Remortgaging Explained: When and How to Do It

If you’ve owned your home for a few years, you might be getting ready to remortgage. But you may not be entirely sure what remortgaging is.

In simple terms, remortgaging means switching your existing mortgage to a new deal, either with your current lender or a different one. It’s a common way for homeowners in the UK to save money, raise cash, or adjust their mortgage to better suit their current needs.

In this post, I’ll explain when it makes sense to remortgage, how to go about it, and what you need to watch out for.

When should you consider remortgaging?

1. Your fixed or discounted rate deal is ending

Many mortgages start with a fixed or discounted interest rate, which is usually lower than the standard variable rate that follows. You can usually fix this rate for anything from one to ten years, although 2, 3 or 5 are most typical. When this introductory period ends the interest rate can increase significantly. Remortgaging to a new deal can help you avoid paying more and keep your monthly payments manageable.

2. You want to reduce your monthly payments

If interest rates have dropped since you first took out your mortgage, remortgaging can help you secure a better rate and reduce your monthly outgoings, freeing up money for other priorities. And if interest rates have dropped significantly it might be cheaper to remortgage early and pay the exit clause of your old deal than continue on with it.

3. You need to release equity

Remortgaging can let you borrow more against the value of your home, commonly known as ‘releasing equity’. This can be useful for home improvements, debt consolidation, or other major expenses. If you’re looking to do something like this it’s worth speaking to a mortgage broker for advice.

4. You want to change mortgage type

Maybe you want to switch from an interest-only mortgage to a repayment mortgage or vice versa. Remortgaging can give you the flexibility to change the type of mortgage product you have.

5. Your financial situation has changed

If your income has increased or your credit score has improved, you might qualify for better mortgage rates. Remortgaging lets you take advantage of your improved financial position.

How to remortgage: Step-by-step

1. Check your current mortgage terms

Look at your current mortgage deal to find out when your fixed or discounted rate ends and whether there are any early repayment charges (ERCs) for leaving your deal early. ERCs can be costly, so timing is important. Most of the time it’s better to wait until the fixed rate ends, but this isn’t always the case.

2. Assess your financial situation

Review your income, outgoings, and credit score. If things have improved, you may get better deals. If not, it might still be worth exploring options but be realistic about what’s available.

Don’t stretch yourself too thin trying to get the lowest monthly payment — ensure you can comfortably afford your new mortgage.

3. Research mortgage deals

Use comparison sites, check with your current lender, and consider speaking to a mortgage broker who can help find the best deals tailored to your situation. We always use a broker to help us find the best deals around.

4. Calculate the costs

Don’t just look at interest rates. Factor in any fees for the new mortgage, early repayment penalties, valuation fees, legal fees, and other costs to make sure remortgaging will actually save you money. This is especially important if you’re looking to free up some equity in your remortgage.

5. Apply for your new mortgage

Once you’ve chosen a deal, you’ll need to formally apply. This involves submitting financial documents, undergoing credit checks, and a property valuation. If you’re changiong lenders you will need to fill in new paperwork and submit all your financial documents again.

6. Complete the switch

Your new lender will manage much of the process, including paying off your existing mortgage. Make sure you understand the timeline and any final payments due.

Remortgaging may seem like a lot of work, but it can save you lots of money

Remortgaging can be a powerful financial tool, whether you want to save money, raise cash, or adjust your mortgage to better fit your life. The key is to research carefully, consider all costs, and time your remortgage to avoid penalties.