What is a remortgage?

Remortgaging is when you look to replace one mortgage product with another, usually this means moving to a new lender. As the years go by, you don’t necessarily have to stay on the same mortgage product as the one you initially took out. It’s likely your personal circumstances will change over time as will interest rates, meaning you’re likely to remortgage a number of times throughout the term of your mortgage.

Why do people choose to remortgage?

It’s always important to review your finances from time to time, consider your options and know that you’ve got a mortgage that fits your individual circumstances and needs.

Much like renewing your car insurance or shopping around for a good broadband deal, there will often be other mortgage rates out there that may be more suitable for you, and the process of changing this is called a remortgage.

Some additional reasons that many choose to remortgage:

– The current fixed mortgage product is up for renewal

– Looking to change the repayment type of the mortgage

– Looking to change the mortgage term

– Looking to be able to make overpayments or a lump sum payment

– Seeking to borrow additional funds for things such as home improvements

Most mortgages will come with an introductory rate period, normally a fixed rate or variable rate. These usually expire after either 2, 3 or 5 years, after which you would revert to a Standard Variable Rate (SVR) which is usually significantly higher, which would result in a larger monthly repayment.

Of course, a mortgage is likely to be the biggest financial commitment you’ll ever have, so there’s a few things you should consider before taking the plunge and seeking to remortgage.

If you’ve spotted a new product out there, there’s a few things to check:

– Be aware of early repayment fees on your current mortgage – if your current mortgage has early repayment charges outstanding, it’s important to factor these in to the calculations or wait until these expire before your new product ends.

– Check the small print to see if there are fees for the new product – arrangement fees, valuation fees and legal fees. It’s important to consider all the costs involved.

– Make sure you’re ‘mortgage ready’ – similar to when you first applied for your current mortgage, it’s important to have a good credit score and financially be in good condition, as there may well be similar checks undertaken as for a first-time mortgage.


Choosing a remortgage product

There are a number of things to consider when choosing new a new mortgage product. We list some key details below, please do speak to us for more information and a full explanation of what each option means and how it can work for you.

Repayment mortgage or an interest-only mortgage?

A repayment mortgage allows you to pay off the original sum, plus a portion of the interest each month, whereas an interest-only mortgage lives up to its name – with you paying just the interest for that period, and not the original sum borrowed. This means that the full mortgage balance will be outstanding at the end of the term, unless overpayments have been made.

Lenders often need solid reassurance that you have a plan in place to repay an interest-only mortgage, so they tend to be harder to obtain than a repayment mortgage. Relying on savings, future work bonuses or inheritance is risky, and not enough to reassure many lenders. Interest-only mortgages are more commonly used in buy-to-let or property development investments, with a clear business plan put in place. Interest Only mortgages will generally be cheaper on a monthly basis, as you’re not reducing the mortgage balance.

Fixed rate or variable-rate mortgage?

Fixed rate mortgages:

As implied, a fixed rate mortgage is a fixed interest rate, for a set period of time. Generally you’ll find either 2,3 or 5 year fixed rates, but longer options may be available. The benefit of a fixed rate mortgage is the fact that it does not change for that period, so it’s great for planning, stability and peace of mind around your monthly outgoings.

Interest rates can fluctuate, dependent upon the state of the economy and a wide range of external factors feeding into it, so by their nature can be varied over time. If you have a fixed rate mortgage set when interest rates were generally low, then you would be protected against any sudden rises in bank interest rates and can continue paying the same repayments each month.

Variable-rate mortgages:

Conversely, variable-rate mortgages broadly follow bank interest rates, moving up and down over time following global events and economic activity.

Within variable-rate mortgages, there are different types further, a ‘Tracker’ mortgage will follow the Bank of England interest rate at a set percentage, usually above it. For instance if you have a tracker following the Bank of England Base Rate at 0.5% above base, your interest rate will always be 0.5% above the base rate at that given time.

There could also be opportunities to apply for Discounted rates where lenders offer a discount from their Standard Variable Rate (SVR) for a pre-defined period of time. The discount will remain the same for a set period of time, but if the lender changes their SVR this will impact the interest rate you’re paying on your mortgage.


Product transfers

Depending on the lender you’re currently with, they may offer a ‘Product Transfer’ or ‘Rate Switch’ which simply means remaining with your current lender and securing a new rate with them.

Your existing lender may offer you a range of alternative mortgage products to choose from to replace your existing deal. The benefits of this are that it’s often simpler and faster to change products with the same lender, however the downside is that it’s not always clear that you are getting the most suitable deal. It is important to take professional mortgage advice to assess your individual needs and circumstances, even if we didn’t help with your current mortgage we can liaise with your current lender on your behalf and secure a new product.


Is there anyone who shouldn’t remortgage?

For those seeking to remortgage, be aware that for some, it may not be in their best interests and sometimes your existing mortgage product may be better than what you can find elsewhere. There are a number of things to consider:

– You already secured a great deal at the time – that nothing out in the market today can complete. With the market always changing, it would be a good idea to speak to us to help you with your options.

– You currently have early repayment charges outstanding – early repayment charges are often payable throughout the initial product term. It may be best to wait until these expire to remortgage, something we can explore for you.

– You own less than 10% of your property – if you need to borrow more than 90% of the current value of your property, you may struggle to find available options. There are 95% mortgages available, however these tend to be aimed predominantly at buyers purchasing property rather than remortgaging.

– Your equity has shrunk – in some cases where the value of your property has fallen since purchase this may cause a challenge. For example, you had a 10% deposit when buying your home, borrowing the remaining 90%, if the overall value has fallen, then the amount you owe is a bigger proportion.

– Your circumstances have changed – if your financial position has altered since your current mortgage was taken out, perhaps one of you have stopped working, you became self-employed, or your income has dropped. Lenders may not be prepared to offer you a new mortgage as you no longer fit their criteria.

– You have a poor credit history – since taking out your initial mortgage, if your credit score has worsened, with any missed credit card, mortgage or utility payments, or loan defaults, then it may be more difficult to remortgage.

– You have a very small mortgage – once your loan falls below a certain amount, for example £50,000, it may not be economic to switch lender, simply as you are less likely to make a saving if the fees are high. The smaller the mortgage you have, the larger the effect of any fees you pay to remortgage are, especially given that most new mortgage deals have a four-figure fee attached.

– You are very close to the end of your mortgage term – for borrowers at the end of their mortgage term, especially if later on in life, it may prove difficult to find a lender who can consider offering you a new mortgage.

For those reasons, it’s important to consider all the variables when remortgaging. This is where we come in and will be on hand to discuss all the options.


Getting ready to remortgage

Check how much you currently owe on your existing mortgage, you can either do this yourself using the documentation supplied by your lender, or we would be able to help you with this as part of the advice we give.

– Plan ahead – allow up to six months for a remortgage to take place, this gives adequate time to undertake research and decision making for what you’re looking for alongside the process of applying for a remortgage itself.

– Plan your finances – just as for applying for your first mortgage, it pays to make sure your finances are in order. Check your credit score, don’t apply for any new credit, avoid any large purchases, avoid any payday loans or overdrafts at all costs to boost your chances of quick acceptance for a remortgage.

– Plan for the application – much as for your first mortgage, the remortgage process normally requires presentation of a range of documents to prove income and identity, so it is wise to have your documentation in order and ready for when your mortgage adviser or lender requests, to allow your application to proceed without delay.


Seek professional advice

Given the range of different mortgage types available, we strongly recommend that you seek advice from a qualified professional mortgage adviser before proceeding. We will listen to your circumstances and make considered recommendations on the type of mortgage that may be most applicable to your circumstances.

We’re ready to assist you in finding a new mortgage – with so many different products available and lots of intricate elements to take account of, it makes sense to book an appointment with us to guide you on the next steps. We have access to thousands of products from many different lender, many with exclusive rates you may not otherwise be able to find.

If you’re looking for assistance with your remortgage visit our remortgage page, or contact us to find out more.


Your property may be repossessed if you do not keep up the repayments on your mortgage.

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