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YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
The FCA does not regulate mortgages on commercial or investment buy-to-let properties.
Remortgaging means changing your mortgage on your current property. You can switch your mortgage to a different product with your existing lender - known as a product transfer, or select another mortgage product with an entirely different lender - which is a full remortgage.
There are a wide variety of reasons that people may choose to remortgage their home, but the most common is to save money with a more competitive deal. You can also remortgage if you want to borrow more money, using the equity in your home as a deposit.
You could make both short and longer term savings by remortgaging if:
1. You're on your lender’s standard variable rate (SVR) of interest
This is usually higher than all other deals they have available, so people often look at the best remortgage deals available to them if they've fallen on this rate.
2. You've gained equity in your home
If you've gained a substantial level of equity in your home, the loan to value (LTV) ratio of your borrowing will have reduced. This means that you're borrowing a smaller percentage of the property value than when you took out the mortgage.
As the best remortgage rates tend to be available to those with the lowest LTV, this can be a good time to look at your options.
3. Interest rates are increasing
If you're on a variable rate deal and increases to the Bank of England base rate are expected, you may feel the need for more stability with your repayments.
Remortgaging to a fixed-rate mortgage can give you more peace of mind, as the interest rate you lock in cannot then increase until that fixed-rate period is over.
4. You want more flexibility with mortgage payments
One way to save money on your mortgage in the longer term is to repay it more quickly, as this reduces the total amount of interest you'll pay over the mortgage term. Some mortgages allow overpayments of up to 10% of the loan per year without charging ERCs (early repayment charges).
If you want to overpay more than that, you might consider remortgaging to a deal with more flexible terms. An offset mortgage can also help you to pay your mortgage off sooner
Some people remortgage to increase their borrowing, which can be helpful in a wide variety of circumstances:
To carry out home improvements
To pay for the costs of education or help get family members onto the property ladder
To consolidate debts
For large purchases, such as a car or holiday
Keep in mind that this is not always the cheapest way to borrow money, however. While mortgage interest rates can be lower than personal loan rates, you'll pay interest on that additional balance for the entire length of your remaining mortgage term.
Whether or not you can get a remortgage deal will depend on your current circumstances. If you’re looking to remortgage with another lender, the same eligibility requirements will apply as when you took out your original mortgage:
LTV - this will depend on the equity you have in your home, but some lenders allow you top up a shortfall in equity with a cash deposit
If you’re concerned that you might not meet the criteria of a new lender, it may still be possible to get a product transfer with your existing lender without the need to have your finances and credit status reassessed. But if you need to borrow more money, it's unlikely your lender will do so without re-assessing.
Timing is the key to maximising the benefits of remortgaging, but the best time to remortgage will depend on your individual circumstances.
You’re coming to the end of your current fixed-rate deal or introductory deal period - you can set up a remortgage as far as six months in advance of the end date
You see a much better rate - bear in mind that you'll need to look at how much any early repayment charges (ERCs) will cost you to leave your existing deal, as they could outweigh the benefits of the better rate
You’re on a variable rate deal and the Bank of England base rate looks like it will rise soon - remortgaging to avoid increased interest rates may be possible, so long as your ERCs won’t end up costing you more
Your home has increased in value dramatically, reducing your LTV
Your current lender doesn’t offer the flexibility you would like, such as offsetting or the ability to overpay
You’re not tied into a deal that has ERCs to pay so can leave at any time
If there are no better rates available than your existing one, in which case it’s probably not worth paying the fees involved with remortgaging, especially if you also have ERCs to pay
If you’re only a short way into a fairly long fixed period. The further you are from the end of your fixed or introductory rate term, the higher fees are likely to be. It’s unlikely you will benefit from remortgaging at this point, but ERCs tend to decrease the closer you are to the end of the deal
Your property value has fallen, causing your LTV to increase, or worse, putting you in negative equity (where you owe more than the current value of your home). If you're in negative equity, it's unlikely you'd be able to secure a remortgage
If you haven’t gained much equity in your home yet, as your property value hasn’t increased and you haven’t repaid much of the original loan. Lenders usually have a minimum equity requirement to remortgage
Your financial circumstances have changed for the worse, meaning that it would be difficult to qualify for a remortgage. You may still be able to do a product transfer with your existing lender, so long as you don’t want to borrow more
Remortgaging is essentially taking out another mortgage, so most of the fees involved in taking out a mortgage will still be payable. This includes arrangement fees and legal fees, as well as the potential for exit fees and ERCs on your existing mortgage.
Some lenders offer various incentives, such as low fee or fee free remortgages, however, it’s really important to look at the full cost of remortgaging and how much you would save, compared to staying on your existing deal.
Remortgage rates vary from one deal to the next and one lender to another. The best remortgage rates will be offered to those with the lowest LTV (so the greatest amount of equity in their home).
This means that you're likely to find more favourable rates when changing deals to save money, as when you remortgage to borrow more, your LTV typically increases.
It’s difficult to compare remortgage rates online, as the mortgage market is highly volatile, so rates change very quickly - here is an overview of today's mortgage rates.
A whole of market broker will be up to date with all the latest and best remortgage deals available, as they have direct access to lenders rates, as well as some that won’t be available to the general public.
It’s a good idea to make sure that you apply at a time where your circumstances are likely to align with lender criteria. For example, if you’ve recently lost your job, or property prices have fallen and your LTV has gone up as a result, it may be better to hold off, if possible.
Like any other mortgage application, you’re more likely to be approved for a remortgage when your financial circumstances allow you to meet the affordability requirements, your credit file is in good shape, and you have a low debt to income ratio. It will also help if you have a good level of equity in your home, and/or can offer additional security in the form of a deposit or high value asset.
If your mortgage deal is ending within the next six months, it's worth looking at remortgaging options now. This is because you can lock in a new rate and switch when your current deal ends, avoiding an ERC. Speak to a mortgage broker who can look at the whole of the market to find the best remortgage deal for you. ”Kellie Steed, Mortgage Content Writer
Remortgage comparison can be difficult to manage alone, due to the high volume of deals available, not to mention the fact the every lender has a different set of criteria that you will need to meet.
Mortgage brokers know which lenders will be most likely to accept your specific income type, or have a maximum LTV that suits your level of equity. They also have up to date rates, while the deals you see online won’t necessarily be available when you approach the lenders.
Remortgaging usually takes about a month, which is the time you need to complete all the paperwork and have a valuation carried out on your home. When the process is over, you’ll be notified with a completion statement from your lender.
If you choose to remortgage with the same lender, this is known as a product transfer. Because the lender already has all your details, product transfers tend to be quicker than remortgaging with a new lender. Some lenders offer digital product transfers which can be completed online very quickly.
If you’re still locked into a mortgage deal, it’s likely you’ll have to pay an early repayment charge (ERC). An ERC is a penalty for leaving your existing mortgage deal early. It’s usually calculated as a percentage of the amount borrowed, which tends to decrease the closer to the end of the deal you get.
Paying an ERC to remortgage before your fixed-rate period comes to an end could any savings you would make, so make sure you calculate the costs carefully to decide whether it's worth it for you.
Yes, you can, so long as you are able to meet the criteria. The process tends to be lengthier than transferring to a new deal with your current lender (a product transfer). Providers sometimes offer better deals to existing customers, but you could save more by remortgaging with a different lender, so it’s worth comparing all the deals available.
Mortgage lenders carry out a credit check at mortgage application to decide whether to lend to you. If this is a ‘hard search’, which it typically will be at application stage, it leaves a mark on your credit score temporarily, but this shouldn’t affect it too much.
The real problem is where you make multiple applications to a number of lenders before being accepted. This makes it obvious that you have been declined by others, but also gives the appearance of desperation, which can discourage future lenders from approving your remortgage application.
The best way to avoid this is to speak to a broker who will be able to direct you to those lenders whose criteria you are most likely to meet.
Yes, you can. This will typically be easier if you had the same circumstances when you took out your original mortgage, or have been self-employed for a substantial period of time, however.
Self employed mortgage applicants will usually need to demonstrate a lengthier period of stable income than employed applicants, with two to three years of accounts and tax calculations the standard requirement. There are a few lenders who will look at self-employed applicants with as little as 12 months trading history, however.
Yes, it’s certainly possible, depending on the level of your credit issue. There are bad credit lenders specifically intended to help people in these circumstances, although the remortgage rates tend to be higher.
If you’re concerned about your credit score, another option is to consider a product transfer. Your existing lender is unlikely to check your credit rating or affordability unless you’re increasing your loan amount or extending the term of your mortgage, so a product transfer can be an easier option.
If you remortgage with a new lender, you will need to have a property valuation, much like you did when you took out the original mortgage. If you use a product transfer to remortgage with your current lender, you won’t usually need to have a valuation, however, you may need to if your house has changed significantly in value.
Most lenders won’t need you to remortgage in order to change from an interest-only to a capital repayment mortgage deal with them. In fact, they will usually be happy for you to do this, as it reduces the risk to them.
If you wanted to change from a repayment to an interest-only mortgage your options would be reduced, as not all lenders are happy to offer interest-only mortgages for residential homes. The criteria are also much more difficult to meet.
Lenders have a maximum LTV that they are willing to offer in any given scenario, depending on how well you meet the other lending criteria and how much you need to borrow.
As lower LTV borrowing is less of a risk to the lender, the interest rates offered tend to be more competitive, the lower the LTV of your borrowing.
The LTV is the percentage of the total cost of the property that you need to borrow. To calculate it, find out the total outstanding value of your mortgage, your property’s current value and then divide your outstanding mortgage balance by your property’s value:
You have £100,000 left to pay on your mortgage
Your property is worth £200,000
Divide £100,000 by £200,000
= 0.50.5 x 100 = 50 (or 50% LTV)
When you remortgage, the LTV will depend on how much of the original loan you have repaid, whether your property has increased in value, and whether you need to borrow more money or are simply remortgaging for a better interest rate.
Historically older borrowers have had a harder time remortgaging, especially if they are nearing retirement age, due to the maximum age limits imposed by many lenders.
However, in recent years there has been a noticeable increase in flexibility in this area, with some lenders extending their maximum age of borrower and maximum age by which the mortgage needs to be repaid.
When nearing retirement age, many people reassess their finances, and a large part of this is likely to be looking at their remaining mortgage balance, and how they can live more comfortably in their later years.
People in these circumstances may consider more specialist products, such as:
Remortgaging onto a retirement interest-only mortgage RIO - often a helpful option for homeowners likely to fall short of repaying the final lump sum balance on an interest-only mortgage
Remortgage onto an equity release product - always take qualified financial advice from an equity release specialist before considering this type of remortgage
Take a look at our articles below or browse all of our mortgage guides.
Last updated: 5 June 2023
Uswitch is not a mortgage intermediary and makes introductions to Mojo Mortgages to provide mortgage solutions. Uswitch and Mojo Mortgages are part of the same group of companies. Uswitch Limited is authorised and regulated by the Financial Conduct Authority (FCA) under firm reference number 312850. You can check this on the Financial Services Register by visiting the FCA website. Uswitch Limited is registered in England and Wales (Company No 03612689) The Cooperage, 5 Copper Row, London SE1 2LH. Mojo Mortgages is a trading style of Life's Great Limited which is registered in England and Wales (06246376). Mojo are authorised and regulated by the Financial Conduct Authority and are on the Financial Services Register (478215) Mojo’s registered office is The Cooperage, 5 Copper Row, London, SE1 2LH, and head office is WeWork No. 1 Spinningfields, Quay Street, Manchester, M3 3JE. To contact Mojo by phone, please call 0333 123 0012.