Remortgaging your home allows you to switch to a new mortgage deal without moving house. There are plenty of reasons you might decide to remortgage: you might want to take advantage of a more competitive mortgage offer, fix your mortgage rate or access the equity in your property to pay for home improvements.
Remortgaging can be a great way to save money. When you take out a mortgage, you normally have a time-limited deal that offers you a competitive interest rate for a specified period of usually two, three or five years. When this ends, your deal jumps up to the lender’s standard variable rate (SVR), which is usually the most expensive option. By switching to a new deal at this point, you can avoid paying over the odds in interest and save a significant amount of cash – just make sure you remortgage at the right time to avoid being charged any early repayment fees.
You may also find that as you’ve paid off a part of the mortgage already, your loan-to-value ratio (the loan as a percentage of the property’s value) improves, which gives you access to a better range of deals. As your loan-to-value reduces and your interest rate comes down, more of your cash goes towards paying off the money you borrowed to buy the property rather than lining the lender’s pockets.
You might also be able to reduce the term of your mortgage, which means you’ll be debt-free more quickly and end up paying less interest overall.
At the other end of the scale, if you want to access some of the equity in your home to help pay for home repairs you could increase the size of your mortgage to do this. Spreading the payments over a new 25-year term would help to keep the repayments affordable.
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When your mortgage deal ends, you are put onto your lender's standard variable rate (SVR), which is usually higher than the initial rate offered, so it's worth considering remortgaging at this point to secure better terms. Once your current offer finishes, you should be able to switch without paying early repayment charges. You can choose between the best fixed, tracker and discounted variable rates on the market. If your loan-to-value has decreased since you took out your existing mortgage, you may be able to access cheaper deals.
When you remortgage, one of your options is to select a new fixed-rate mortgage. With these deals, your interest rate and monthly repayments are guaranteed for several years. Offers typically run for two, three, five or even 10 years. While the interest rates can initially be higher than on tracker or discounted variable deals, fixing means you know exactly what you have to pay each month for the duration of the deal. This means you can budget more easily, and protect yourself if interest rates rise. You won’t benefit if rates fall though.
When you remortgage, you might be able to borrow more money. That means you can release some of the equity you have tied up in your property, spreading the payments over the length of the remaining term of your mortgage or a new 25-year or longer term. This lets you access cash for house renovations, for example. Mortgage interest rates are usually lower than for other types of borrowing, which means it's often a cost-effective way to borrow money.
The most common mortgage term is 25 years, although it can be up to 40 years. Remortgaging can allow you to shorten the mortgage term to pay off your loan sooner and save in interest. Overpaying your mortgage has the same effect, but not all mortgages let you do this and many charge you a fee if you overpay by more than a certain amount. So, remortgaging is a good option if you have spare cash to make bigger repayments. If you can get a lower interest rate than before you could even find that your monthly repayments stay the same over a shorter loan term.
Lenders use the loan-to-value (LTV) ratio to determine what interest rates they charge. If your property is worth more now than when you bought it, you'll have a smaller loan-to-value ratio. For example, if you borrowed £150,000 to buy a £200,000 property, the LTV would have been 75%. If the property is now worth £300,000 and you still owe the full £150,000 the LTV is just 50%. If you’ve made repayments in that time, the LTV should be even lower. That means you should be able to access cheaper deals.
If you've had bad service from your mortgage provider, you might want to remortgage to a new lender. If so, you should try to find one with a reputation for excellent customer service. Shopping around online and reading customer reviews is a good place to start. While customer service is important, you should still make sure you’re getting a good deal. Also, try to avoid remortgaging before the end of your current deal, otherwise, you may have to pay early repayment charges.
The eligibility criteria applied when you apply for a remortgage are the same as when you first take out a mortgage. This means that the critical factors will be your credit rating, your income and affordability, your LTV and your overall financial position.
If you were eligible for a mortgage before, you should be able to find a remortgage deal now. The deal offered may even be more favourable than before if your LTV is lower. However, if your financial circumstances have changed significantly in the intervening years you could find that the deals available to you are worse or you struggle to remortgage at all. Changes in the mortgage market as a whole could also affect the remortgage deals on offer.
Things that may make it harder to remortgage include:
A lower credit score
New debts or loans
A drop in earnings / giving up work / going part-time
Switching to self-employment
A fall in the value of your home
Any missed mortgage payments
Changes in circumstances (e.g. divorce)
Mortgages becoming more expensive or lending criteria becoming stricter since you took out your previous mortgage
To get a fixed interest rate and guarantee monthly repayments
To get a better deal which means lower repayments
To borrow extra money and release equity from your home
To get more flexibility – e.g. a deal that allows overpayments
To switch providers for better customer service
To change the length of your mortgage term
If early repayment charges (ERCs) cost you more than you’ll save by switching
If you can’t afford the remortgage costs - set-up fees, arrangement fees and/or booking fees can add up to around £2,000
If you’re thinking of moving house soon and don’t want to lock into a new deal
If you've recently been rejected for a mortgage or any other debt product
If your circumstances have changed so you only qualify for worse deals
If your credit rating has dropped or you’ve missed repayments on the mortgage
There are a number of steps you can take to get the cheapest remortgage deal possible. It’s also worth considering speaking to a mortgage broker, who will look at the whole available market to find the best deal for your circumstances.
Your credit rating will have an impact on the cost of the remortgage deals you can get so it’s worth improving it where possible. Always make credit repayments on time and get onto the electoral roll if you’re not already on it.
You should also get free credit reports from the three credit reference agencies: Experian, Equifax and TransUnion. Use these to check that there are no mistakes on your record, and contact the relevant credit reference agencies to ask for corrections if there are any errors.
You can use comparison sites or speak to a mortgage broker to compare deals and find the lowest interest rates available. However, make sure you also take fees into account as they can make a deal with a low interest rate more expensive than some with higher rates.
The lower your LTV, the cheaper the deals you’re likely to get. This is because the lender is more likely to be able to get its money back by selling the property if you can’t repay your mortgage. The best deals are available if you’re borrowing 60% of the property’s value or less so bear this in mind if you’re thinking about increasing the size of your mortgage. You may want to consider whether you have savings you could use to reduce your LTV.
Fees can bump up the overall cost of a mortgage so make sure you factor these in when comparing deals. That said, low fees don’t necessarily mean a deal will be cheaper if its interest rate is higher. Looking at the total cost over the period of the initial deal is the best way to compare costs. You can do this by looking at the Annual Percentage Rate of Charge (APRC). This is an interest rate which is meant to reflect the whole cost of a mortgage for every year of its term, including any fees.
There will often be fees to pay when you remortgage but in most cases, it’s still worth doing as you’ll avoid having to pay your lender’s higher standard variable rate when your existing deal ends. Here are the main fees you might have to pay.
A lender will always want to value your property when deciding how much and whether to lend to you and there will be legal work involved in completing the remortgage. However, remortgage deals often come with free valuation and legal fees.
Many remortgage deals come with product fees, which can be known as administration fees, arrangement fees or booking fees. You can usually add these to your loan but you should avoid doing this if possible as you’ll end up paying interest on them for the life of the loan.
You’ll pay an early repayment charge if you switch your mortgage before your initial deal ends so you should wait until these no longer apply where possible. It’s only worth switching before this if you’ll save more money by remortgaging than you’ll be charged for exiting your existing deal.
It's usually quicker to remortgage than it is to take out a mortgage to buy a new home. It's especially quick if you're getting a new deal with the same lender and not borrowing any extra money.
Typically, a straightforward remortgage takes about four to eight weeks but this can be longer if your application is rejected or there are any problems.
Yes, you can switch to a deal with a new lender. It will pay off your old mortgage and you’ll start making repayments to the new lender instead.
Make sure you compare deals from new lenders against deals from your existing provider to check you’re getting the best possible offer for your circumstances.
Using a broker can be a good option to help you remortgage, especially if you have complex requirements and need specialist support or advice – for instance, if you have a small deposit, are trying to remortgage with bad credit, or are doing a buy-to-let or shared ownership remortgage. In these cases, a broker could help you find a good deal that suits your financial situation.
Yes, you can get a mortgage offer from a lender before you need it. Some remortgage offers last for several months. It is always good to plan ahead and make sure you have an offer in place before your current deal ends so you don’t end up moving onto your lender’s standard variable rate.
Yes, remortgage providers will usually let you borrow more than you owe on your property, particularly if your home has gone up in value. You can use the extra money for specific purposes like renovations. The lender will want to know what the cash is for and will carry out affordability checks to make sure you can make the repayments comfortably.
Yes, lenders usually want to value your home before they offer you a new deal, especially when you switch to them from another mortgage company. They may not do this in person but do a “desktop valuation” instead, which involves looking at recent sale prices. Or a surveyor might do a “drive-by” valuation where they look at the property from the outside only.
There’s no legal age limit, but most lenders have their own criteria. This means the pool of providers that will offer you a remortgage starts shrinking after the age of 70. However, some have no age limits at all and will let you borrow well into retirement. Others offer you a remortgage, but might limit the term of the loan to 10 or 15 years. If your remortgage runs past retirement age, you may have to share your pension details to prove you will still be able to afford the repayments.
When you're looking for a remortgage deal, make sure you're in the best financial shape you can be. Pay attention to your credit score and make sure it is high enough for the lender to accept you. The cheapest remortgage rates are only available to people with an excellent credit rating.
Lenders may also consider how much equity you have in your property. If your LTV ratio is still quite high, use savings to give yourself a bigger deposit. This will make you a more attractive borrower and you should get access to better rates. The best remortgage rates are often reserved for LTVs of 60% or under. The best remortgage rates are often reserved for LTVs of 60% or under. So, the remortgage rates on a 60% LTV will be better than you would get on a 90% LTV remortgage.
If you’re struggling to find deals, make sure you speak to your current mortgage lender. Sometimes the cheapest remortgage deals are only available to existing customers. Consider a broker if you need more specialist help – they should also be able to give you advice to improve your chances of getting a good deal.
Applying for any form of credit involves a hard search on your credit record that can impact your score. If your application is successful, any dip in your credit score will usually only be temporary and it should start to improve again as you make your monthly repayments on time.
Unsuccessful applications will have a bigger negative impact on your credit score, making it harder to get accepted for future deals. Try to space out applications so there is a six-month gap after any rejections. Before you apply for a remortgage, check your credit files with the three credit reference agencies (Experian, Equifax and TransUnion) to make sure you’re in the best shape to get a deal.
If you've been rejected recently, there will be a reason. You need to find out what this reason is before you apply for another remortgage. The more often you are rejected for a remortgage, the more your credit score will drop. This can make it far harder to get accepted for credit products in the future. Experts suggest leaving three to six months before applying again and taking steps to improve your credit score in the meantime.
Yes, it is perfectly possible to remortgage when self-employed. However, if you were in full-time employment when you took out your previous mortgage, you may find you’re offered less attractive rates and are subject to more stringent affordability checks. Lenders will need to see proof of income, and they will want evidence that you’ve got a healthy stream of work coming in. Your credit score will be more important than ever, so make sure it’s as high as possible before you apply.
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