How to remortgage
When you remortgage your property, you're essentially switching from one mortgage to another.
This might be a new deal with your existing lender, or you might decide to move to a new mortgage with an entirely different lender.
There are lots of reasons why you might decide to remortgage. You may, for example, have found a cheaper deal which can help you reduce your monthly outgoings, or want to increase the amount you're borrowing, perhaps to fund home improvements.
In this guide, we explain how remortgaging works, when to remortgage, how the different types of remortgage deal work, and how much remortgaging is likely to cost you. We'll talk you through the process step-by-step, so you'll know exactly what to expect when moving to a new deal.
How does a remortgage work?
The process of remortgaging works by you taking out a new mortgage deal that replaces your existing one.
The first thing you need to do if you're looking to remortgage is to check that there aren't any early repayment charges (ERCs) for leaving your existing deal, as if there are you may be better off waiting until it finishes.
If there aren't any charges, you'll then need to think about what type of mortgage you want, for example a fixed or tracker deal (more about these later). Seek expert advice if you need help choosing the right remortgage deal for your individual circumstances.
Once you've chosen a remortgage deal, you can then submit your application to your new lender. You'll need to provide them with evidence of your income and outgoings, as well as details of your current mortgage.
The lender will carry out a credit check and arrange for your property to be valued. You'll need a solicitor who will handle all the legal paperwork and sort out the transfer of funds in order to complete the remortgage.
Why remortgage?
The main reason homeowners choose to remortgage is to make sure they're always on the most competitive deal possible so that they are not paying more than they need to.
After all, your mortgage payment is likely to be your biggest monthly outgoing, so it makes sense to keep costs to a minimum. Remortgaging can often save you hundreds (if not thousands) of pounds a year, especially if you're moving from your lender's standard variable rate (SVR). The SVR is the rate you typically move onto once your current deal finishes and is usually much more expensive than remortgage rates.
Other reasons to remortgage include helping to pay off your mortgage earlier, or to raise capital.
Find out more: Why should I remortgage?
When to remortgage?
There are numerous occasions when it might be beneficial for you to remortgage. Here are some of the main ones:
Your current mortgage deal is finishing
If you're currently tied into your existing mortgage deal, but it's due to finish in the next few months before moving onto a much more expensive variable rate, it makes sense to remortgage so that you can keep costs to a minimum.
You want to borrow more
You might need to remortgage so that you can borrow more, freeing up funds perhaps to help pay for home improvements, or to buy another property. Bear in mind that you'll need to have spare equity in your property if you're looking to borrow more.
You want the security of a fixed rate
If you're worried about interest rates rising and are currently on a variable rate mortgage, you may decide you want to switch to a fixed rate mortgage so that you know your monthly payments won't vary if rates do go up.
Your home has gone up in value
If your property has increased in value, this may provide you with access to a wider range of more competitive remortgage rates. That's because you'll have moved into a different loan-to-value band and therefore may qualify for lower rates.
Find out more: When to remortgage.
When might remortgaging not be a good idea?
Remortgaging isn't always a good idea, so if you're not sure if it's the right decision for you, seek professional mortgage advice before you go ahead.
Some of the reasons it might not be advisable to remortgage include:
You've only got a couple of years to go before your mortgage is paid off
If you're approaching the end of your mortgage term, you'll need to weigh up whether the costs of remortgaging might outweigh the benefits. That's because the smaller your mortgage is, the bigger the impact of any arrangement fees, so you'll need to do your sums carefully to find out whether it's worth it.
Your credit score isn't up to scratch
If you've missed debt repayments in the past, this will have had an impact on your credit score, which lenders look at to help them decide whether to offer you a mortgage. This means any mortgage application you make may be refused. However, it's still worth checking as your existing lender may offer you a better deal than the one you're currently on.
You'll pay high early repayment charges
Before remortgaging, check to see whether you'll have to pay any early repayment charges when you leave your existing mortgage. If these are high, this could wipe out the benefit of switching to a new deal with a lower rate.
Your property's value has fallen
If your property is now worth less than you paid for it, then you may find that you don't have enough equity in your home to be able to remortgage. If this is the case, you may have to sit tight and wait for prices to go up again before you can remortgage. It's worth speaking to your existing lender though, as they might still be able to offer you a new deal.
How much could you save by switching to a better deal?
The amount you can save by remortgaging will vary depending on the size of your mortgage, your mortgage term, and how much lower your new rate is compared to your old one.
Savings are likely to be biggest if you're moving from your lender's standard variable rate (SVR) to a new deal and could potentially run into hundreds or even thousands of pounds of year.
For example, saving 2% on a £150,000, 25 year repayment mortgage would cut the monthly payments by about £160 a month, or nearly £2,000 over a year.
What happens when you remortgage?
There are several steps in the remortgage process. Once you've found a deal you want to move to, you'll need to complete the remortgage application forms and supply any additional information that the lender might require. This will include things such as payslips and bank statements showing your outgoings.
If your new lender doesn't provide a legal service, you must appoint a solicitor who will deal with the basic legal work of transferring your mortgage across. Your property will need to be valued by a surveyor and this is usually arranged by your new lender.
On completion day, your new lender will release funds to pay off your mortgage and you will be moved across to your new remortgage deal.
Which remortgage deal should you get?
There are lots of different types of remortgage deal to choose from, so it's important to get to grips with how they all work.
Here, we look at the main remortgage options, and why you might want to consider each one.
Fixed rate remortgages
A fixed rate mortgage, as the name suggests, enables you to lock into a fixed rate for a set period of time. This is typically either two, three or five years, but can be as long as ten years. There will usually be early repayment charges if you want to pay off or switch your mortgage during the fixed rate period.
Ideal if you want to... fix your mortgage payments for a certain period so you'll have peace of mind that your monthly mortgage payments won't change if interest rates rise.
Tracker remortgages
A tracker remortgage usually tracks the Bank of England base rate, plus a set percentage. Homeowners with tracker remortgages benefit when interest rates are falling, as their mortgage rate and monthly payments reduce when the base rate does. However, when the base rate increases, their mortgage rate also goes up, meaning steeper monthly payments.
Ideal if you want to... benefit from a low remortgage rate now and are comfortable that your monthly payments may fluctuate over time.
Capped rate remortgages
If you choose a capped rate remortgage deal, your mortgage rate can go up or down over time, but it will never be able to go above a certain limit. It's worth noting however that capped rate mortgages are rarely available.
Ideal if you want to... benefit from lower rates if interest rates fall, but don't want your payments to exceed a particular amount if they move in the other direction.
Discount remortgages
With a discount remortgage, the lender will typically offer you a discount off their standard variable rate (SVR) for a specified period of time. This means that you'll pay a rate that is always lower than the SVR and will benefit if interest rates fall and the lender passes on this cut by reducing the SVR. You must, however, be prepared for higher payments if interest rates rise and your lender increases their SVR.
Ideal if you want to... benefit from lower rates if interest rates are cut, although your lender doesn't have to move its SVR down if this does happen.
Offset remortgages
An offset mortgage allows you to offset any savings you have against the amount you're borrowing, enabling you to reduce the amount of interest you pay. This can help you to pay off your mortgage sooner. Bear in mind though, that offset remortgage rates tend to be slightly higher than standard mortgage rates.
Ideal if you want to... keep your savings readily accessible but use them to help keep mortgage interest costs to a minimum.
How much does it cost to remortgage?
There are several charges you'll need to take into consideration when remortgaging. These include:
Arrangement fees
Remortgage deals can come with arrangement fees, sometimes known as admin fees or booking fees. These can range from a couple of hundred pounds up to a couple of thousand, so it's important to factor these in to your overall costs.
Legal fees
Many lenders will offer free legal work or cashback as an incentive to remortgage with them. However, if they don't then basic legal work will typically set you back around £300.
Valuation fees
Again, valuation fees may be covered as part of your remortgage deal, but if they aren't, the amount you'll have to pay will depend on the size and value of the property. They usually range from a couple of hundred pounds upwards.
Find out more: Remortgage costs
Am I eligible to remortgage?
To be eligible to remortgage, you'll need to have at least 5% equity in your home. The more equity you have, the better the remortgage rates you'll be able to access.
You'll also need a good credit score and must be able to demonstrate to your new lender that you'll be able to keep up with your repayments.
Your monthly income will also be a key factor that lenders will look at, along with any debts you might have. If, for example, you have lots of other outstanding loans and credit card debts, they may limit the amount you can borrow.
Compare remortgage deals & start the process online
Ready to start your remortgage? You can compare all the best available remortgage deals via our Online Mortgage Finder tool.
All you need to do is enter your property value, the mortgage term you want, and whether you're looking for a repayment or interest-only remortgage, and it'll come up with all the deals that are currently available. You can narrow your selection down by indicating whether you want to go for a fixed or a variable deal, and how long you want your deal to last.
Once you've chosen the deal you want, simply enter a few more details and we'll show you all the remortgage deals you're likely to qualify for, and how much they'll cost. Don't forget, if at any point you want to chat anything through with one of our advisers, you can call us on 0808 292 0922 (lines are open 7 days a week, 9am-8pm Mon-Thur, 9am-5.30pm Fri, 9am-5pm Sat and 10am-4pm Sun)
Remortgage FAQs
- How long does a remortgage take?
It is possible to get a new mortgage offer in just a few weeks. It's still a good idea to start the process a while before you want your remortgage to start, so that if there are any hiccups you've got plenty of time to sort them out.
Find out more about how long the remortgage process takes.
- How early can you remortgage?
You can usually start looking for remortgage deals from three to six months before your current deal ends. This can enable you to arrange to move directly from one deal to another, without moving onto your lender's standard variable rate. Lenders will take different approaches to how far in advance they will give you a remortgage offer, so make sure you check exactly when your current deal is due to end.
Find out more about the remortgage process.
- Can I borrow more with a remortgage?
You may be able to borrow more when you remortgage, provided you have enough equity in your home and your income is high enough for you to qualify for additional borrowing.
- Do I have to get my house valued when I remortgage?
Yes, your home will need to be valued when you remortgage, so that the lender can check that the property will be good security for the mortgage.
- When you remortgage, who values your house?
Your new lender will arrange for a valuation of your home. Often a surveyor won't need to come into your home to do this, and instead can do a drive-by valuation, or an automated desk-top valuation.
You can get a rough idea of what your property might be worth using our house price calculator.
- How often can you remortgage?
You can remortgage your property as many times as it makes financial sense to do so. Remember that there are costs involved when you remortgage, and you must make sure that these don't outweigh the benefit of moving to a new deal.
- How much can I remortgage my house for?
That will depend on how much equity you have in your property, as well as your income and how much lenders think you'd be able to afford to borrow. Stricter mortgage rules introduced in 2014 mean lenders will want to be certain that you're not taking on too much debt. They'll also want to see you'd be able to cope with steeper mortgage costs if interest rates rise in future.
Check out our remortgage calculators to see what might be possible.
- How much equity do I need to remortgage?
You'll need at least 5% equity in your property to remortgage, although having 10% or more should increase the range of options available. Remember that the greater the amount of equity you have, the more competitive mortgage rates are likely to be.
- Can I remortgage with negative equity?
If the current value of your home is less than your mortgage, you will struggle to remortgage to a new lender. However, it's worth speaking to your existing lender as they might be able to offer you a new deal.
- What documents do I need to remortgage?
The lender you're remortgaging to may typically want to see the following documents:
- Proof of identity, such as your passport and/or driving licence
- Your last three months' bank statements
- Your last three months' pay slips
- Up to the last three years' accounts if you're self-employed
- Your latest P60 showing your income and the tax paid
Find out more about what you'll need to apply for a mortgage.
- What happens on remortgage completion day?
Your solicitor or conveyancer will have arranged for your remortgage funds to be released by your new lender on the day of completion, so that they can transfer the money to pay off your existing mortgage. After completion, they will then register your new mortgage at HM Land Registry.
- Can I remortgage to fund an extension?
Lenders will often allow you to remortgage to release funds to pay for home improvements such as an extension. They'll want to know what you require the money for and in some cases may want to see tradesmens' quotes for the work you're planning.
- Can I remortgage a house to buy another?
Provided you've got enough equity in your existing property, you may be able to remortgage your house to buy another. This can be a way to pay for a buy-to-let property or a holiday home. You'll need to be able to prove to your lender that you'll be able to afford higher repayments.
- Can I remortgage with the same lender?
Yes, you may be able to switch to a new deal with the same lender, or remortgage to a different one if they offer a better deal.
- Can I remortgage with a different lender?
Yes, you can switch to a deal with a new lender. The new mortgage will pay off your old mortgage and you can start making repayments to them instead.
