Remortgaging in Plain English
When you remortgage, you replace your current mortgage with a new one. The new mortgage pays off what you owe on the old one, and you start making payments on the new deal instead. You stay in the same property throughout the process.
Most people remortgage because their initial fixed-rate or tracker deal has come to an end. Once that introductory period finishes, lenders typically move you onto their standard variable rate (SVR), which is almost always more expensive. Switching to a new deal can save you hundreds of pounds each month.
It is worth noting that remortgaging is different from taking out a mortgage to buy a new home. With a remortgage, you are simply changing the terms of the borrowing on your existing property.
Why Do People Remortgage?
There are several common reasons UK homeowners choose to remortgage:
- To save money – switching from an SVR to a new fixed or tracker rate can dramatically reduce your monthly payments.
- To release equity – if your property has increased in value, you may be able to borrow more against it for home improvements, debt consolidation, or other purposes.
- To get a better rate – as you pay down your mortgage, your loan-to-value (LTV) ratio improves, which can unlock lower interest rates.
- To change mortgage type – for example, moving from a variable rate to a fixed rate for more certainty over your payments.
- To overpay or shorten the term – some homeowners remortgage to a shorter term in order to pay off their mortgage sooner.
Whatever your reason, it is always worth comparing the potential savings against any costs involved, such as early repayment charges, arrangement fees, and legal costs.
Is Remortgaging Right for You?
Remortgaging is not always the best option. If you are still within a fixed-rate or introductory period, there may be early repayment charges (ERCs) that make switching expensive. In some cases, a product transfer with your existing lender could be simpler and cheaper.
However, if your current deal is ending soon, or you are already on your lender's SVR, remortgaging is well worth exploring. Even a small reduction in your interest rate can add up to thousands of pounds saved over the life of the mortgage.
It is a good idea to start looking at your options around three to six months before your current deal expires. This gives you enough time to compare deals, apply, and have everything in place before you move onto a higher rate.
Key Things to Know Before You Start
Before you begin the remortgaging process, there are a few important things to keep in mind:
- Check your current deal – find out when your introductory rate ends and whether any early repayment charges apply.
- Know your property value – your LTV ratio affects the rates available to you. A lower LTV generally means better deals.
- Review your credit file – lenders will carry out a credit check, so it helps to review your report beforehand and correct any errors.
- Factor in all costs – consider arrangement fees, valuation fees, and legal costs when calculating whether a remortgage will genuinely save you money.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Important: Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice. The actual rate available will depend on your circumstances. Think carefully before securing other debts against your home.