Correct as of December, 2022.
A guide to remortgaging your home
Now that you’ve possibly come to the end of your fixed term mortgage, you might want to start looking for a better deal. 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 about.
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 Correct as of December, 2022.
About London & Country Mortgages Ltd (L&C)
**London & Country Mortgages Ltd (L&C) are a multi-award winning mortgage broker with over 20 years’ experience in helping people secure their perfect mortgage. Advice is provided by L&C, who are authorised and regulated by the Financial Conduct Authority (143002). L&C are not part of Compare the Market Limited. Comparethemarket receive a % of the commission that our partner London & Country earns. All applications are subject to lending and eligibility criteria. L&C will not charge you a broker fee should you decide to proceed with a mortgage.
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.
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 you might want to remortgage your home, for example to:
- Move to a new deal: your current deal could be coming to an end – most fixed-rate mortgage deals last between two and five years. Once your current deal expires, you’ll be put on your lender’s Standard Variable Rate (SVR), which is likely to be higher. By remortgaging, you could find a lower interest rate.
- Benefit from a lower LTV: if your property has increased in value, a lower LTV (loan-to-value) might help you secure a better rate of interest when you remortgage. LTV is the percentage you borrow against your home. The more equity you have in your property (the part you own), the lower your LTV will be. This means you’ll have a better chance of securing a cheaper mortgage deal.
- Find a more competitive deal: if you’re on a variable deal like a tracker mortgage, the interest rate you pay will go up or down in line with the Bank of England base rate. If the base rate increases – as it has done recently – your mortgage repayments will also go up. By remortgaging, you might be able to find a more competitive deal.
- Overpay your mortgage: you want to start overpaying your mortgage, but your current lender won’t let you. In this case, you might want to remortgage with a more flexible provider that won’t penalise you for overpaying.
- Access 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.
- Offset your savings – if you’ve built up a fair amount in savings, or you’ve had a cash windfall, remortgaging to an offset mortgage would enable you to use your savings to reduce the amount of interest you pay on your mortgage.
What fees are there when you remortgage?
When you remortgage your home, there’s often an arrangement fee on the 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
- Early repayment charges – if your existing mortgage hasn’t yet come to the end of its term.
Don’t forget, you need to take into account any fees when working out whether you’ll save money overall by remortgaging.
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 look for 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 (the percentage of your property’s value that you’re borrowing).
- 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%.
But 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 could then be 80% on a remortgage. That’s because the risk to 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 LTVs 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?
When you’re looking at the mortgages available, start by deciding whether you want a repayment mortgage or an interest-only mortgage. Then decide if you want a fixed-rate mortgage or a deal with a variable rate.
- Repayment mortgages
With repayment mortgages, you pay off the interest and some of the outstanding mortgage every month. After the mortgage term, typically 25 years, you’ll have repaid the amount you borrowed 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.
- 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, which will help you to budget each month. 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.
- Variable mortgages
These could be tracker mortgages, where the interest rate is above, below or the same as the Bank of England base rate. Or they could be discounted rate mortgages, where the rate is below the lender’s standard variable rate. The standard variable rate (SVR) is set by the lender and can change at any time (within the conditions of the mortgage). 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.
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 you may have to pay penalties if you’re still on your initial deal. If your deal is ending or has ended, there aren’t usually any penalties to pay.
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.
Do I need a solicitor to remortgage?
Remortgaging is usually more straightforward than a new mortgage, but you’ll need to use a solicitor or conveyancer to compete the switch. A free legal package may be included with some remortgage deals, so you don’t need to worry about covering the solicitor’s fees yourself.
What information will I need to remortgage?
The documentation you’ll need to remortgage typically includes:
- Bank statements and payslips for the past three to six months
- If you’re self-employed, accounts/tax returns for the previous two or three years
- P60 tax form from your employer, showing your income and the tax you’ve paid in each tax year
- SA302 tax return, if you’re self-employed or have more than one source of income.
- A form of ID, like your passport or driving licence
- Proof of your address, such as utility or council tax bills.
How much can I borrow with a remortgage?
If you’re coming to the end of your current deal and you want to move to a better interest rate, you’ll likely want to remortgage for the amount that you still owe on your current mortgage.
But if you’re looking to release equity, you’ll probably need to borrow more and take out a bigger mortgage.
In both cases, the amount you’ll be able to borrow depends on your situation and how much your new lender is prepared to let you borrow. Be aware that lenders have much stricter affordability criteria now, so you may not be able to borrow as much as you initially thought.
How can I remortgage to release equity?
Remortgaging to release the cash tied up in your home means you’ll need to borrow more than you currently owe on your existing mortgage. Whether you’ll be able to take on a larger mortgage depends on affordability and the LTV (the percentage of your property’s value you want to borrow).
An alternative would be to keep your existing mortgage, and take out a separate new loan – known as a second charge mortgage on your home. However, it would mean having two loans on the same property and the interest rate may be higher on the second mortgage.
If you’re aged over 55, equity release may be an option but can be complicated, so it’s best to get professional advice from an equity release adviser before you go ahead.
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 your existing deal ends.
The remortgaging process works like this:
• Shop around. It’s easy to use Compare the Market to find out what’s available with both your current lender and across the market. Many lenders include the option to apply directly online.
• 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 that potential mortgages allow, like over-payment.
If you’re applying to a new lender:
- Apply for the mortgage: you’ll typically need to supply proof of identification, payslips and bank statements. If you stay with your current lender, there’s no need to provide any of this.
- Assessment: your potential lender will check that you can afford the mortgage, 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 confident, 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 extra, this will be paid to you on completion.
Can I apply for a remortgage in advance?
Most lenders will let you remortgage several months in advance of your existing mortgage deal coming to an end. You can normally remortgage between three and six months before your current deal expires, although this varies among lenders. 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 interest rates and find a deal. Avoid slipping onto the standard variable rate, as this is almost always more expensive than a fixed-rate deal.
Use our remortgage calculator to find out how much you could save by remortgaging.
Is there an age limit for 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, while others have a maximum age for when the mortgage term ends.
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 need to go through any additional checks to be accepted for a new deal with them.
But if you want to remortgage with a different lender, it’s a good idea to maintain or build a good credit score by paying bills on time, not building up debts and not borrowing too much.
Check your credit record for any mistakes and get them corrected by the time you apply for a new mortgage deal. And don’t forget to check you’re on the electoral roll – if you’re not, it could damage your credit rating.
Can I remortgage with bad credit?
Your existing lender is unlikely to check your credit rating if you’re not increasing your mortgage amount or term, so it’s worth checking what remortgage deals are available with them first. You may still be able to remortgage to another lender if you have a bad credit rating, but it’s unlikely you’ll get the best rates available.
If your credit rating is low, you might want to hold off looking for a new deal until you can improve your score – which can take up to six months. Start by finding out what information is held on your credit report. Then you can take steps to build your credit score.
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.
But if you’re remortgaging to borrow more and your repayments will go up, then your lender will want to reassess your finances. 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, remortgage application is rejected, you’ll have no choice but to stay on your current deal or the standard variable rate 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 more careful pickier about who they’ll lend to. Under Financial Conduct Authority (FCA) regulations, they lenders need to check that you can afford the current repayments now, and also in and any increases the future should interest rates rise.
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. You can improve your chances of being accepted by showing:
- Proof of income – at least three years of 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 a schedule of current and upcoming jobs can help to prove current and future incoming.
- 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.
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 to remortgage on your own without professional advice – known as the ‘execution-only’ route – you won’t be able to complain to FOS about your decision.
We’ve partnered with multi-award-winning mortgage broker London & Country Mortgages Ltd (L&C)** to provide you with fee-free mortgage advice.
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.”
- Daniel Evans, Mortgages expert
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