Remortgage

What is a remortgage?

A remortgage involves replacing your current mortgage with a new one, often with a different lender. Selecting a new deal with the same lender is known as a product transfer or rate switch.

Why should I remortgage?

There are numerous reasons why you might want to remortgage, including:

• Getting a new interest rate – better rates might be available, especially if your loan-to-value has decreased. Even if you are coming off a very low rate, reviewing your options could reveal better deals than settling for your lender’s follow-on rate.
• Making changes to your mortgage – for example, you might want to reduce the overall term.
• Releasing equity – if you have sufficient equity in your home and can meet the affordability requirements, you could borrow more to gain access to a lump sum of cash. This can be used, for example, to pay for home improvements or provide a deposit for a rental property purchase.
• Debt consolidation – some homeowners use a remortgage to consolidate high-interest debts, such as credit card debt, into a lower-interest mortgage loan. This can make it easier to manage. Think carefully before securing debts against your home.

How does remortgaging work?

A remortgage involves submitting a full mortgage application to a new lender. It’s therefore vitally important that you research lender criteria, and do affordability checks, before applying. This will increase your chances of success.

You will have to provide documentation such as bank statements and income proof. The lender will conduct credit and affordability checks, and will do a basic valuation of the property. Products are available that include a free valuation if you don’t want to pay for this.

Likewise, some deals come with free standard legal fees, too. In these instances the lender chooses the firm of solicitors that will act for them and for you. The alternative is selecting a deal that means you have to pay for the legal work yourself. This can give you more flexibility because you can then choose a suitable firm yourself. You might get a small amount of cashback from the lender in lieu of free standard legal fees.

You need a solicitor because they handle the transfer from one bank to another, not just in terms of funds but also at Land Registry.

There may be associated costs such as application fees and appraisal fees. It’s essential to carefully consider the costs and benefits of remortgaging and to compare offers from different lenders to make an informed decision based on your financial goals and circumstances.

When should I remortgage?

You can look to remortgage at any time. However, if you are tied into a deal, there may be early repayment charges and exit fees to pay. Remortgaging might not be cost-effective in this case.

Most people remortgage at the end of their fixed, tracker, or discounted rate period. This tends to be when early repayment charges cease to be payable. The lender’s follow-on rate is also typically quite high in comparison, so doing nothing could be costly.

Generally, a mortgage offer is valid for up to six months. We therefore advise starting to look at available deals up to six months before your current deal ends. 

If you are moving to a new lender, legal work needs to be carried out. Securing a new rate early should mean the solicitors have enough time to do their checks and get everything set up so that your new mortgage will start the next working day after your current deal ends.