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What is Remortgaging?

Written by Reviewed by Emma Lunn

15th Apr 2020 (Last updated on 19th Jun 2020) 11 minute read

Remortgaging is the process of taking out a new mortgage to pay off an existing one on your home.

There are several key reasons people remortgage:

  • To get a better interest rate and therefore reduce monthly payments
  • To release equity from their home
  • To pay off their mortgage quicker

If your house is worth £300,000 and you have paid off £100,000 then you will have an outstanding mortgage of £200,000. Your new mortgage will be used to pay off this amount and you will begin repayments on this.  

Seeing a notable increase in popularity, around a third of all home loans made in the UK are remortgages. Between July 2018 to June 2019 there were 469,000 homeowner remortgages, worth more than £84 billion. On average there are 39,000 homeowner remortgages every month in the UK.

In this guide, Compare My Move will look at everything you need to know about remortgaging. We will review how and when you should plan to remortgage and what you need to prepare. 

This article will cover the following:
  1. Why Remortgage Your Home?
  2. Remortgaging Your Home
  3. How To Prepare To Remortgage Your Home
  4. Understand Why Loan-to-value Matters
  5. When Should I Remortgage?
  6. How Long Does it Take Remortgage?
  7. What Fees Are Involved With Remortgaging?
  8. What Documents Do I Need to Remortgage?
  9. Remortgaging FAQs
  10. Save Money With Compare My Move

Why Remortgage Your Home?

There are a number of reasons why you may want to consider remortgaging. Here are the key reasons:

1. Your Current Deal is About to End

If you have a fixed rate mortgage, the interest rate on your mortgage will be fixed for a set amount of time (normally two, three or five years).

When the fixed rate ends, you’ll normally be moved to your lender’s standard variable rate (SVR). The SVR will normally be higher than the fixed rate you were paying – so your monthly payments will go up.

Remortgaging to another fixed rate (or a different type of mortgage) will usually save you money.

2. Releasing Equity

If the value of your home has increased, you might remortgage to release equity. Your home might have increased in value because:

  •  House prices have risen in your area
  •  You’ve paid off some of your mortgage
  •  You’ve made improvements to your home which boosts its value

For example, say you bought a property for £200,000 and put down a 10% (£20,000) deposit and borrowed £180,000 as a mortgage on a two-year fixed rate (so at 90% LTV). At the end of the two years your property might be worth £250,000.

You could take out a £200,000 mortgage on the property, pay off the £180,000 mortgage and have £20,000 in cash. Your LTV would be 80% (£200,000 is 80% of £250,000).

3. To Change the Length of Your Mortgage Term

When you remortgage you don’t necessarily have to remortgage for the same mortgage term as before.

If your financial circumstances have changed – for example, you’ve had a pay rise – you might be able to afford to pay more each month and pay off your mortgage quicker. You could do this by choosing a shorter term when you remortgage.

You can also remortgage to repay your mortgage over a longer term. This will mean lower monthly payments. However, you’ll pay more interest overall.

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Remortgaging Your Home

To begin the process, research the mortgage deals available on the market. Are they cheaper than what you are paying now? Are there decent products at your LTV?

It’s best to discuss what you want to do with a mortgage broker. They’ll be able to give you advice about mortgage deals from different lenders. If they are a whole-of-market broker, they will have access to mortgages from the whole mortgage market.

It can also be worth seeing what your current mortgage lender would offer. If it switches you to a different product, this will technically be a “product transfer” rather than a remortgage.

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How To Prepare To Remortgage Your Home

The affordability checks which are done during a mortgage interview also apply to remortgage. So just as you will have prepared for your mortgage interview when you first got a mortgage, ensure you are prepared to remortgage.

1. Check Your Credit Score

Although your credit score may have been good enough to secure your first mortgage, it is worth checking if there have been any changes since.

Also, if you are opting for a different deal or different lender, the requirements for a mortgage may differ and you may want to check what credit score you need for your new mortgage

2. Do Your Research

There are many different types of mortgages available, so benchmark the cheapest mortgages available to you and your circumstances. 

This can be done via mortgage comparison sites or individual lenders' sites. You should look at direct-only deals and not just the deals available to mortgage brokers.

3. Ask a Professional

There are a number of advantages to using a mortgage broker in this instance as they will have better access to the market and various deals. They can save you money, time and legwork when it comes to researching and preparing your application. It is also possible that they will have access to deals that would not be available to you and know which lender is best for your circumstances. 

4. Get a Valuation

You may want to find out how much your home is worth before you decide to remortgage. Its value may have changed since you purchased the property.

The cheapest way to do this is to ask an estate agent to value your home. Most estate agents will give a “no obligation” quote.

As part of your remortgage application, the lender will instruct its own valuation to be sure the property is adequate security for the mortgage.

Understand Why Loan-to-value Matters

Your loan-to-value (LTV) is how much of the property’s value you borrow as a mortgage. 

For example, if you bought a property for £200,000 and put down a 10% (£20,000) deposit and borrowed £180,000 as a mortgage, your LTV would be 90% (as £180,000 is 90% of £200,000).

The lower your LTV, and the bigger your deposit, the more mortgage deals you’ll have access to and the cheaper they will be. Each mortgage will advertise a “maximum LTV”.

When Should I Remortgage?

Knowing the right time to remortgage can be vital for getting the best deal and saving money. Switching before the end of a fixed-term will cost you money, but a better deal will save you money, so make sure you do your research and weigh up all factors.  

When a fixed rate ends

If you want to remortgage during a fixed rate, you’ll have to pay early repayment charges (ERCs). These can be very expensive and are likely to be more than the money you’d save by remortgaging. Most EPCs end when a fixed rate ends.

You can schedule a remortgage to complete after a fixed rate ends and before you start paying your lender’s SVR.

Anytime when you’re on a SVR

If you are paying your lender’s SVR you can normally remortgage at any time without paying ERCs.

When interest rates are low

The Bank of England base rate is currently at an all-time low of 0.1% due to the economic fallout from Covid-19. As a result, mortgages are at low rates too.

When your circumstances change If you own a house with your partner and split up, one of you may want to buy the other out. This will involve remortgaging so the mortgage is held by just one person

At the time of writing, lenders are reporting a "remortgage rush" as a result of the COVID-19 outbreak. This is largely due to the Bank of England cutting its base rates to an all-time low, currently sitting at 0.1%.

How Long Does it Take Remortgage?

It normally takes between four and eight weeks to remortgage, but it can be longer if there are any complications.

Doing a product transfer with your current mortgage lender may be quicker than remortgaging. 

Returning your completed documents to your conveyancer as soon as possible, in addition to the paperwork required by your lender, will speed up the process.

What Fees Are Involved With Remortgaging?

There may be fees attached to your new mortgage deal which you will need to weigh up against the savings you’ll be making on the lower interest fees and better mortgage deals. 

These could include:

  • Application fees charged by the lender (these will vary lender to lender)
  • Deeds release fee - this is to pay your current lender to forward on your title deeds to your solicitor. This ranges from £0-300 but not all lenders charge it
  • Conveyancing fees - solicitors fees if you are remortgaging with a new lender 
  • Valuation fees from the lender for the valuation of your property
  • Mortgages fees from your new lender (if you switch lenders)
  • Early repayment charges (ERCs) are likely to apply if you are exiting a fixed rate early.
  • Mortgage broker fees.

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What Documents Do I Need to Remortgage?

The remortgage process will require certain documents and paperwork to prove your identity, income and outgoings and employment - similar to when you first took out a mortgage. 

Under Money Laundering Regulations, lenders are required to verify your identity to guard against money laundering and fraud. 

Below we have listed the key documents you will need for remortgaging:

  • Bank statements for the past three months
  • Payslips for the past three months
  • If you are self-employed you will need your accounts and tax returns for the past one to three years (depending on the lender)
  • Proof of any bonuses and/or commission
  • Your latest P60
  • ID document, normally a passport
  • Proof of address (for example, a utility bill)

Remortgaging FAQs

We’ve answered some of the most frequently asked questions relating to the requirements and process of remortgaging.

Do I Need a Deposit to Remortgage?

No. You will be able to use the equity you have in your home instead of a deposit. However, you can add money to the equity in your home so you can take out a smaller mortgage, allowing you to pay your mortgage off quicker with lower monthly repayments. 

Is It Better to Remortgage with the Same Lender?

It may certainly be quicker to remortgage with the same lender, but you may get a better deal elsewhere. Before going ahead with your current mortgage lender, do some research and see if there are mortgages with lower interest rates which are better suited to your needs. A mortgage broker will be able to assist you with this.

Can I Remortgage with Negative Equity?

Negative equity happens when you owe more on your mortgage than your home is actually worth, normally caused by falling property prices. Unless you have savings that can repay the difference between the value of your home and your mortgage, this can make it difficult to remortgage. 

Very few lenders will offer you a mortgage if you are in negative equity so it may be worth enlisting the help of a mortgage broker who will be able to advise you on the lenders that may be willing to consider your application. 

What is the Difference Between a Remortgage and a Second Charge Mortgage?

A second charge mortgage allows you to use any equity (the percentage of the property owned outright by you) you have in your home as security against an additional loan. This would mean you would have two mortgages on the home. Remortgaging is replacing your mortgage with a different mortgage, still leaving just one mortgage on the house.

Can I Remortgage a Buy to Let?

Yes, it is possible to remortgage your Buy to Let property. A Buy to Let mortgage works in a similar way to a traditional remortgage on a residential property. 

However, there may be a few anomalies among lenders who will take into account other factors if you are remortgaged your buy to let. These include the monthly rental income, your age, the type of property and your experience as a landlord. 

Can I Remortgage to Pay Off Debt?

Although this is possible, it is worth taking careful consideration before doing so. As we mentioned above, you are able to remortgage your property in order to release equity. However, you could be putting your home at risk if you are using one debt to pay off another.

What Are Surplus Funds When I Remortgage? 

Surplus funds are monies due to you following completion of your remortgage. This occurs when you borrow more money from your new lender than you need to pay off your existing lender. Your conveyancing solicitor will arrange with you to send any surplus funds directly to you on the day of completion.

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Save Money With Compare My Move

Being prepared for a remortgage, your first mortgage, selling your home or a house move is the best way to stay organised. You can also stay organised and save time and money by planning your conveyancing, surveying and home removals with Compare My Move. 

Our easy-to-use forms can help you compare quotes in your local area and connect you with verified and experienced professionals today.

Adele MacGregor

Having written for PerformanceIN, WalesOnline, Grazia Magazine and The Olive Press, Adele now writes advice articles for home movers, first-time buyers and house sellers alike.

Emma Lunn

Reviewed by Emma Lunn

Freelance Personal Finance Journalist,

Emma Lunn is an award-winning journalist who specialises in personal finance, consumer issues and property.