Remortgage

What is a remortgage?

A remortgage is when you take out a new mortgage deal on a property you already own. This might be to replace an existing mortgage or to borrow additional money against the property.

You may be looking to remortgage for several reasons - you could be coming to the end of the initial rate on your current mortgage and want to move to a different deal with your existing lender. Or you might be looking to switch your mortgage to a new lender.

In both of these situations, the aim is usually to avoid going on to your existing lenders’ standard variable rate (SVR) so you can make savings. This is because most lenders’ SVRs are higher than the initial rate that comes with a new mortgage.

Other reasons to remortgage could include if you’re looking to borrow more on your mortgage to free up some cash for a home renovation or extension, or to help pay off some debts.

Whatever your motivation, remortgaging can be a great way of finding better mortgage terms or getting better interest rates and ultimately saving money on your mortgage payments.

Why and when should I remortgage?

There are many reasons why you might want to remortgage:

• Your current mortgage deal is coming to an end
• Your variable rate mortgage has a high interest rate
• You’re not happy with your current lender
• You’d like to start mortgage overpayments
• The value of your property has increased
• You’d like to borrow more on your mortgage

Your current mortgage deal is coming to an end so you’ll be moved to the lender’s standard variable rate (SVR). This rate is usually higher than your fixed rate deal. By remortgaging, you could find a new deal with a better interest rate.

Your variable rate mortgage has a high interest rate and a rise in the Bank of England’s base rate could increase your mortgage payments. You could find a more competitive deal by remortgaging.

You’re not happy with your current lender or with the level of service you’re currently receiving. Choosing not to remortgage with your current lender means you’re free to find a new one with better service and a better reputation.

You’d like to start mortgage overpayments but your current deal doesn’t allow or has restrictions on overpayments. You could find a remortgage deal that lets you start or increase your overpayments.

The value of your property has increased and you’d like to see if you now qualify for better interest rates. If you’re lucky enough to own a property that has increased in value, your new lower loan-to-value (LTV) could help you when applying for better interest rates when you remortgage.

You’d like to borrow more on your mortgage in order to get a lump sum to help consolidate debts, for some home improvement or for something else. You can remortgage to release some of the equity from your property.

If you’re over 50 years old, you may be eligible for equity release.

What are the costs and fees of remortgaging?

The cost of remortgaging largely comes down to the interest rate that’s set by your chosen lender. Lenders offer a number of different rates but the rate you get is decided by things like your personal financial situation, credit history and your home’s loan-to-value rate (LTV).

Some of the fees that typically come up during the remortgaging process include:

• A property valuation
• Arrangement fees
• Admin fees
• Legal fees
• Early repayment fees

A property valuation is often part of the remortgaging process. This is so the lender can decide if your home is worth the amount you’re looking to remortgage for.

Arrangement fees is the fee for the mortgage product. Sometimes known as the product fee, it can cost up to a couple of thousand pounds. Some lenders may let you add the fee to the mortgage amount.

Admin fees may be charged to you by the lender for the cost of setting up your remortgage deal.

Legal fees might come up if you need to pay for a solicitor to take care of the legal side of things. This could be if you’re looking to switch and remortgage with a different lender.

Early repayment fees are normally charged if you change mortgage products before the end of the introductory period. The bulk of charges will be taken up by this kind of fee.

Exit fees may have to be paid if your existing mortgage deal hasn’t come to the end of its term yet and you’re ending it early. Depending on your mortgage deal, you might still make savings by remortgaging, even if there are exit fees.

Some lenders may offer free fees with a remortgage deal, but it’s important to take into account all fees when working out if you’ll save money overall with a new deal.

When you compare with our mortgages partner Koodoo, you'll be able to view deals from multiple lenders. Alongside each deal they clearly show the total cost of the initial period so it’s easy to compare different deals. If you need more detail, you can also view and compare account rates, fees and incentives for each deal

What types of remortgage deals can I take out?

Finding a remortgage deal is very similar to taking out your first mortgage. The most common types are:

• Fixed rate mortgage
• Tracker deal mortgage
• Capped rate mortgage
• Discounted mortgage
• Offset mortgage

A fixed rate mortgage has a fixed interest rate for a set amount of time. Good for when you want to know exactly how much your mortgage payments will be every month. Fixed rate deals typically last between 2 and 10 years.

A tracker deal mortgage has variable rates that track the Bank of England’s base rate at a set percent just above theirs. Your payments rise and fall depending on how high or low the base rate is each month.

Capped rate mortgages are similar to variable rate mortgages. A capped rate mortgage ties your payments to how high or low the rate is every month. This type of mortgage differs slightly though as there is a limit on how high the rate can go. Perfect if you want to avoid high, unaffordable payments.

Discounted mortgage is another type of variable mortgage but this offers a discounted rate on the lender’s SVR for the duration of the initial period. The difference between a discount mortgage and a tracker mortgage is that the discount mortgage has an interest rate that is a set percentage of the lender’s SVR. While the interest rate on a tracker mortgage is a set percentage on top of the Bank of England’s base rate.

An offset mortgage is a type of mortgage that can help to reduce the interest you pay by offsetting your savings against the balance or total amount of your mortgage.

For a more detailed look at the types of mortgages offered, our guide to mortgage types should be able to help.