Updated: February 14, 2022

A Complete Guide to Remortgaging

Looking to remortgage your home? Find out how the process works, if you can save money & a complete step-by-step guide on how to do it in our expert guide!

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: February 14, 2022

Remortgaging is when you move from one mortgage deal to another. It could potentially save you hundreds of pounds a month, but only if you move to the right deal at the right time.

Here, we’ve rounded up everything you need to know about remortgaging, including why and when to consider it, how the process works, and how much it could cost you.

Read on for more information or jump to the section that’s relevant to you via the links below…

What is remortgaging?

Remortgaging is when you switch from your current mortgage deal to a new one, either with your existing lender or a different provider.

People remortgage for a variety of reasons such as to get a better rate or to raise cash for home improvements (more on that below), but one of the biggest incentives is to save money when their initial fixed term or tracker deal comes to an end.

Introductory deals tend to be fairly attractive as mortgage lenders like to entice new customers with superior rates.

However, when these deals – which typically last two, three or five years – end, lenders move customers on to their standard variable rate (SVR), which is usually more expensive. Most borrowers remortgage to avoid having to pay this higher rate.

You can remortgage before the end of your initial term, but if you do, you might have to pay an early repayment charge.

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How to remortgage

The remortgaging process isn’t hugely different to applying for a mortgage but it should be more straightforward as you’re no longer a completely novice borrower.

Here’s a step-by-step guide to getting a remortgage…

Step 1: Look at your current deal

Your first move is to check how long you have left on your existing deal. There are two reasons to do this.

  1. You need enough time to research the market and find a new deal. If you’re staying with your current lender, the remortgage process can be pretty quick. But if you’re switching providers, it’s more complicated and will take longer. It’s a good idea to allow at least three months for the process.
  2. If you want to switch deals before the end of your current term, you may have to pay an early repayment charge, which can run into thousands of pounds, so you’ll need to weigh up whether or not it’s worth paying the fee.

Remember, your mortgage is likely to be your single biggest expenditure so it’s worth getting tailored advice from a mortgage advisor before making any big financial decisions.

Step 2: Work out your loan-to-value (LTV) ratio

The LTV ratio is the amount you’re borrowing relative to the property’s value. It will determine the choice and quality of remortgage products lenders will offer you. Typically, the lower your LTV, the better rate you’ll get.

You’ll need to know the value of your home to figure out your LTV. If you have no idea, you can either ask an estate agent or use a website like Zoopla.

Work out your LTV by dividing your outstanding mortgage loan by your property’s value and multiplying it by 100.

For example, if your outstanding loan is £200,000 and your property value is £500,000, your LTV would be 40% (200,000 ÷ 500,000 x 100 = 40).

Step 3: Get your paperwork in order

You’ve applied for a mortgage before but you’ll still need the right paperwork to get your remortgage approved.

Even if you’re staying with your existing lender, they’ll still want to check your circumstances haven’t changed and that you still meet their eligibility criteria.

Here’s a reminder of what you need.

It’s also a good idea to check there are no errors on your credit reports. Your credit reports help lenders establish how good you’ve been at paying back your mortgage and other loans so it’s important they’re accurate.

You can download your credit reports through our dedicated credit reports hub.

Step 4: Make your application and instruct a conveyancer

Although you can apply for a remortgage deal directly online with a lender, it’s a good idea to speak to an adviser who specialises in remortgages. Brokers can identify the best deals for your circumstances, negotiate with lenders on your behalf, and can also get access to exclusive deals. So, a broker could save you time and money.

If you’re switching lender, you’ll need a conveyancer to carry out the legal side of the remortgage such as confirming you own the property. Many remortgage deals include free conveyancing but this means you won’t be able to pick the solicitor you use.

Why should you refinance your mortgage?

There are several reasons you may consider remortgaging…

1. Your current deal is coming to an end and you’re going to be moved onto your lender’s standard variable rate, which will probably be more expensive.

If you’re in this situation, start by asking your existing lender for their best offer and seeing if you can move from one deal to another. This is called a product transfer.

If you don’t switch lenders, the remortgage process is quicker and easier and you won’t have to pay as many fees.

A quick note: although it may be easier to stick with your current provider, it’s worth checking what other lenders are offering as you could end up paying a lot less each month by switching. A mortgage broker can help you with this.

2. You want to be on a better interest rate than you’re on now

This could be particularly relevant if interest rates have fallen and you want to pay less each month. If your current lender has an attractive rate, you could consider a product transfer. Just remember to check if your existing deal comes with an early repayment charge and weigh up whether moving to a new deal is worth it.

3. You want to switch from an interest-only mortgage to a repayment mortgage (or vice versa)

Many lenders will let you switch to a repayment mortgage or an interest-only mortgage via a product transfer. However, you may use the opportunity to look across the whole market for a better interest rate. This would mean doing a full remortgage with a new lender, which is something an experienced mortgage broker could help you with.

4. Your existing deal won’t let you overpay or take a payment holiday

If your circumstances have changed since you first took out your mortgage, you may need more flexibility than your existing lender offers. Perhaps you’ve moved to a higher-paid job and would like to start making overpayments, but your current lender doesn’t allow this? You may want to remortgage to a new lender who will meet your needs.

5. You want to unlock equity in your home

Equity is how much of your home you own outright. You tend to build up more equity over time as you pay off your mortgage.

There are many reasons to remortgage to release equity from your home such as to fund home improvements, settle debts or help family financially. When you remortgage to unlock equity, your lender will add the amount you want released to your current loan.

6. You want to borrow more money

When you remortgage, you have the opportunity to borrow extra money which you can put towards whatever you like such as home improvements or a new car. Most lenders are happy for you to do this, but they may ask what you’re planning to do with the money.

7. You want to consolidate debt

This is an option if you have other forms of debt, for example credit card debt or personal loans, and you’d rather make just one monthly repayment. When you remortgage, you can borrow more money to pay off these other debts. While having just one monthly repayment may seem appealing, there are drawbacks to doing this, so it’s best to talk to an advisor before making any decisions.

How long it will take

The remortgage process typically takes between six to eight weeks, however it can take longer depending on how complicated your application is and whether or not you’re moving to a new lender.

It tends to be faster if you’re remortgaging to a new deal with your existing lender, which is known as a product transfer.

Remortgages are dealt with in the same way as new applications, meaning lenders will want to make sure you meet their eligibility criteria and stress tests whether you’re an existing customer or not. This can take time especially if you don’t have the correct paperwork ready to go.

The process could also be held up by any conveyancing work or if the lender requests an independent property valuation.

A broker who specialises in remortgages can save you time. They can review your circumstances, identify the best deals for you and help you with the application process.

How much it will cost

When remortgaging, there are a number of fees you’ll have to pay. Here’s a summary of the most common ones…

Arrangement fees

This is the fee your lender charges for setting up your new mortgage. The amount you pay will depend on the provider and the deal you go for, but you’ll typically pay at least £1,000.

Lenders will usually let you pay the fee as a lump sum or add it to your mortgage (which means you’ll be paying interest on it, as well as on the mortgage). There are also mortgage providers who offer deals with no arrangement fees

Booking fees

Some lenders will charge a booking fee of between £100 and £200 to secure a rate. It isn’t very common in today’s market but is worth looking out for.

Legal fees

You’ll need a solicitor to deal with the legal side of your remortgage if you’re switching lenders. Many remortgage deals include free legal work but this will only cover the basics. If you require anything additional, such as removing a name from the title deeds, you’ll have to pay extra.

Valuation fees

Not all lenders will require your property to be physically valued, but some will. The price is included in a lot of remortgage deals, but if it isn’t, you can expect to pay anywhere between £250 and £1,500.

While all lenders will want a valuation to be completed, the valuation type can vary from one to the next. Some will only request an online valuation, while others will want a valuation team to attend the property to carry out a more thorough inspection of it.

Early repayment charge

This is a penalty you could end up having to pay if you want to remortgage before the end of your current mortgage term. These fees tend to be pretty steep (£1,500+) as the lender will want to recoup some of the interest it will lose out on when you switch. Early repayment charges are more likely to apply to fixed-term mortgages than variable-rate mortgages.

Exit fees

These are also known as mortgage completion fees and are charged by some lenders when you pay off your mortgage in full – so in this case, when you remortgage to a new lender.

Should you stick with your current lender?

Staying with your existing lender may seem like the easy route but it won’t always be the sensible option.

Yes, you may get your remortgage approved faster and you may avoid an early repayment charge. However, there are big downsides.

The biggest drawback is you could miss out on better rates from other lenders and end up paying more than you need to each month.

Your existing lender may also not offer the type of product you need such as the option to make overpayments or take a payment holiday.

Shopping around for the best remortgage deal could dramatically reduce your monthly repayments. It may feel like a gruelling and time-consuming task, but an experienced broker can do the legwork for you. Not only will they be able to find the best deal for your needs, but they’ll be able to sort out the paperwork and help you with your application.

If your situation is complex, for example you’re thinking about remortgaging to consolidate debt or releasing equity from your home, then it’s always worth speaking with a broker, whether you’re planning to stick with your current lender or switch. These are big financial decisions that shouldn’t be made without seeking professional advice.

Get matched with an experienced mortgage broker today

A broker who specialises in remortgages will be best suited to help you achieve your goals and save you money.

Call 0808 189 0463 or make an enquiry and we’ll match you with somebody who can help with your individual needs today. We hand-pick all the brokers we work with and rigorously vet them on your behalf so you can be assured you’re getting the best advice possible.

FAQs

Do you need a deposit to remortgage?

No, you don’t. Rather than a deposit, a lender will focus on the amount of equity you have in your existing property and the overall loan-to-value (LTV) when deciding whether they can accept your application.

When you remortgage can you pay a lump sum?

Paying a lump sum would defeat the object of remortgaging. The main aim is to try and reduce your monthly payments through finding a better interest rate deal or to raise further funds for other needs, such as home improvements.

People sometimes choose to overpay more than their usual 10% overpayment allowance. The remortgage process can be a good time to pay a big lump sum at the same time. Albeit, not many people actually do it.

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We can help! We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Remortgages Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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