How to remortgage
Remortgaging is made simple with our independent advice guide. We cover why, when and how to remortgage.
What does remortgage mean?
When you remortgage you essentially switch from one mortgage to another. This might be a new deal with your existing lender, or you might decide to move to a new mortgage with a different lender.
Why should I remortgage?
There are lots of reasons to remortgage:
- Your current mortgage term is coming to an end. At this point you’ll be put onto your lender’s standard variable Rate (SVR) which you want to avoid at all costs as the interest rate you’ll pay is almost always much higher.
- You want to increase your borrowing to free up cash for a major expense. You might be moving home and want to borrow more. Or have a home improvement project you want to fund or school fees to pay.
- You want to reduce your monthly repayments. You might be looking for a cheaper deal to make your mortgage more affordable every month. You don’t have to borrow more to switch to a better deal.
- You want to overpay. You circumstances may have changed and you want to move to a mortgage provider that lets you overpay your mortgage by more than your current one
- A Bank of England base rate rise. If you’re on a variable rate mortgage then this might spur you to shop around for a more competitive rate
- Your property has increased in value. In which case a lower loan to value (LTV) might mean you qualify for a cheaper mortgage
- To fix your payments for a period of time. If you know your circumstances are going to change or perhaps you think rates are going to increase, you might remortgage to a fixed rate deal to give you certainty of your monthly mortgage outgoings
Homeowners should look to remortgage every few years, and especially when the term of their current fixed rate mortgage ends, to ensure they are on the best deal and are not paying over the odds.
If you’ve repaid a decent chunk off your mortgage over the past few years and gained equity in your home, switching to a different mortgage can reduce the interest you’ll pay each and every month because you’re able to take advantage of the most competitive deals.
According to UK Finance’s mortgage lending trends, in May 2019, 21,370 new remortgages with additional borrowing (where the homeowner borrows more than their original mortgage) was nearly 20% more than in the same month of the previous year.
When should I remortgage?
Timing is crucial if you’re thinking about remortgaging your home. If you switch before your current mortgage deal has expired, you may be charged penalties.
It may still be cheaper for you to pay the penalties and switch – but you need to review this carefully. You should compare your current mortgage against some of the best deals on the market to find out if you can still save money.
It may help to get advice on the best deals. Our free mortgage service, provided by L&C can help and are just a phone call away if you want to talk through your options.
Can I extend my existing mortgage?
While in most cases remortgaging is a great opportunity to shop around for the best provider, if you are locked into a certain deal there are still options. You could speak to your lender about remortgaging your current lending over a longer term, thus making your monthly repayments cheaper – although the mortgage will be more expensive over its lifetime.
If you’re looking to access the equity in your house, but don’t want to move from your current lender because you have a great rate, again you may be able to extend the mortgage with your existing lender to arrange a larger loan as part of a remortgage.
What are the barriers to remortgaging?
- If you are in negative equity, it is very unlikely you will find a remortgage deal
- If you have any issues with your credit rating, this can also affect your chances of a new mortgage. Find out how to improve your credit rating here
- If you are self-employed you may struggle to remortgage if you can’t provide adequate evidence of your income and lenders will no longer allow you to self-certify. See our guide on self employed mortgages for more information
- Many of the bigger banks will lend into retirement but they will often have an upper age cap, with the majority asking for loans to be repaid before your 70th or 75th birthday. This means that if you’re aged 55 and over, you would have to pay the mortgage back in 20 years rather than the standard 25 years. For more information, see mortgages for over 50s.
- Lenders also often demand higher salaries relative to loans than in previous years and take into account your outgoings as well as your income when deciding to offer you a mortgage.
Can my existing mortgage lender offer the best deal?
By sticking with the same provider, you may avoid some extra fees and save time – but it may not be the best deal. Shopping around for the best rate and doing the maths to take account of any fees and penalties may take time but will likely pay off in the end.
Using a mortgage broker can cut through this and provide the expert advice and leg work that’s required. However, you should still approach your provider to see if they could offer you a better deal.
How do I remortgage?
If your fixed deal is due to end, set a reminder for three months before it expires. This will give you plenty of time to shop around and get your remortgage application completed in time for you to simply switch onto a better deal.
When you’re ready to think about a new mortgage, you should contact award-winning mortgage brokers L&C. They provide free advice and can help you get started, answer any questions you have, explain how remortgaging works and talk you through your options.