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What is Remortgaging?

Written by

15th Apr 2020 (Last updated on 19th May 2020) 12 minute read

Remortgaging is the process of switching your existing mortgage to a new deal. This replaces the original mortgage taken out on the home. 

For example, 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.  

Many people remortgage to either replace their existing mortgage with a better deal and lower interest rate, or to borrow money against their property. 

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. How to Remortgage Your Home
  3. When Should I Remortgage?
  4. How Long Does it Take Remortgage?
  5. What Fees Are Involved With Remortgaging?
  6. What Documents Do I Need to Remortgage?
  7. Remortgaging FAQs
  8. Save Money With Compare My Move

Why Remortgage Your Home?

There are a number of reasons why you may want to consider remortgaging. Whether it is to save money, to release equity or because your current deal is coming to an end, below are some of the most common reasons why homeowners remortgage. 

1. Your Current Deal is About to End

Most people will remortgage when the initial deal on their mortgage comes to an end. This is due to the fact that once the deal period is over, the mortgage will revert to the lender’s standard variable rate (SVR) which can be considerably higher. 

For example, 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). At this point, most people will remortgage for a better deal. 

When you remortgage, you can take advantage of a new deal which will almost certainly be lower than the lender's SVR. 

A mortgage is likely to be one of the biggest financial commitments someone will undertake in their lifetime so you want to make sure you are getting the best deal.

2. To Save Money With a Better Deal

Many people will opt to remortgage to save money by opting for a mortgage with a lower interest rate. As we’ve mentioned above, being put on your lender’s SVR could end up costing you far more than if you were to switch to a new deal once your initial offer ends.

You don’t have to stay with the same lender or on the same mortgage as the one you initially took out. Just like you would shop around for the best deals on energy rates or broadband, you can do the same with your mortgage. If you find a better deal, you may want to switch.

Speak to your current lender about your options and do your research on what other lenders are offering. Remortgaging could end up saving you a considerable amount of money in the long term. 

3. Releasing Equity

Another popular reason is to borrow money against their home, perhaps for another large purchase such as home renovations or a wedding. This is called equity release.

Equity is the stake of your property you own outright. This will be your initial deposit and any amount you have paid back to the lender via your remortgage payments. Providing the value of your home has increased since you purchased it, you are able to remortgage and release some of the added value as cash.

4. Paying Off Your Mortgage Earlier

When you remortgage you can ask the lender if you are able to change the length of term on your new mortgage. 

Although extending your term will make your monthly repayments smaller, you will end up paying more interest over the length of the term. 

You’ll pay more each month if the term is shorter, but you’ll pay less interest in the long term and pay the mortgage off in less time. This gives you the option to own your home completely and be debt-free sooner. 

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How to Remortgage Your Home

To begin the process, research some of the mortgage deals available. Have in mind what mortgage deal you currently have and what you would like to achieve from remortgaging. 

You will need to set up a meeting with a mortgage lender. This can either be the lender you currently have a mortgage with or another provider who has a better deal to suit your needs. 

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.

Here are a few ways you can prepare to remortgage your home:

1. Check Your Credit Score

Another way to prepare for remortgaging is to check your credit score before applying. 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 comparison sites or individual lenders sites, but make sure you are looking at those which include 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, to get an idea of the value of the property since you purchased your home. 

If your home has increased in value it will give you a far more favourable loan to value, which is one way lenders decide how much you can borrow and how much interest they charge.

You can do this by organising a valuation yourself or opting for a homebuyers survey with a valuation. A homebuyers survey will also highlight any work required and give you an idea of the overall condition of your home. 

As part of your remortgage application, the lender will instruct their own valuation to be sure the property is adequate security for the mortgage. This will also give the lender an indication of the market value of the property. 

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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.  

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%.

Many homeowners consider remortgaging before their current deal ends to avoid being automatically transferred to the lender’s SVR.

If you want to remortgage before a fixed-rate or mortgage deal ends, you will normally have to pay early repayment charges (ERCs). However, if the benefits of remortgaging outweigh the costs, the early repayment charge may be worthwhile.

It may also be worthwhile remortgaging at a time when interest rates are lower than what you are paying now. If you are able to secure a good deal at the right time, this could save you a considerable amount of money over the length of your mortgage. 

You could also try transferring your mortgage when moving house if remortgaging is not an option for you.

How Long Does it Take Remortgage?

It will take between four and eight weeks to remortgage, but this can be longer if there are any complications. It is also likely to take longer if you switch lenders rather than getting a new deal with your current mortgage lender. 

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 
  • Survey fees from the lender for the valuation of your property
  • Mortgages fees from your new lender (if you switch lenders)

Further costs may be incurred if you are ending your mortgage deal early. These include early repayment charges and exit fees costing £50 to £200. 

If you are planning to hire a mortgage broker this may be another cost you will need to factor in when remortgaging. 

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What Documents Do I Need to Remortgage?

Just like when you first applied for a mortgage, remortgaging will require certain documents and paperwork to prove your identity, income and outgoings and employment. 

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 last three months
  • Payslips for the past three months
  • If you are self-employed you will need your last three years’ tax returns
  • 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.