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What is Remortgaging?

Adele MacGregor

Written by Reviewed by Emma Lunn

15th Apr 2020 (Last updated on 25th Nov 2020) 13 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 including getting a better interest rate, to release equity from their home or to pay off their mortgage quicker.

Compare My Move work with property and financial experts to provide you with everything you need to know about remortgaging. We will review how and when you should plan to remortgage, how much it costs and what you need to prepare when it comes to remortgaging your home.

This article will cover the following:
  1. COVID-19 and Remortgaging
  2. What Does it Mean to Remortgage?
  3. Why Remortgage Your Home?
  4. When Should I Remortgage?
  5. Should I Remortgage With the Same Lender?
  6. Do I Need a Solicitor to Remortgage?
  7. How To Prepare To Remortgage Your Home
  8. What Documents Do I Need to Remortgage?
  9. How Long Does it Take Remortgage?
  10. What Fees Are Involved With Remortgaging?
  11. Remortgaging FAQs
  12. Save Money With Compare My Move

COVID-19 and Remortgaging

With the global spread of Covid-19 and the lockdown across the country which followed, the UK is officially in recession. As a result, the housing market has taken an unexpected hit as a result, impacting the industry, sellers and buyers alike. 

Lenders may have changed or reduced their mortgage products in light of the economic downturn. It is advisable to check with your current mortgage provider, in addition to a number of others, to see what is available and best suits your circumstances at this time.

What Does it Mean to Remortgage?

Remortgaging is when a new mortgage is taken out on a property to pay off an existing mortgage on the same 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. 

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.

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Why Remortgage Your Home?

Remortgaging your house can potentially save you money, but there are other reasons why people choose to remortgage their home. Below we’ve listed the key reasons why people opt for remortgaging and why they would benefit from doing so:

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, depending on the lender’s SVR. Keep in mind that you may incur charges if you decide to switch before your fixed rate ends. 

2. To Change the Length of Your Mortgage Term

When you remortgage you don’t necessarily have to remortgage for the same mortgage term - the number of years to pay off the mortgage- as before.

If your financial circumstances have changed, for example, if 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 (with higher monthly payments) 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 over the length of your mortgage term, costing you a lot more than if you had a shorter-term mortgage arrangement.

3. If Your Circumstances Change 

If your circumstances change drastically, it may be worth considering remortgaging your home if it aids you financially or suits a change in lifestyle. For example, if you own a house with your partner and you split up, one of you may want to buy the other out. This will involve remortgaging so that the mortgage is held by just one person. 

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. Keep in mind the changes that may have been made to mortgage products in light of the impact of COVID-19.

At the End of Your Fixed-Rate Term

For those on a fixed-rate mortgage, the interest rate on your mortgage -  and therefore your monthly payments -  will be fixed for a set amount of time. This is normally between two to five years. When the fixed-rate period ends, most people will be moved to their lender’s standard variable rate (SVR). Usually, this will be a higher rate and your monthly payments will become more expensive. At this point, most people will remortgage for a better deal.

If you want to remortgage or move house before the end of your fixed-rate term, you will normally have to pay early repayment charges (ERCs). To make sure you avoid charges, you can schedule a remortgage to complete after a fixed rate ends and before you start paying your lender’s SVR.

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, many mortgage products have low-interest rates at this time, so it may be worth considering a new mortgage deal. 

However, it is essential you take into consideration your current circumstances, especially with regard to employment and financial commitments, before taking the plunge. It is also worth weighing up the benefits of savings against the possible charges you may incur for switching, to ensure you don’t end up worse off. 

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Should I Remortgage With the Same Lender?

You are not obliged to remortgage with the lender with whom you have your current mortgage. However, it can be worth seeing what your current mortgage lender would offer. If your lender switches you to a different product, this will technically be a “product transfer” rather than a remortgage. This means changing the mortgage product you have with your current lender. It may certainly be quicker to do this, but you may get a better deal elsewhere.

Before going ahead with your current mortgage lender, do some research and see if there are other lenders and mortgage products with lower interest rates which are better suited to your needs. A mortgage broker will be able to assist you with this, especially if your circumstances have changed or you have been impacted by the economical effects of COVID-19.

Do I Need a Solicitor to Remortgage?

If you are staying with the same provider and moving to a new rate or deal, this will be a “product transfer” as stated above, which will not require the services of a conveyancer. 

However, if you are switching to a different lender, you will require a conveyancer to handle the legal details and administration of your new mortgage offer. Lenders may suggest or offer the services of their own solicitors, but it is worth checking what fees apply before proceeding. Some lenders may include this free of charge as part of the remortgaging deal but this may not be the case with all lenders. 

You are not obliged to use the conveyancer they suggest and are able to research your own should you wish. Again, this will come with an additional cost. If you are either adding someone or removing someone from the mortgage, you will need to appoint your own solicitor for this process.

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How To Prepare To Remortgage Your Home

To begin the process, research the mortgage deals available on the market. You can do this yourself however a mortgage broker will 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.

When preparing to apply, it is worth noting that the affordability checks which are done during a mortgage interview also apply to the remortgaging process. Much in the way you will have prepared for your mortgage interview when you first got a mortgage, ensure you have taken the necessary steps to start the remortgaging process. Below we’ve listed a few things you can do to prepare:

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, especially if there have been changes to your circumstances or spending. 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.

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 (and/or driving license)
  • Proof of address, such as a utility bill

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 or delays. If you stick with the same lender, doing a product transfer with your current mortgage lender may be quicker than remortgaging. 

If you have switched to a different mortgage provider, ensure there is minimal delay in the process. Return any required documents to your conveyancer as soon as possible, in addition to the paperwork required by your lender. This will speed up the process and keep the process on track.

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. Below we’ve listed 7 expenses you may encounter when you remortgage your property. These include:

  1. Application fees charged by the lender (these will vary lender to lender)
  2. 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
  3. Conveyancing fees if you are remortgaging with a new lender 
  4. A fee for the valuation of your property (charged by the lender)
  5. Mortgages fees from your new lender if you decide to switch lenders
  6. Early repayment charges (ERCs) are likely to apply if you are exiting a fixed rate early.
  7. Mortgage broker fees if you opt to use one

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Remortgaging FAQs

As remortgaging has a variety of factors to consider, many depending on individual circumstances, below we’ve answered some of the most frequently asked questions relating to the requirements and process of remortgaging:

1. 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. 

2. 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. 

3. 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.

4. 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. 

5. 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.

6. 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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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.