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A guide to remortgaging your home
Now that you’ve possibly come to the end of your fixed term, you might want to start looking for a better deal on your mortgage. Or you might be looking to free up equity to extend your home, for renovations or to consolidate debts. Whatever the reason, we’ve put together a guide on what you need to know.
And, if you’d like to see how big a difference remortgaging could make for you, using our remortgage calculator to find out.
How does remortgaging work?
Remortgaging is the process of switching your existing mortgage to a new deal, using the same property as security. You can remortgage with the same lender or a different provider – you’re not moving home and your new mortgage will still be secured against your existing property.
If you’re moving and looking to take your current mortgage with you, see how to port your mortgage.
Why do people remortgage their home?
There’s a variety of reasons why people remortgage their homes. These include:
- Seeking a better deal: Your current deal could be coming to an end - most fixed-rate mortgages last between two to five years before they become a standard variable rate mortgage. You may want to find better interest rates. Or perhaps you want to start to overpay so you can pay off your mortgage quicker, but your lender won’t let you. To find out how much you could save on your mortgage, use our remortgage calculator.
- Access to a sum of money: Some people remortgage their property to get access to a sum of money (equity). You could potentially free up cash to pay for an extension to your home, for example. But by increasing your mortgage, your monthly payments are likely to go up. Depending on your age, you might be able to increase how long your mortgage lasts (the term) to balance this out.
Remember - your home may be repossessed if you don’t keep up repayments on your mortgage.
What fees are there when you remortgage?
When you remortgage your home, there’s often an arrangement fee on a new mortgage. You may also need to pay:
- Valuation fees and solicitor fees (although some lenders may offer this for free as part of the remortgage deal).
- An administration charge.
- A fee for finding a new mortgage – that can be the case if you use a broker. Our partner broker, London & Country, doesn’t charge a fee.
- Exit fees if your existing mortgage hasn’t yet come to the end of its term.
Don’t forget, you need to take account of any fees when working out whether you’ll save money overall.
When should I remortgage?
- When your fixed-term deal is coming to an end. You’ll be moved to your lender’s standard variable rate (SVR) when your fixed-rate deal ends. This is usually higher than your original deal.
- To get a better interest rate. You may be able to find a mortgage with a lower interest rate than yours for the same term, so your monthly payments will go down.
- If you need to know what your outgoings are. Having a fixed- term mortgage means you’ll know how much you’ll have to pay every month. Also, your mortgage won’t increase if interest rates rise.
- To get a more flexible deal. Not all mortgages allow overpayments or mortgage holidays (when your lender grants you a temporary break from paying your mortgage, or lets you reduce your payments for a few months). If these are important considerations for you, then you may want to try to switch to a more flexible deal.
- If your home’s value has increased. You may be able to get a better deal because of changes to the loan-to-value ratio (see the answer to the next question).
- To borrow more. To use some of the equity you’ve built up in your property, for example, to fund home improvements.
- To consolidate debt. You might want to consolidate debts to reduce your monthly outgoings, or to borrow at a lower interest rate.
- You’ve had poor service from your mortgage provider. You may want to change to one with a better reputation for customer service and satisfaction.
Frequently asked questions
How does the loan to value (LTV) rate of my property affect remortgaging?
Mortgage lenders may offer different rates of interest depending on what proportion of the value of the property you want as a loan.
For example, if a property is valued at £250,000 and you want to borrow the whole sum, your loan-to-value rate is 100%.
Let’s say that after a few years, you pay off some of the mortgage, leaving you with £220,000 to repay. During this time, the property has risen in value to £275,000. Your
loan-to-value rate could then be 80% on a remortgage. That’s because the risk for the lender is lower. If you default on your mortgage and your house is repossessed, the lender is much more likely to get all their money back when they sell it on.
Having a lower loan-to-value rate could take you into a mortgage tier with a lower interest rate. The best rates are often reserved for LTV under 75%. If you’ve built up equity in your home, you might now be eligible for better rates.
But remember, if you’re remortgaging to raise money, your LTV might stay the same or even rise, depending on how much you’re borrowing.
What mortgages are available?
Compare the Market makes it easy to do a mortgage comparison, but first we should look at the kinds of mortgages that are available. You need to decide if you want a repayment mortgage or an interest only mortgage. You then need to decide whether you want a fixed rate mortgage or one with a variable rate.
- Repayment mortgages
With repayment mortgages, you pay off the interest and some of the overall cost of the house every month. At the end, typically after 25 years, you should have managed to pay for the whole house and the interest. That means you’ll own your home outright.
- Interest only mortgages
With interest-only mortgages, you pay only the interest on the loan and nothing off the capital (the amount you borrowed). After 25 years, for example, the mortgage would still be outstanding. Interest-only mortgages offer lower monthly payments, but you’ll need to show from the start that you have plans for how you’ll pay off the loan at the end of the term.
- Variable mortgages
Variable rate mortgages could be ‘tracker mortgages’ where the interest rate is above, below or the same rate as the Bank of England base rate. Or they could be fully variable, where your lender decides on a rate and can change this at any time (within the conditions of the product).
Other kinds of variable rate deals are available, like capped or collared mortgages where there might be upper and lower interest rate limits. With any of these, your mortgage payments could go up or down as interest rates change.
- Fixed rate mortgage
If you choose a fixed rate, your interest rate and your monthly payments are set at a certain level for an agreed length of time. These, and a lot of variable mortgages, are often two or three-year deals. But you can also get a five or 10-year fixed-rate mortgage. At the end of the deal you’re automatically switched to another rate, usually a bank’s standard variable rate.
Can I get a new mortgage with a different lender?
Yes, you can get a new mortgage with a different lender. You don’t have to use your existing lender to remortgage. But remember, you may have to pay penalties if you’re still on your initial deal. If your deal is ending or has ended, typically there are no penalties.
Do I have to get my house valued when I remortgage?
Only if you’re changing lender. You won’t need a valuation if you’re staying with your current lender.
How long does remortgaging take?
It’s typically faster than buying a new home. It can take less than a day if you’re staying with your existing lender and not borrowing an additional amount.
If your current deal is coming to an end and you’re thinking of switching, make sure you start the process early enough to move straight to your new deal, without a few months of paying at the (usually higher) standard variable rate.
Most lenders allow you to apply and secure a rate for three to six months before you complete.
The remortgaging process works like this:
- Shop around. It’s easy to use Compare the Market to find out what’s available. If you’d like to get free, unbiased mortgage advice you can contact our partner London & Country.
- Decide on the right deal for you. Do this by taking into account both your monthly payments and all the fees you might need to pay, plus the options potential mortgages allow, such as over-payment.
If you’re applying to a new lender:
- Apply for your mortgage: You’ll need to supply things like proof of identification, payslips and bank statements. Make sure you know what you need, so you can start getting documents together. Again, London & Country can help you with your application. If you stay with your current lender, there’s no need to provide any of this.
- Assessment: Your potential mortgage lender will look at your application to check that your mortgage will be affordable for you, taking into account your income and expenditure. They’ll also check your credit rating and carry out a valuation of your property.
- Mortgage offer and completion: Once the lender is happy to give you the mortgage, they’ll make you a mortgage offer. When you accept the offer, your conveyancer will complete the necessary legal paperwork and arrange completion. The money will then be paid to your previous mortgage provider. If you’re borrowing a bit extra, for example, for home improvements, the extra will be paid to you at completion.
Can I apply for a remortgage in advance?
If you’re looking for the best deals to remortgage, you should start looking with plenty of time to spare. Most lenders will let you remortgage several months in advance of your existing mortgage deal coming to an end. This varies between lenders, but you can normally remortgage anywhere between three and six months before your current deal expires. Don’t forget to check whether any early repayment charges apply on your current deal.
Make sure you take advantage of this time to compare rates and find a (hopefully) better deal. Avoid slipping onto the standard variable rate, as this is almost always more expensive than the many fixed-rate deals you can find.
To get find out how much you could save by remortgaging, use our remortgage calculator here.
Is there an age limit on remortgaging?
Different providers have different age limits, so you’ll need to check this with any provider that you’re considering. Some may have a maximum age for starting a mortgage, and others for when the mortgage term ends. This could mean that if you’re 61 and remortgaging, you might find mortgages that need to be paid off by the time you’re 70. But what may matter more is whether your income is high enough to cover your mortgage repayments.
How can I improve my chances of being accepted for a remortgaging deal?
If you’re happy with your current lender, then you don’t have to go through any additional checks to be accepted for a new deal with them.
But if you’d prefer to remortgage with a different lender, it’s always a good idea to keep your credit record as good as you can, paying bills on time, not building up debts and not borrowing too much. Check your credit record to see if there are any mistakes so they can be corrected by the time you apply. Also, don’t forget to check that you are on the electoral register.
Will applying for a remortgage affect my credit score?
If you’re sticking with your current lender and your mortgage balance, term and repayment method don’t change, then a remortgage shouldn’t affect your credit score as you might not need a hard credit check.
But if you’re remortgaging to borrow more and your repayments go up, then your lender will want to reassess your finances to make sure you’re capable of making the higher repayments and can afford to borrow the extra money. This means they’ll do a hard credit check, which will be marked on your credit file and could impact your credit score.
You’ll also have to undergo a hard credit check if you remortgage to a new lender.
What happens if my remortgage application is rejected?
If your remortgage application is rejected, you’ll have no choice but to stay on your current deal for the time being. Try to find out why you were refused; it could be that you’ve recently changed jobs or perhaps you’ve applied for other types of credit in the past few months. Or it could simply be that the lender’s criteria has changed since you took out your last mortgage. Affordability rules and the economic turmoil left by the COVID-19 pandemic now mean that lenders are far pickier about who they’ll lend to. Under Financial Conduct Authority regulations, they need to check that you can afford the repayments now and also in the future should interest rates rise.
It’s a good idea to check your credit report for any mistakes or payment issues that may have affected your application. Once you have a better idea of your finances, you can take steps to build up your credit score before applying to remortgage again – give yourself a good six months for your credit score to improve.
Can I remortgage if I’m self-employed?
Remortgaging can be tougher if you’re self-employed, simply because lenders may find it more difficult to assess your financial situation. That doesn’t mean it’s impossible to remortgage if you’re working for yourself – you’ll just need to be more thorough when presenting evidence of your finances.
You can improve your chances of getting a remortgage application accepted by showing:
- proof of income – at least three years’ worth of your business’s financial records, which may need to be signed off by a chartered or certified accountant. Alternatively, a lender may accept evidence of your earnings on a SA302 tax calculation form from HMRC.
- workflow – a healthy client list and workflow schedule of current and upcoming jobs can help to prove current and future incomings.
- a good credit score – this will show that you’re able to manage your finances and have a good history of paying bills on time.
Criteria can vary between lenders – what’s fine for one might not be for another. That’s why it’s a good idea to talk to a mortgage expert before applying to remortgage, especially if you’re self-employed. They’ll be able to advise you on the best course of action and likely mortgage deals that you’ll be accepted for.
Do I need advice on remortgaging?
Taking advice from a qualified expert can give you additional protection because if the mortgage turns out to be unsuitable, you can complain to the Financial Ombudsman Service (FOS).
If you make the decision on your own without professional advice – known as the ‘execution-only’ route - there will be fewer situations where you can complain to the FOS.
We’ve partnered with multi-award winning mortgage broker London & Country Mortgages Ltd (L&C) to provide you with fee-free mortgage advice. L&C are authorised and regulated by the Financial Conduct Authority (143002).
Brokers like L&C know the mortgage market and can sometimes get special mortgage deals that may not be available elsewhere.
London & Country can help you find mortgages from big high-street names like Halifax, Barclays, Nationwide, NatWest, Santander, Skipton and the Post Office, as well as smaller building societies and specialists like The Cumberland, Platform and the West Brom.
All applications are subject to lending and eligibility criteria.
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**On average it can take less than 1 minute to complete a mortgage quote through Compare the Market based on data in November 2020.
From the Mortgages team
What our expert says...
“You don’t have to wait until your current mortgage deal finishes before you can start looking for a new deal, as many remortgage offers are valid for between three and six months from the date they’re issued. Securing your next mortgage in advance means that you can make a smooth transition from one deal to the next, without having to move onto your lender’s standard variable rate.”
Time to compare
Whether you have a fixed or variable mortgage, it can be a good idea to shop around a little before your mortgage deal ends, and move to another one if it can save you money.
Always read every detail before signing up. After all, this is one of the most important financial decisions you can make.
To get an idea of what you could save when it comes to compare, use our remortgage calculator to help.