Why should I remortgage: What are the benefits?

• Remortgaging can significantly reduce your monthly payments and save thousands over your mortgage term by securing better interest rates.
• You can release equity from your home to fund major expenses like home improvements, education costs, or debt consolidation.
• Improved loan-to-value ratios from paying down your mortgage and property appreciation often qualify you for better interest rates.
• Consider all costs including arrangement fees, legal fees, and potential early repayment charges before switching lenders.
• The process typically takes 4-8 weeks and requires financial documentation, but staying with your current lender is usually quicker.

Remortgaging means switching your existing mortgage to a new deal, either with your current lender or a different one. The key benefits of remortgaging include securing lower interest rates to reduce monthly payments, accessing equity in your home, and taking advantage of better mortgage terms and features. 

Why remortgage?

Most homeowners remortgage to save money. Others remortgage to release equity, switch from interest-only to repayment, or gain more flexible options. With mortgage rates and products changing frequently, remortgaging allows you to ensure your mortgage continues to meet your needs and financial goals.

When your current deal is about to end

The most common trigger for remortgaging is reaching the end of your current deal. When your current mortgage term concludes – whether it’s a 2, 3, or 5-year term – it's a natural time to review your options and decide whether to remortgage.

If you don’t remortgage, your lender will automatically move you onto their standard variable rate (SVR). These rates are typically higher than mortgage deals, often sitting several percentage points about the best available options.

With millions of homeowners facing deal renewals this year, there's healthy competition among lenders, which can work in your favour when you're looking to remortgage. Even if rates have increased since your compared to your current mortgage, remortgaging to a new deal almost always proves more cost-effective than staying on your lender's standard rate.

Substantial long-term savings

One of the most compelling reasons to remortgage is the potential for significant savings. Even a 0.5% reduction on your interest rate can save thousands over your mortgage deal term. For example, on a £200,000 mortgage, dropping from 5% to 4.5% could save you roughly £500 a year – that’s £2,500 over a typical 5-year fixed-rate period.

Learn more: A helpful guide to remortgaging

Lower monthly payments

Who wouldn't want to pay less every month? Reducing your monthly payments frees up cash for other priorities. Whether you want to build an emergency fund, invest for the future, or simply have more breathing room in your monthly budget, remortgaging for a better deal can make a real difference in your day-to-day finances.

If you’ve been paying off your mortgage for a while and your property value has potentially increased, your loan-to-value (LTV) ratio improves. A lower LTV ratio - meaning you owe less relative to your home's value - typically qualifies you for better interest rates and more competitive mortgage deals, further reducing your monthly payments.

Better product features

Some mortgages offer flexible features that make your life a little easier. These might include payment holidays (temporarily pausing payments), overpayment options without penalties, or the ability to make underpayments during periods. These flexible terms can provide valuable financial security you might not have in your current mortgage.

Releasing equity for other goals

As you pay off your mortgage and your property value increases, you build up equity. When you remortgage to release equity, you're essentially borrowing against this ownership stake in your home. The released funds can be used for any purpose.

Many homeowners use it for things like home improvements, funding education, starting a business, but it can be used how you wish.

Some even find they can release equity while simultaneously securing a better interest rate than their current mortgage, achieving two financial goals at once.

Debt consolidation

If you're carrying expensive credit card debt or personal loans, remortgaging to consolidate these debts can dramatically reduce your overall interest payments. Mortgage rates are typically much lower than other forms of credit, making this a smart financial strategy for many homeowners.

When you consolidate debts through remortgaging, you're essentially replacing multiple high-interest debts with one lower-interest mortgage payment. This can significantly reduce your monthly outgoings and simplify your finances by having just one payment to manage instead of juggling several different creditors. It’s important to be aware that your home would be at risk if you do not keep up with your repayments, so it is essential to seek financial advice before consolidating debt in this way.

The key is being proactive rather than reactive - don't wait until you're automatically moved to your lender's standard variable rate, which could cost you hundreds of pounds extra each month.

The optimal approach is to start exploring your options well before your current deal expires, giving yourself time to compare rates, arrange any necessary paperwork, and secure the best possible terms. Your personal circumstances, current market conditions, and the specifics of your existing mortgage will all influence the ideal timing for your situation.

For detailed guidance on timing your remortgage perfectly, including specific scenarios and expert advice on when to start the process, read our comprehensive guide: When should I remortgage?

Upfront Costs and Fees

While remortgaging offers significant benefits, it's important to understand the potential costs involved. Upfront fees can include arrangement fees, valuation costs, legal fees, and potentially early repayment charges if you're switching before your current deal ends. These costs can range from a few hundred to several thousand pounds, which need to be weighed against your potential savings.

Time and Paperwork Requirements

The process also requires time and paperwork - you'll need to provide financial documentation, undergo affordability assessments, and potentially arrange property valuations. If you're switching lenders, the legal process can take several weeks to complete. Additionally, if your circumstances have changed since your original mortgage, you might not qualify for the rates you're hoping for, making the effort less worthwhile than anticipated.

What is the main benefit of remortgaging?

The primary benefit is usually securing a lower interest rate, which can save you hundreds or thousands of pounds over your mortgage term. Even a small rate reduction can make a significant difference to your monthly payments and overall costs.

Can I remortgage to release cash from my home?

Yes, if you have built up equity in your property, you can remortgage for a higher amount than you currently owe and use the extra funds for home improvements, debt consolidation, or other major expenses.

Will remortgaging affect my credit score?

Applying for a remortgage will involve a credit check, which may temporarily affect your credit score. However, successfully managing a new mortgage can actually improve your credit rating over time.

Do I need a solicitor or conveyancer to remortgage?

If you're switching to a new lender, yes - you'll need legal representation to handle the transfer. If you're staying with your current lender (product transfer), legal work is typically not required.