What is remortgaging?

A remortgage means changing from your existing mortgage deal to a new one without moving home. You can remortgage with your existing lender, but you may want to remortgage with a different lender instead if they offer a better rate of interest. You can also use a remortgage to release equity, for example to buy a second home, either for your holidays or as a buy-to-let property.

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Credit will be secured by a mortgage on your property. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Written quotations are available from individual lenders. Loans are subject to status and valuation and are not available to persons under the age of 18. All rates are subject to change without notice. Please check all rates and terms with your lender or financial adviser before undertaking any borrowing.

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What is a remortgage calculator?

A remortgage calculator can help you to find and compare remortgage deals. Our calculator works out your loan-to-value (LTV), based upon your house price and how much you need to borrow. It will show you the mortgages – including interest rates and product fees – that are available and the total amount payable over your mortgage deal. You can refine your results further by interest rate type, such as fixed rate or variable.

How do you calculate your loan-to-value for a remortgage?

You will need to know how much you have left to pay off your mortgage and your property’s current value. You then divide your outstanding mortgage balance by your property’s value. For example:

  • You have £200,000 left to pay on your mortgage
  • Your property is worth £350,000
  • Divide £200,000 by £350,000 = 0.57
  • 57 x 100 = 57 – this makes your LTV 57%.

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A guide to Remortgaging

At a glance

  • You can remortgage to access new, additional finance for things such as home improvements or to buy a second property.
  • If you stay with the same lender, you may be able to switch mortgages without incurring valuation or legal fees, but you could still have to pay mortgage product fees.
  • You can move between lenders to find products that are better suited to your individual requirements.

Why do people remortgage their home?

There are four reasons to remortgage:

  1. Reduce your total and monthly mortgage costs – by finding a lower interest rate and minimising fees to switch.
  2. Release equity – you may want to access some of the cash tied up in your home and use this to invest in other properties or for personal spending. If you are not ready to remortgage, you could ask your existing lender for a further advance instead.
  3. Consolidate debts – remortgaging might reduce your overall monthly credit payments if you can secure this at a lower rate of interest than you may currently be incurring. Other options include a personal or secured loan.
  4. More choice and more flexible products – if you now qualify for a lower LTV product, you likely have an increased range of choice in the market (if you are starting at above 75% LTV) and this comes with a better chance to find a product that allows payment holidays, underpayments or drawdown for example.

Remortgaging checklist

  • See if your LTV has changed since your last mortgage deal. A lower LTV could open-up potentially lower interest rates, saving you money compared to your last mortgage – read our guide to What is LTV.
  • Make sure you keep a note of your mortgage end date. Your provider should write to you and give you notice but it is best to start looking at mortgage rates in advance of this.
  • Don’t automatically accept your existing mortgage lender’s remortgage offer. Make sure you compare remortgage rates and you could save a lot of money in reduced interest costs. Our chart calculates the total interest you will pay over the mortgage deal period.
  • Check the total costs of your remortgage. This includes product fees to switch and, especially if you have a fixed rate mortgage, any early repayment charges that might apply on your current mortgage deal. Our table calculates the total interest cost for you and shows the product fees to help you work out if a remortgage will save you money.
  • Have your circumstances changed since your last mortgage? When you remortgage to a new lender, you will need to complete a full mortgage application and affordability check. However, your existing lender may allow you to switch under an ‘execution-only’ basis, which means they only need you to select a product to start the remortgaging process. If your financial situation has changed since your last mortgage deal, you should inform your mortgage lender of this.
  • See if your credit rating has changed since your last mortgage deal. Before remortgaging it's important to check your credit scoreAs part of the mortgage application process, your chosen lender will run a credit check on you and whoever else you may be buying the property with. 

Can I borrow more if I remortgage?

You may be able to borrow more when you remortgage. This will depend on your financial circumstances, such as your credit score and levels of affordability. An alternative to a remortgage (for example if you are locked into a deal and don’t want to incur early repayment charges) is to ask for a further advance from your current mortgage lender.

What is a further advance?

A further advance is when you borrow an additional sum of money, usually at a rate of interest different to your mortgage deal. Sometimes this will be on a deal with no repayment restrictions, meaning that once your main mortgage comes to an end, you can join both pots of borrowing together and remortgage onto one single product.

What fees are there when remortgaging?

When you remortgage, you may need to pay a product fee – sometimes your existing lender may offer a reduced fee as part of an incentive to remortgage with them. In addition, if you are moving lender you will probably need to pay a valuation fee. However, many lenders as part of wanting to attract new remortgage business will offer these free of charge.

You can find out more about mortgage fees in our guide What fees do I need to pay when getting a mortgage.

How to find the best remortgage deal?

Comparing remortgage deals

 

Remortgage option one

Remortgage option two

Remortgage option three

Initial interest rate

1.29%

1.54%

1.99%

Product fee

£999

£0

£0

Total amount repayable over two years

£18,265.08

£17,677.92

£18,434.64

The table above shows mortgages at 75% on a repayment basis

When comparing remortgage deals, you should look at the total amount you will pay over the deal period. Above shows an example for a 75% LTV mortgage, on a repayment basis over a two-year fixed deal. While option one has the lowest initial interest rate, the fee makes this more expensive. The best remortgage deal in the example above is option two, which is £756.72 cheaper than option three, the most expensive.

Some mortgages will apply early repayment charges. which means that if you leave the mortgage deal before the deal period ends you will have to pay a penalty. This is usually a percentage fee of your mortgage balance and can make switching very expensive.

Moneyfacts tip

Moneyfacts tip Derin Clark

Always compare the total cost of switching your mortgage, including the interest cost and product fee. High fees can especially increase the total costs.

Remortgaging for older borrowers

There is now more flexibility from lenders to give mortgage terms past the age of 65. Many have extended their maximum borrower ages and some now have no maximum at all. Our guide to Mortgage tips for over-70s can tell you more about borrowing in later life. In addition, you may want to consider a retirement interest-only mortgage or equity release.

How to improve your chances of getting a remortgage

It’s important to check your credit score to make sure it is high enough to qualify for a mortgage. If you are switching to a new lender, you will need to meet their affordability requirements. You can prepare for this by reviewing your outgoings and reducing or removing unnecessary spending or bills.

Remortgage Frequently Asked Questions

How long does it take to remortgage?

The process of remortgaging can be fairly quick if you are simply sticking with your current lender, but it could take as long as two months (or more) if you’re switching to a new one. This will depend on your own application, if there are any difficulties to consider and the lender you’ve chosen. Don’t let such a long time-frame deter you from switching to a different lender, however, as the benefits (if you’ve picked the right deal for you) should outweigh any stress in the end.

 

Can a mortgage broker help me to remortgage?

If you are not sure about remortgaging or are thinking about borrowing some additional money for something such as home improvements or to buy a car, then a mortgage broker can help you to quickly find out which lenders are happy to consider your application and at what LTVs.

Can I apply for a mortgage before my current deal expires?

Yes, you should allow at least two months before your current deal expires, if not more, to give you time to search for a remortgage deal and find one that meets your needs. If you leave it too late you could find your mortgage reverts to a higher rate of interest that will increase your monthly mortgage payment.

Do I use a solicitor when I remortgage?

If you are remortgaging with your current lender then you should not need a solicitor, as this is termed as a product transfer. However, if you are moving to a new lender then you will need a solicitor to cover the usual legal requirements of getting a mortgage.

Can I remortgage with a different lender?

Yes, as long as you meet the criteria of the new lender, both for affordability, LTV and credit score, then you should be able to move to a new lender’s mortgage deal.

Do I need a house valuation when I remortgage?

If you are moving to a different provider and/or trying to move to a lower LTV tier, you are likely going to need a new valuation. If you’re sticking with your current provider, however, you may be able to agree with them not to have a new valuation done.

How do I find out the value of my property for a remortgage?

You will need to agree with your lender the value of your property. Your lender will do this either by completing some desk research or conducting a formal valuation of your home.

What are the most common remortgage LTVs?

Most remortgages are below 75% LTV, however you can remortgage at up to 95% depending on your circumstances. If your initial mortgage started at 95% LTV on a property worth £363,400 and you borrowed £345,000 at 2.59% fixed, the total amount you would pay over the two-year period is £38,409.84. After two years you would have £306,590.16 remaining on your mortgage. If after two years your property is still worth the same amount, then your LTV would now be 84%. This means you would qualify for a broader range of remortgages compared to when you first started.

Pros and cons of remortgaging guide

  • Potential for a better rate. When your current mortgage deal comes to an end, you can remortgage to a new deal rather than reverting to your lender’s standard variable rate.
  • More choice. By looking for a new remortgage deal, you can compare rates and see which will let you overpay, reduce your mortgage term or pay low remortgage fees.
  • Free up money. A remortgage could help pay for essential home improvements or pay off other debts (this is subject to the lender's criteria), either by reducing your outgoings or borrowing more than your previous mortgage.
  • Time to do affordability tests. Just like any new mortgage, a remortgage with a new lender will require you to complete an affordability test.
  • Need to be in good financial shape. As with the initial mortgage, your current credit score will be an important part of the remortgage application process.
  • Additional mortgage fees. Each time you remortgage, you may have to pay a new product fee, as well as valuation and legal expenses if you change providers

Moneyfacts tip

Moneyfacts tip Derin Clark

Always start looking to remortgage a couple of months ahead of the date when your current mortgage deal ends. This will give you a feel of the market and enough time to select the best remortgage product for you.

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