What is remortgaging?
Remortgaging is the process of switching your current mortgage to a new mortgage deal. You can remortgage to a new deal with your existing lender, known as a product transfer, or you can remortgage with a new lender which is simply referred to as a remortgage.
Remortgage deals can be found using our mortgage rate comparison tool, simply enter your property value and the amount and term of your mortgage to see the best deals on the market. It is usually a good idea to speak with a mortgage broker* to ensure that you qualify for your preferred remortgage deal before applying, as a declined application could adversely affect your credit score.
How does remortgaging work?
Essentially, remortgaging moves your mortgage balance from your current mortgage deal to a new mortgage deal so that you avoid going onto your lender's standard variable rate (SVR). Mortgage deals usually last 2, 3, 5 or 10 years and once they expire, you revert to the lender's SVR, which will typically be far higher than any of the remortgage deals on the market at that time. Lining up a new mortgage deal to seamlessly take over from your old one will prevent you from moving onto your lender's SVR so it is important to note when your current mortgage deal expires.
Although the vast majority of remortgages are carried out to simply switch the existing mortgage balance over to a new mortgage deal, it can also be an opportunity to borrow more money or change the overall term of your mortgage.
Remortgaging to release equity from your home can provide you with money to consolidate credit card debts and other loans, carry out home improvements or pay for any other large expenses. You may also wish to spread your mortgage over a longer period to reduce your monthly repayments or even shorten the term so that you can pay your mortgage off sooner.
Remortgaging with your existing mortgage lender
This is called a product transfer and is simple and quick to arrange because your mortgage lender already has all of your information as well as details about the property. Valuation and legal fees can usually be avoided when you complete a product transfer so you may also save money by choosing this route to remortgage. Your mortgage lender will usually write to you with new mortgage offers and you can simply complete a product transfer application to switch over to the neal mortgage deal. That being said, it is always a good idea to check for the best mortgage rates before you choose to stick with your lender as you may save more money by switching to a better mortgage rate elsewhere even after paying valuation fees and legal costs.
Remortgaging to a new mortgage lender
Remortgaging to a new mortgage lender is like applying for your mortgage all over again as the new lender will need to assess your affordability as well as carry out checks on the property. While this may seem laborious, you may be rewarded with a more competitive interest rate that can help reduce your monthly mortgage payments as well as the overall cost of repaying your mortgage. Depending on your circumstances, you may even decide to transfer to a mortgage deal with a lender that offers more favourable terms; perhaps they don't charge exit fees or they allow genberous overpayments without penalty.
Convenience may be important to you, but it is best to weigh up the difference in the cost of mortgage deals before you choose to stay with your existing lender. You can search for the best mortgage deal using our Mortgage comparison rate tool - you will find fixed-rate mortgage and tracker-rate mortgage deals from over 90 lenders' mortgage products.
How to decide if remortgaging is a good idea
Weighing up the pros and cons of remortgaging will help you to understand what is best for you. Below, we list some of the advantages and disadvantages or remortgaging to a new mortgage deal.
What are the advantages of remortgaging?
- You will avoid paying a high reversion or standard variable rate of interest that may fluctuate
- Budgeting may be easier if you fix your monthly mortgage payment amount
- A lower loan-to-value could get you a lower mortgage interest rate if your property has increased in value
- You could borrow more money on your mortgage for home improvements, debt consolidation or other expenses
What are the disadvantages of remortgaging?
- Switching lenders can take time as you will need to provide evidence of earnings and bank statements
- You may have to pay legal fees, valuation costs and mortgage arrangement fees
- A higher loan-to-value could push you onto a less favourable mortgage deal if your property has reduced in value
Is it easy to remortgage?
It can be relatively straightforward to remortgage, particularly if you decide to stick with your current lender. The average product transfer takes around 1 to 2 weeks to complete while it can take roughly 6 to 8 weeks to complete a remortgage to a new lender. Most of the information needed for your remortgage will be the same as when you applied for your original mortgage but it is useful to gather the following to streamline the process:
- Evidence of your earnings over the last 3 months
- Bank statements for the last 6 months
- Mortgage redemption statement from your current lender
- Credit report
Situations where you may find it difficult to remortgage include:
- Negative equity where your property value has fallen below the mortgage amount
- Affordability issues where your income has fallen or your outgoings have increased
- Adverse credit caused by missed payments or defaults
If you find yourself in any of the above situations or any other circumstance that makes remortgaging difficult, you should speak with a mortgage specialist*. Mortgages can usually be arranged in adverse circumstances and it is a good idea to explore your options with a mortgage broker instead of resigning yourself to paying a high interest rate with your existing lender. There are often specialist lender deals that you can qualify for that offer more attractive interest rates and may allow you to fix your mortgage payments for a period of time.
Is it a good time to remortgage?
Whether now is the right time to remortgage is ultimately down to you as there is no way of telling exactly what will happen to interest rates in the future and everyone's situation is slightly different. If you are worried about rising interest rates and you are coming to the end of a fixed deal then it would make sense to look at the best fixed rate mortgage deals on the market as remortgaging will ensure you avoid moving onto your lender's standard variable rate, which is likely to be expensive. We explore this subject in more detail in our article 'Remortgaging in 2023 - is now the right time to fix and for how long?' The article also considers whether you should fix your mortgage rate and how long you should fix it for.
If your mortgage deal is coming to an end then it is a good idea to start the remortgage process at least 6 months before your current deal is due to expire. Speculative borrowers may wish to wait and see if interest rates reduce further and you can find more information to help you decide whether this is a good strategy in our article, "When will interest rates rise (or be cut) - latest predictions".
How to find the best mortgage deals
It is a good idea to enlist the help of a mortgage specialist to guide you through the mortgage options available to you. Not only is a mortgage specialist able to access mortgage deals that are only available through a broker, but they also have specialist knowledge of which lenders are best for your particular circumstances. Mortgage brokers will also provide you with advice about the type of mortgage that is best for your needs and can advise on which lenders are best for making overpayments and avoiding early repayment charges.
If you do not have a mortgage broker, you can source one that is local to you and vetted by customers using the VouchedFor* website. VouchedFor provides the details of financial professionals including mortgage brokers that you can compare easily.
Alternatively, you can contact Habito*, an online mortgage broker that can search over 90 lenders and 20,000 mortgage deals for you. We have vetted the services provided by Habito and found the advisers to be excellent, providing insights that help borrowers find the best mortgage deals. There is no charge for the service as Habito is paid a fee from the lender.
If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. The following link can be used if you do not wish to help Money to the Masses or take advantage of any exclusive offers - Habito, Vouchedfor
