Very rarely do you take out a mortgage and stick with the same one for the whole term - why? Because you can save a lot of money by remortgaging! Learn more about why and how here.
11 min read
Something people ask us a lot is: should I remortgage? And it’s a very good question to ask!
Very rarely do you take out a mortgage and stick with the same one for the whole term – i.e. 30 years – until it’s all paid off and you’re mortgage-free (oh, the dream!). Instead, it’s much more likely you'll find yourself looking to remortgage to take advantage of a new deal to suit your needs and current budget.
In this guide, we’ll be helping you figure out if now is the right time for you to remortgage. We’ll discuss everything from timings, types of mortgages, risks and rewards, plus how remortgaging actually works.
A remortgage is a term given to arranging a mortgage on a property that you currently own but you either:
Want to move from your existing mortgage provider to a different lender
Want to borrow more than your current mortgage amount, for example, raise additional capital to pay for a renovation, even if you’re staying with the same lender
How to remortgage your home
If remortgaging is the route for you, here are the steps you’ll need to undertake…
Get your paperwork in order
To keep things moving smoothly, it’s recommended that you get your paperwork in order before you start the process. At the very least, you should have a record of your latest mortgage payments and bank statements.
Reach out to a mortgage advisor
Unless you’re a financial wizard, you should be consulting an experienced mortgage advisor to understand your options. A good advisor will not only be able to break down your borrowing options, they’ll also be able to assess your current mortgage to check for any restrictions.
Find a new mortgage
Working with your mortgage advisor or through your own research, you’ll explore the market and select a new mortgage for your home. It’s likely your decision will be based on both rates on offer, as well as the fees involved.
Remember, you’ll potentially need to cover: legal fees and valuation costs.
Consult with your existing provider
Before you press the eject button, it’s worth consulting with your current provider to see if they’re willing to match the competitor. While it’s not guaranteed, if a provider is willing to offer a similar deal, you could save you both time and money to stay put.
Start your application
In order to get the ball rolling, you’ll need to complete your lender’s application form and submit yourself for a financial assessment (this is where all those bank statements will come in handy).
Once your identity and finances have been confirmed, you’ll be offered an agreement in principle. From here a survey of your home will be carried out, and you’ll be asked to settle all the fees associated with the process.
With your payments covered and your home assessed, a mortgage offer will be sent over for you to review. If you agree to what’s on offer, you’ll need to wait for a completion statement for things to be official.
Overall, you should expect the entire process to take at least a month.
Why should I remortgage?
There are many reasons why you may want to remortgage, but here are some of the most common reasons to remortgage your house…
Borrow more money
Remortgaging your home can be a great way to make those home improvements you’ve been pondering over for so long. Whether it’s a dreamy, state-of-the-art kitchen or an extra room to make into a cosy home office, you might be able to release some equity you’ve built up to help fund these projects, and maybe add value to your home at the same time!
Your first step is to consider how much your renovation will cost, as well as telling you how much extra this may cost you each month. You also need to bear in mind that exiting your mortgage deal before the end of its discount period means that you may have to pay an early repayment charge. But don’t worry, our expert team will be able to talk you through any charges that you may occur.
Lower monthly payments
The main reason people remortgage is to save money on their monthly repayments. A better interest rate could mean lower monthly payments.
Talk to one of our team and we can help you find out how must you could be paying. However, you need to consider early repayment charges that may occur if your current mortgage deal has not yet come to an end.
Your current deal is about to end
When your current deal comes to an end, your lender will put you onto its standard variable rate (SVR). This is likely to be higher than your old interest rate, so you’ll probably end up paying more money each month.
You may have a higher paying job or been gifted some money, meaning you have more disposable income and can afford to pay more on your monthly mortgage repayments. This is great news! However, not all lenders will allow you to overpay so you may want to switch to another lender.
Again, this could mean you have to pay an early repayment charge, but we can advise whether it’s still beneficial to switch.
Your home’s value has gone up
If the value of your house has risen since you last took out your mortgage, you may find you’re eligible for much lower rates, meaning lower monthly repayments. This can be worth looking into to make sure you aren’t paying more than you need to.
This depends on the lender, and why you are choosing to remortgage. Sometimes the lender will require you to pay an early repayment charge before you switch, which does add to the overall cost of remortgaging. However, this may be offset over time by the lower interest rate you find with a different lender.
For the most part, homeowners tend to remortgage to take advantage of their improved rate as they near the end of a fixed-term mortgage deal. This better loan-to-value allows you to make reduced payments over the new mortgage term and can have a positive impact on your monthly budget.
Things to consider when remortgaging
Full financial checks will be required
You, and whoever else is named on the mortgage, will need to go through the full application process. This means full disclosure of your income, monthly committed expenditure, and any outstanding debts, the same way you’d apply for a mortgage if you were moving home.
Your property will need to be valued
The property you’re borrowing against will need to be valued for mortgage purposes (this is called a mortgage valuation) and is undertaken by a chartered surveyor. Some lenders charge for this, although some include it in the cost of the product, so it’s worth checking to see if you have to pay if you’re moving to a new lender. Expect a mortgage valuation to cost upwards of £150, depending on the value of the property you’d like to borrow against and how much you’re borrowing.
A solicitor/licenced conveyance will be required
You’ll need a solicitor or licenced conveyancer to act on your behalf to ensure that the legal side of the remortgage process is taken care of correctly. Some lenders include either the full cost or a contribution towards the legalities in their products, but others don’t, so again it’s best to check upfront so you can budget for any fees you may have to find. It’s also worth checking to see if the lender has a ‘panel’ (or list) of approved solicitors or licensed conveyancers that you must use in order to take out a mortgage with them.
You may face extra fees
Some lenders charge a fee for specific mortgage products, for example, if you’re taking out a five-year fixed rate, you may find that there’s a product fee for this. Again, you need to check upfront if this is the case, and if so, what the amount is. If there is a fee, you may find that your lender will allow you to add the costs of fees, for example, legal fees, mortgage valuation and product fees to the total cost of the mortgage, rather than having to find the money upfront. That’s okay, but just remember, that’s an additional amount that you’ll be paying interest on over a number of years, so you need to factor that into your calculations to ensure that you’ve got a full understanding of the total costs of the mortgage and associated costs, not just what your monthly payment will be.
Remortgaging: pros and cons
Pros
Exploring all available competitive mortgage options can allow you to find one that suits your needs and save money too, should a lower interest rate be on offer.
For homeowners currently on a Standard Variable Rate (SVR), you have the chance to potentially reduce your payments.
Remortgaging is an attractive option for renovators, as it allows you to borrow a significant amount of money and is likely to have better interest rates than high-street personal loans.
Depending on who you manage the financing of your project, it could be possible for the added value your renovation creates to be utilised to get you a better remortgaging deal.
Cons
Remortgaging does mean going through a full mortgage application again, whereby you and who else is named on the mortgage, will need to disclose your financial details. This includes your income, monthly expenditures, as well as debts.
Your home will need to undergo a Mortgage Valuation. This involves a surveyor visiting your property to map out its condition. Some lenders will expect you to cover the cost of this service.
Undergoing a remortgage will require a Solicitor or Licenced Conveyancer to manage the process on your behalf. If you don’t have a preference, some lenders do offer a ‘panel’ of legal professionals for you to choose from. Some may even cover the legal costs involved, but a lot won’t. Therefore, you’ll need to discuss what costs are involved and adjust your budget accordingly.
Another fee to bear in mind is the one some lenders charge for taking on certain mortgages, such as a product fee attached to a five-year fixed rate.
Remortgaging alternative: a product transfer
Many people are familiar with the term ‘remortgage’ but haven’t heard of a ‘product transfer’ before… so don’t worry if you’re unsure, you’re not alone!
If you’re happy to stay with the same lender and don’t want to borrow any more money, also known as looking for a ‘like for like’ mortgage but on a new rate, then you may be eligible for a product transfer.
This is a much quicker process as you’re just choosing from the products that your lender offers, then applying your current mortgage balance onto a new deal with them.
Advantages of a product transfer
You don’t have to go through the same application process as you would with a remortgage. It’s usually a much quicker process and can often be done over the phone. Most product transfers can be done within ten working days, or even less.
You don’t have to provide the same amount of paperwork to support your application, so this can speed up the process.
You won’t need a mortgage valuation or have to enlist a solicitor or licensed conveyancer to deal with the paperwork.
Things to consider
You won’t be able to raise any additional capital. Taking a product transfer means you’ll only be able to swap your current outstanding mortgage balance onto a new product, not borrow any more.
You’ll have to stay with the same lender, which means that you may not have access to the most competitive product available for your circumstances; you’ll only be able to select from the rates that your current lender can offer you.
If you want to add a partner to your mortgage, for example, if they’ve moved in with you, or if you want to take someone off the mortgage (perhaps you’ve split up with a partner) then you won’t be able to do this on a product transfer. You’ll have to remortgage and go through the appropriate legal process.
Product transfer: pros and cons
Pros
Because you won’t need to undergo a full application, as you would for a remortgage, is usually much quicker.
A product transfer application doesn’t require the same level of paperwork - another time saver.
It can also be more cost-effective in terms of fees, as you won’t be covering legal fees of a Solicitor or Licensed Conveyancer.
Cons
Unlike a remortgage, you won’t be able to use a product transfer to raise money for any desired projects.
Because you’re staying with the same lender, your options will be limited and you may miss out on lower interest products.
Want to add a partner to your mortgage? Then a product transfer won’t be for you, likewise if you want to remove a partner from the paperwork. In these scenarios, you’ll need to undertake a remortgage.
Conclusion
Whether you want to get a better deal or release equity from your home, a remortgage could be just the answer. However, before you dive in, it’s worth nailing down your motivations and options.
You’ll not only need to assess the terms of your current mortgage, but it might also be worth considering product transfer and the benefits this route provides. Likewise, if you find a better rate elsewhere, you should discuss this option with your current provider, just in case they’re willing to match this deal.
Above all else, if you’re new to the process, having an experienced mortgage broker by your side can make all the difference. Even if you just need help working out the steps you need to take, a consultation could provide the confidence you need to get started.
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