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Should I remortgage?

Remortgaging can cut your monthly payments, free up some extra cash, and lock in a cheaper rate – an intelligent move if interest rates are about to rise. Whatever your reason for remortgaging, our guide has everything you need to know.
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When should you remortgage?

Remortgaging is when you take out a new mortgage on a property you already own. 

There are many reasons to remortgage, from borrowing money for home improvements to clearing expensive debts. You can also choose to remortgage to get a cheaper deal or the peace of mind afforded by a fixed-rate arrangement. If, or when, you should remortgage will depend on your circumstances.

Compare remortgaging mortgages

Compare mortgages for home owners thinking about getting a new mortgage

Can remortgaging save me money? 

You may be able to save money if you remortgage and switch to a cheaper mortgage with lower monthly payments. Opting for a new fixed-rate mortgage could save you cash if interest rates rise over the coming years. 

After a prolonged period of low interest rates, the Bank of England has started pushing rates up. That trend is likely to continue, with inflation predicted to reach more than 7% in 2022. So it makes sense to consider whether remortgaging could save you money. However, you need to review all the options because savings aren’t guaranteed, and there may be costs involved. 

Most mortgages last for around 20–25 years, with a cheaper locked-in rate for the first three to five years. After that, the interest rate switches to the lender’s standard variable rate (SVR), which tends to be more expensive. If you’ve already been moved to that tariff,  it may be time to think about remortgaging. 

Make sure you factor in any early exit fees that may be applied if you cancel a mortgage during the contract period. You may still be able to save money – if the savings of a cheaper mortgage outweigh the cost of any fees – but you’ll need to check this before you sign up for a new mortgage.

What does remortgaging involve?

Remortgaging is simply taking out a new mortgage for a property you already own. It’s important to consider when to do this.

The best time to start looking for remortgage deals is when you’re approaching the end of a fixed rate of interest payment, although it is possible to arrange a new mortgage at any time.

You will often pay an early repayment charge if you’re still in the initial discounted period of your current mortgage. The charge is based on the debt remaining on the mortgage and is paid to your current provider. 

Not all mortgages have early repayment charges, however. For instance, if you’re on a tracker mortgage rather than a fixed-rate deal – this type of fee may not apply. 

There are many mortgage providers on the market, and it’s important to compare their offers. You don’t want to sign up for the first one you see, and you’ll need to take some time to compare all of the costs involved.

You can remortgage on your own by finding a new deal and applying for it, or you could use a mortgage broker. Often a mortgage broker will have access to deals not available to the public, and they may be able to give you specialist advice. Just be sure to check how much they charge for their service before you agree to consult one. Some are free.

Pros and cons of remortgaging

Pros

  • It could save you money

  • You can lock in a cheaper price 

  • Peace of mind if interest rates are about to rise

  • Debt consolidation

Cons

  • It won’t always save you money

  • There could be fees to pay

  • You’ll need to pass eligibility checks

  • Borrowing more isn’t always a good option

Why should I remortgage? 

There are many reasons to remortgage and some circumstances where it makes complete sense. If any of the following situations apply to you, it may be time to start thinking about renewing your mortgage arrangements.

  • Your current fixed-rate mortgage deal is about to end, and your interest rate is going to rise, making your monthly payments more expensive

  • You want a lower interest rate, and you’ve seen a better rate available on a different mortgage. There may be fees to pay, especially if you’re in the fixed-rate period of your mortgage, but it could still save you money to switch – just make sure you do the maths before you make a move.

  • You're worried that interest rates will rise after the recent increases from the Bank of England. If you’re on a variable-rate mortgage, this will affect you if prices rise. Moving to a fixed deal means you’ll be locked into a rate that can’t change. However, if you’re on a great deal, it may be cheaper to stay where you are, as even if rates rise, switching could cost you more if the interest rate is significantly higher. It’s all a bit of a balancing act. 

  • If your home's value has risen since you took out your current mortgage (which is quite likely given how quickly house prices have increased over the past year), you may be able to save money with a new mortgage. You may now qualify for a new loan-to-value (LTV) mortgage as you’ll own more of your home, which could open you up to a range of cheaper mortgages than your current deal. 

  • You want to borrow more money for home improvements or something else entirely. Using a mortgage to access money is possible and maybe cheaper than other forms of borrowing, such as loans or credit cards. You need to tell your new provider why you want to borrow more, and it will consider your reason when deciding whether or not to accept your application. 

  • You’d like to overpay more than your lender allows, so you want to switch to a mortgage that permits this. Mortgage providers have rules about how much you can overpay, especially in the first few years. If you break the rules by paying more than you should, you may trigger fees for overpaying and leaving a mortgage deal early. This doesn’t mean you can’t switch, but you need to carefully weigh up all the options and costs before you do.

  • You’re hoping to switch from an interest-only mortgage to a repayment mortgage. You can do this by remortgaging, but you may not need to. Most providers will let you change your current mortgage to a repayment one. You can even transfer part of it and leave the remainder as an interest-only loan. 

  • You want more flexibility with your mortgage, such as a mortgage holiday or the option to link it to your other financial products. Remortgaging to a different type of loan could suit you better, but as always, it’s important to weigh up the savings versus the costs.

Why shouldn't I remortgage?

While there are many great reasons to remortgage, it isn’t always the answer. The following scenarios show where it might not be a good idea.

  • Your mortgage debt is small, and it doesn’t make sense to remortgage because any fees you’ll have to pay will outweigh the potential savings in interest.

  • You’re already on a great deal, so remortgaging isn’t going to benefit you by giving you a better interest rate. The mortgage market has gone through a period of very cheap rates recently, so you might already have a market-leading deal, and if this is the case, it probably makes sense to stay where you are for the time being.

  • Your early repayment charge is expensive, and it’s going to cost you more than any savings you will make by switching to a different mortgage. If this is the case, it’s better to stay put and do as much research as you can so you’re as prepared as possible to remortgage when it makes sense to do so. You could also ask your current provider what the options are if you stay with it after the offer period ends. It may be able to move you to a cheaper mortgage. 

  • If your financial position has worsened since you took out your current mortgage, you may find that the mortgages you are offered are more expensive, or you may not be accepted for a new mortgage at all. Mortgage providers need to check your eligibility, so if your situation has changed, a mortgage provider could consider that there’s a higher risk of you not being able to pay your mortgage. This could lead to them charging you a more expensive interest rate. Circumstances that could adversely affect mortgage applications include the following: you or your partner have lost their job, you’ve reduced your hours or become self-employed.

  • If you’ve had credit problems, this can impact your ability to take out a new mortgage or get one with a decent interest rate. Mortgage providers check your income, outgoings, financial commitments and credit score. Any missed payments on a credit card or other loan can raise a red flag and stop you from getting your hands on a better mortgage. 

  • Your home's value has fallen since you took out your mortgage, or you’re in negative equity (your mortgage debt is higher than the value of your home). Remortgaging won’t save you money in this case. Instead, it’s better to wait until your property starts to rise in value and make overpayments as and when you can, avoiding any extra charges for doing so.

  • If you have low equity in your home, you may face higher charges when trying to get a new mortgage. A range of 95% mortgages has been introduced recently, but these tend to be more expensive than mortgages where you own a more considerable proportion of the property.

Can I remortgage early?

In most cases, it is possible to remortgage early, even if you’re in the fixed-rate interest period of your current mortgage, but you need to calculate the costs before you do anything. 

When you take out a mortgage, it’s usually for 25 years or longer, but this doesn’t mean you’ll stay with the same provider, on the same deal, for this entire period.

Familiarise yourself with the terms and conditions of your current mortgage, so you know which fees will be applied if you remortgage. 

What are the benefits of remortgaging early

Remortgaging early, which means while you’re still in the fixed-rate period of your deal, can save you money or free up extra cash if you need it. As long as the fees are lower than the savings you’ll make by remortgaging, you should be better off.

How early can you remortgage? 

Each mortgage provider sets its own rules about how soon you can remortgage, but you usually have to wait at least six months. However, you may get a better deal if you can wait for a longer period.

Can you remortgage at any time?

There’s no rule to say when you can remortgage; it’s all about the costs involved. Generally, you won’t make sufficient savings in the first six months after buying a property to make remortgaging worthwhile, but there will be exceptions. It can take around two months to remortgage, so keep this in mind if you want to time your new deal to start when your fixed-rate period ends.  

Can you remortgage during a fixed term? 

If you want to remortgage before the end of a fixed term because you’ve seen a better mortgage, you can. However, the costs will likely be higher than if your fixed term had ended. You need to weigh up the costs and potential savings to see if you’re better off remortgaging.

How often can you remortgage?

You can remortgage as many times as you want, but the reason for doing so is usually to free up some extra money or to get a better deal. There’s no point in remortgaging just for the sake of it, and if you’re not sure if it could benefit you or not, it could be worth speaking to a mortgage adviser.

What are the fees associated with remortgaging early?

You will usually pay an early repayment charge to your current provider – this is a fee based on your outstanding debt, which you need to pay for breaking a contract early. There may also be an exit fee to pay. These fees aren’t always charged – so always check your provider’s terms. You will also need to factor in the costs a new provider will charge.  These will be similar to the fees you paid when you took out your current mortgage.

When is the best time to remortgage?

You can usually remortgage at any time, yet it might not always make sense to do so. There are times when remortgaging will make more sense financially. These include when: 

  • Your fixed-rate deal is due to end in four to six months' time – you can usually remortgage and avoid paying the penalty for breaking the mortgage contract early

  • You’ve built up equity in your home and are now eligible for a better deal

  • Interest rates are lower than when you took out your current deal

Should you remortgage with your existing bank or switch to a new lender?

The reason for remortgaging should be to get a cheaper interest rate to lower your monthly repayments. This should be the priority, so go with a new provider or stay where you are, depending on what’s available.

Sticking with your current provider can be a more straightforward process because it generally involves less administration. But just because it’s easier doesn’t mean it’ll save you the most money.

There are lots of mortgages on the market, so you’ll need to take the time to compare prices and find your best deal. Even if you remain with your current provider in the end, always see what other providers are offering.

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