new lenders.
Your home may also have to be valued again and if your new mortgage deal is approved, you will receive a new mortgage offer and your old lender will need to provide a redemption statement to switch your mortgage balance over.
Essentially your old mortgage should be paid off by your new mortgage - or you will need to meet any surplus – and you then pay off the new debt on a new rate.
How much does it cost to remortgage?
Remortgaging costs are dependent on the mortgage deal you choose to transfer to and whether you switch away from your current mortgage lender.
If you remortgage at the end of your current mortgage deal period, you will usually avoid early repayment charges but the following costs may apply:
- Valuation fee - some lenders will not charge a valuation fee as an incentive but if it is charged it usually costs between £250 to £1,500 for a more thorough report
- Conveyancing fee - this is not always needed and sometimes your lender will cover the cost of conveyancing but if you are required to pay it then expect to pay around £300 to £500
- Mortgage broker's fee - many mortgage brokers do not charge for their services as the lender pays them a fee but if you do pay a fee it can be a few hundred pounds up to 1% of the property value
- Administration fee - there may be a small charge for the administration of releasing the property deeds and assigning these to a new lender if you change lenders
It is important to weigh up the initial costs involved in remortgaging to a new mortgage deal and the cost of your new deal over the period that you will be locked into it. It can be all too easy to make your decision based on the remortgaging charges and fees but these may be worth paying if you can secure a competitive mortgage deal as this may reduce your costs over the deal period.
For example, you may choose to pay £1,500 worth of charges to remortgage and secure a 2-year fixed rate remortgage deal 5.25% interest rate on a £180,000 at a 60% LTV and your monthly payment would be £1,078. The total cost of your mortgage, in this case, by the time you reach the end of the 2 years of your mortgage deal period would be around £27,000.
On the other hand, you may be attracted to a slightly higher interest rate that has no upfront costs but if we imagine the interest rate of that deal is 5.64%, you may end up paying over £28,000 over the 2-year deal period.
You should always weigh up the overall cost of your remortgage deal over the period of the deal to get a true indication of how much it will cost you. You can find current remortgage rates using our mortgage rate comparison tool - remember to toggle the initial option to remortgaging rather than arranging a new mortgage to get accurate rates.
Who can remortgage?
It is not just homeowners who can remortgage. You can also get a remortgage if you own a buy-to-let property. Buy-to-let lenders will typically want the rent to cover mortgage interest payments up to a certain ratio, typically around 125 per cent. You can find the best remortgage deals in our article, "Best remortgage deals in the UK".
Is now a good time to remortgage?
If the alternative to remortgaging is paying your lender's SVR, it is likely that it is a good time to remortgage to avoid a large increase to your monthly mortgage costs. Mortgage rates increased by a considerable amount in September of 2022 and having peaked around an average of 6% for 2-year fixed rate mortgage deals on an 80% LTV, rates have steadily reduced and stabilised.
However, the mortgage market remains difficult to read in terms of where mortgage rates may be at the end of a 2-year or 5-year fixed period so there may be some situations where mortgage holders would be wise to pay the SVR on their mortgage until such time as they are happy to lock in a new deal. It is almost always sensible to speak with a mortgage adviser about your affordability, current and short-term, future plans before you make your mind up. It is good to do this ahead of reaching the end of your current mortgage deal period to ensure you have the time to gather all options and give each of them careful consideration.
How to get the best remortgage deal?
It is important to shop around for the best remortgage deals available. Don’t just accept what your current lender offers you. If may also seem easy just to walk into your local bank branch, but remember these advisers will only be promoting what their own mortgage deals.
You could also check comparison websites for an idea of the best deals on the market but there is a big difference between what comes up in a search engine and what you can actually borrow.
For most people, their best bet may be a mortgage broker as they will have an overview of the market and the best types of loans for particular types of borrower as well as access to some that aren’t online or available direct. They can also help prepare your application to ensure you don’t waste time with lenders who won’t lend to you anyway. Mortgage brokers receive a procurement fee from a lender when completing a loan.
Some will charge a separate cost for the work, although you may find fee-free mortgage brokers. If you don’t already have a mortgage broker you can trust you can get a free mortgage review in 30 seconds* from a vetted FCA regulated mortgage professional.
Always remember that you need to compare the best remortgage deals by price as well as the length of the deal. Two-year fixed rates are typically cheaper but you have to consider what mortgage pricing will be like at the end of the deal and if you will end up coming to the end of a deal just as rates rise.
Alternatively, a 5-year fixed rate gives you longer security over what you will pay for your mortgage and you also pay fewer broker and product fees, but you also risk rates going down over that period and losing out on better deals.
The best remortgage calculator we’ve found
You don’t have to start with a mortgage broker if you are just curious about how much you will save. If you already know how much you owe and your current rate then there are plenty of mortgage calculators online that will give you an idea of the savings available.
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