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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:
Affordability
Credit status
Age
Property type
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
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.