Key takeaways
Remortgaging means switching your mortgage to a new deal, either with your current lender or a different one
Common reasons include reducing monthly payments, accessing better rates, or releasing equity from your property
Start looking for new deals 5-6 months before your current mortgage expires to avoid moving to a Standard Variable Rate
Early repayment charges and various fees mean remortgaging isn't always financially beneficial
You'll need a conveyancer when switching lenders, but not for a product transfer with your current lender
Thinking about remortgaging but not too sure whether it’s the right move for you? Or maybe you just need to know a little more about what the process is.
Well, needn’t worry, we cover it all here in our helpful guide to remortgaging.
Let’s get into it.
Put simply, remortgaging is when you switch your mortgage deal to a new one, this can be with the same lender or with a new one. It involves taking out a new mortgage loan and using the funds from that to pay off your existing mortgage.
Remortgaging is common, and people remortgage for different reasons. Whether it be to get a better deal, reduce monthly payments, release equity, consolidate debt, or something else, each situation and reasoning is unique.
Reduce monthly bills
For many of us, our monthly mortgage payments are our biggest outgoing every month, so it makes sense to try and get a cheaper deal. By switching, you can sometimes save hundreds.
Because remortgaging is a bit more hassle than changing car insurance, or utility bills provider, many stick with their same lender to reduce stress. However. if you look around the market, you could save by switching..+
Enhanced flexibility
Life brings surprises. A new job may have you eager to pay more towards your mortgage, only to find an overpayment limit holding you back. Or you may need the flexibility of payment holidays – temporarily stopping or reducing monthly payments if money gets tight.
We understand. Changes happen. There will always be mortgage deals out there that can accommodate your situation. If your current deal is more frustrating than flexible, it’s natural to think it’s time for a change.
Your home is worth more now
Home values shift over time. Yours may be worth more now than when you first took out your mortgage. Knowing your loan-to-value (LTV), which compares how much you still owe to your home’s current value, gives you important insight that can expand your options.
The lower your LTV, the more attractive remortgage deals available generally are. Whether your priority is decreasing monthly payments, funding home renovations by borrowing more against the equity you have in the property, or anything in between, remortgaging could provide the flexibility you’re after.
You want a better rate
Hearing others boasting better mortgage rates can make you feel like you’re missing out. There may be better options out there for you.
Remortgaging allows you to switch lenders and improve your current deal. If you’re still within your existing deal, early repayment fees could apply, be wary of this before agreeing on a new deal. In some cases, the long-term savings could outweigh this cost, but sometimes it’s better to wait for your deal to end.
Your deal is expiring
When your current mortgage deal expires, lenders typically move you to their Standard Variable Rate (SVR) if you do not agree to and sign a new deal. This baseline rate tends to be higher than promotional fixes lasting 2- 5 years.
You need to release some equity
Life presents financial needs at unexpected times. You may want extra cash to invest to fund your goals. However, your current lender may not allow you to tap into your home equity.
In those cases, remortgaging with a different provider could help. New lenders look more favourably on releasing funds if you share how you plan to use it.
Depending on your remortgage deal and lender will impact the costs that are involved in conveyancing.
Costs for leaving your current mortgage:
Early repayment charge: We understand that you could feel eager to remortgage before your current deal ends. But exiting an agreement early will likely incur extra fees – typically 1-5% of your outstanding mortgage. Patience could pay off if you’re likely to pay a hefty amount, it can commonly cost thousands.
Exit fee: Not all, but some lenders will charge you an exit fee if you switch lenders. If charged, the exit fee is typically between £50 and £300, depending on your lender.
Admin charge: Your current lender may charge an admin fee called a “Deeds Release” to forward your home’s property documentation to your conveyancer or solicitor. This fee can cost anywhere between £50 - £300.
Costs for getting your new deal:
Arrangement fee: Also known as a ‘Product fee’, covers the cost of setting up your new mortgage deal. Lenders will vary on how much they charge, be wary and make sure you find this out before switching to avoid a nasty surprise. These charges range from £0 to over £2,000.
Valuation fee: When remortgaging, your chosen lender is going to require an assessment of your property’s current valuation before approving a loan. Some lenders will include this free of charge, but you may have to cough up to £400 depending on your lender.
Conveyancing fee: If you are switching lenders when remortgaging, legal work will be required to remove the original lender’s interest. Additionally, your new lender may require fresh property searches to be conducted.
Legal fees could range from £600+, depending on the value of your property.
Broker fee: Although you don’t have to use a broker, they can often get you the best deal. Even if you do use one you may not incur costs. Some brokers don’t charge clients a fee and will earn a commission from lenders.
If you do need to pay for their services, typical fees start from around £300+ or could be a percentage of the mortgage amount.
Whilst remortgaging might be right for some, it doesn’t mean that it’s right for everyone.
Although there may be potential savings on offer, if the finances, timings, or personal circumstances aren’t right, you may need to rethink about remortgaging.
So, who are the people who might not need to remortgage?
You’re already on a good deal
Though remortgaging may promise savings, your existing deal could already be optimal, and making the switch could be costly.
It’s always good to keep an eye on the market and research what deals you could get. Although you have a good deal now, it won’t stay like this forever.
You’re trapped by penalties
On the opposite end, you could be stuck in a deal where you have high monthly repayments and harsh early repayment charges. It’s only natural to want to leave a deal like this. But if your early repayment charge is high, and the potential savings of switching wouldn’t outweigh this, it’s best to see your deal out rather than incur high costs.
You could ask your current lender to switch deals, remaining with them, but they’ll likely want to keep you on your current deal.
Those who own 10% or less of their home
Homeowners who own less than 10% of their property will need to borrow 90% or more to remortgage. And whilst 95% mortgages are increasingly common, they are aimed at home buyers, not remortgages. These deals will also often be some of the less favourable ones on the market.
Unless you’re on an incredibly high rate currently, it’s best to own more than 10% of your property before remortgaging.
Those with a poor credit history
Missed payments on debts like loans or mortgages damage credit scores. Most lenders require a squeaky clean (or at least a very good) credit history, so if your credit score is on the lower end, it’s going to be difficult to secure a good mortgage deal.
Although time-consuming, if you’re in this situation, you need to build your credit score up. You need to prove that you can make payments back to lenders on time. Moving forward, avoid late or missing payments if possible, on both existing and new credit.
Those whose circumstances have changed
Your financial position may have changed, perhaps you’ve stopped working or recently became self-employed. New lenders might not be prepared to offer you a loan if you do not meet their criteria, meaning it could be best to stay put and work towards meeting their requirements.
Remortgaging is a big decision, take your time if deciding to move forward and make sure you are well prepared.
Making thoughtful preparations upfront will ensure you pursue the optimal financing path aligned to your long term financial goals.
If your situation is right, and you think it’s time, here are some tips that can help you prepare:
Start looking about 6 months in advance
You should start looking for a new mortgage deal around 5-6 months before your current deal expires. Making sure you're set up for a smooth switch means you won’t be put on your lender's SVR.
This goes for whether you’re doing a product transfer with your current lender or moving to a new one and remortgaging. It’s always best to be prepared.
Will you be paying an early repayment charge?
Most mortgage lenders want to keep you with them as long as possible, so will require you to pay an early repayment charge if you remortgage during your agreed fixed deal. This could also extend after the deal ends, depending on what you agreed.
An early repayment charge is typically between 1% and 5% of what you still owe on your mortgage and can end up costing thousands. You may be able to negotiate, but your lender holds the power here.
Get your paperwork ready to speed up the process
You probably remember scrambling to find paperwork when you applied for your last mortgage. Well, you’re going to need to do it again. That’s why it’s better to be prepared.
Prepare these documents in advance to avoid the last-minute panic:
Having all this ready and sending it in one batch can help to speed up the process.
Get your finances into a good place
Your finances are going to be checked when you apply for any loan or credit, same goes for when you remortgage. It’s a good idea to prepare for this to make sure you are eligible for the best mortgage deals.
Try to avoid taking out any new credit when it’s getting close to remortgage time, and make sure you’re paying your bills on time, and your income has been steady in the recent months.
If you apply for a mortgage and you are rejected, avoid being tempted to immediately apply again. You got rejected for a reason, it’s important to rectify issues before applying for more mortgages as you’ll dig yourself into a deeper hole with all the credit checks.
How much do you owe your current lender?
It’s important to know how much you’ll need to borrow to remortgage, try not to estimate. Instead, contact your current lender and ask them how much you’re going to owe on a given date when you intend on switching.
Asking for a specific date will consider any payments you make between when you ask, and the intended switch date. Relying on an estimate may mean you either under or overestimate how much you need to borrow.
Take more caution if you’re self-employed
If you’re self-employed, have been living abroad or could struggle to show long-term income, getting a remortgage deal may be slightly more difficult.
You’ll need rock-solid evidence of your income. Be prepared to show up-to-date proof of your finances and business operations. You’ll need to show:
Business accounts: you’ll likely need to show at least two years’ worth of accounts, or maybe three years.
Or
Tax returns: If you’re unable to show business accounts, you’ll need to at least provide up to three years of tax returns.
As the process can become quite complex, it’s a good idea to use a mortgage broker. They can help you prepare for each specific lender as they’ll know what evidence they require.
If you’ve become self-employed recently, it’s unlikely that you’ll be able to secure a remortgage as you won’t have enough evidence to prove income stability.
Remortgaging with a new lender? No problem, we’ve put together a helpful step-by-step guide to walk you through what’s going to happen.
Switching lenders introduces new processes, but we outline what to expect so you can prepare efficiently.
Remember, if you’re remaining with your current lender, most of this won’t apply to you:
1. Your current lender will notify you
Your lender should write to you to let you know your current deal is set to expire on a set date. If you’ll be going onto your lender’s SVR, now’s the time to start looking into new mortgage deals whether it be with your current or a new lender.
2. Ask your lender for a closing balance
Your lender will provide you with a redemption statement when requested. This will highlight the amount needed to pay off the remaining mortgage and any other fees owed. You’ll need to know this amount so you can apply for new mortgages.
3. Find a broker
Although this isn’t required, it may give you the best opportunity to find a great mortgage deal.
A mortgage broker has expert market-wide knowledge and often has access to deals not available on the open market.
4. Compare rates and deals
Whether you’re doing this on your own or with a broker, make sure to explore the market thoroughly.
You’ll also need to decide on the type of mortgage you want, whether it's fixed-rate, variable or even interest-only.
5. Instruct a conveyancer
You’ll only need to instruct a conveyancer if you’re changing lenders. Your conveyancer or solicitor will sort out all the legal work involved in remortgaging. Your conveyancer will:
What does the conveyancing timeline look like?
6. Eligibility and affordability checks
Remember when we said to get your documents ready, it was for this time. Your mortgage broker (if using one) and lender will want to see all the documents that we listed earlier to check you’ll be able to manage your monthly repayments.
7. Apply for a mortgage & receive an offer
If you already have a mortgage in principle and are going to apply for a mortgage with the same lender, you’ve already done a lot of the legwork.
The more evidence you have of being a reliable payer of credit, the more likely you are to have your application approved and a mortgage deal offered.
If your application is successful, you’ll be sent an offer letter outlining the amount you can borrow based on your credit checks, property valuation, and income. The offer will typically stand for 6 months before expiring.
Check our full guide to mortgages here
8. Your conveyancer conducts legal work
Although you can instruct a conveyancer before receiving a mortgage offer, your conveyancer can’t do much until you’ve received an offer.
It’s at this point where your conveyancer will conduct all the legal work involved that we mentioned earlier.
Once your lender is satisfied, and completion comes around, your conveyancer will request money from the new lender and pay off the old mortgage.
9. Register your new mortgage with the Land Registry
Your solicitor will register your new mortgage with the Land Registry, and if applicable, the deeds are transferred to the new lender.
Congratulations! You completed your remortgage on your property.
At Eden, we take the stress out of conveyancing, allowing you to focus on the exciting parts of your move.
With a 24/7 online platform and your very own dedicated conveyancer, you'll never be left in the dark.
Get an instant quote with Eden today.
