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What is Remortgaging?

Adele MacGregor

Written by Reviewed by Emma Lunn

15th Apr 2020 (Last updated on 26th Oct 2022) 10 minute read

Remortgaging is the process of taking out a new mortgage to pay off an existing one on your home. If you remortgage with your existing lender, this is known as a "policy transfer". When you remortgage with a different lender, you will need a conveyancer to complete the process.

On average there are 39,000 homeowner remortgages every month in the UK. There are several reasons people remortgage their homes. Many people will remortgage when the term of their current mortgage comes to an end. People also remortgage to get a better interest rate, to release equity or pay off their mortgage quicker

Below we review the process, costs and what you need to prepare when it comes to remortgaging your home.

This article will cover the following:
  1. How Does Remortgaging Work?
  2. What Fees Are Involved?
  3. How Long Does it Take?
  4. Why Remortgage Your Home?
  5. When Should I Remortgage?
  6. Should I Remortgage With the Same Lender?
  7. Do I Need a Solicitor?
  8. How To Prepare To Remortgage Your Home
  9. What Documents Do I Need?
  10. FAQs
  11. Learn More About Mortgages

How Does Remortgaging Work?

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 remaining amount.

This can be done with your current lender - via policy transfer - or you can remortgage with a different lender. Be aware that if you remortgage before your term ends you could be subject to fees. You will also need to factor in the cost of a conveyancer if you remortgage with a different lender.

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What Fees Are Involved?

The average cost of remortgaging your property is £3,553. This does not include the percentage of the property value that may be due when paying an early repayment charge.

The cost of remortgaging will depend on a few factors. If you move to a different lender, it is likely to cost more as you will need a conveyancer. Using a mortgage broker will also add to the cost.

Below we've broken down the average costs according to our data:

FeeCost (£)
Conveyancing Fees£1,078
Leaving Current Deal£175 plus 1-5% of property value
New Deal Cost
£2,150
Total
£3,403 (plus 1-5% of property value)

    How Long Does it Take?

    It normally takes between four and eight weeks to remortgage, but it can be longer if there are any delays. If you stay with the same lender, a product transfer may be quicker than a remortgage.

    Using a different lender may take longer, especially as you will need to hire a conveyancer. To ensure a swift process, return any required documents to your conveyancer as soon as possible. Be prepared with anything the lender needs too.

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    Why Remortgage Your 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. This is 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.

    2. To Change the Length of Your Mortgage Term

    If your circumstances have changed, for example, a pay rise, you might be able to afford to pay more each month. You could do this by choosing a shorter term (with higher monthly payments). This would mean paying your mortgage off quicker.

    You can also remortgage to repay your mortgage over a longer term. This would mean lower monthly payments. However, you’ll pay more interest over the length of your mortgage term, costing you more in the long run.

    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. Remortgaging before the end of a fixed term can result in fees. But, a better deal could save you money, so make sure you do your research and weigh up all factors.

    At the End of Your Fixed-Rate Term

    For those on a fixed-rate mortgage, your monthly payments will be fixed for a set amount of time. 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 avoid charges, you can schedule a remortgage to complete after your fixed rate ends.

    When Interest Rates Are Low

    Some people opt to remortgage when interest rates are low. This can mean lower monthly repayments and a better mortgage deal. However, you may incur charges if you remortgage before the end of your current mortgage term.

    As of late, the Bank of England base rate has been on the rise, so this is something to be aware of when remortgaging. The base rate impacts interest rates on mortgages, which are currently rising. This has especially been the case after the Government mini-Budget. With this in mind, take into consideration your circumstances and what you can afford.

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    Should I Remortgage With the Same Lender?

    You are not obliged to remortgage with your current lender. However, it can be worth seeing what your current mortgage lender would offer. If you stay with your lender, this will be a “product transfer” rather than a remortgage. It will likely be quicker to stay with your current lender. You also won't need a conveyancer for a policy transfer.

    That said, it may be worth researching other lenders and mortgage products. You can do this yourself or enlist the help of a mortgage broker. They may have access to exclusive mortgage deals and can advise you on the lenders and products which suit you and your circumstances.

    Do I Need a Solicitor?

    If you are staying with the same lender, the process of "product transfer" does not need a conveyancer.

    However, if you are switching to a different lender, you will need a remortgage solicitor. They will handle the legal details and administration of your new mortgage offer. Lenders may suggest their own solicitors, but it is worth checking what fees apply before proceeding. Some lenders may include this 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.

    Be aware that if you are adding someone or removing someone from the mortgage, you will need to appoint your own solicitor .

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    How To Prepare To Remortgage Your Home

    Below we’ve listed a few things you can do to prepare for your product transfer or 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.

    This is especially if there have been changes to your circumstances or spending. If you are opting for a different deal or a different lender, the requirements for a mortgage may differ. 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 best mortgages available to you. 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 many advantages to using a mortgage broker. 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.

    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 arrange for a valuation to be sure the property is adequate security for the loan.

    What Documents Do I Need?

    You will need to provide documents to prove your identity, income, outgoings and employment. This is 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

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    FAQs

    Below we’ve answered the most frequently asked questions relating to 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. This allows 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. This is 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. In this case, 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 home you own outright) as security against a loan. This would mean you would have two mortgages on the home. Remortgaging is replacing your mortgage with a different mortgage.

    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, lenders may want to know details like 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 to send any surplus funds directly to you on the day of completion.

    Learn More About Mortgages

    This article is part of our mortgages and deposits guide. Next we look more at the remortgaging process and whether you need a solicitor. For more information see: Do I need a Solicitor For a Remortgage?

    Disclaimer

    All data, research, facts, and figures have been taken from reputable sources and government data that was accurate at the time of writing. Any information featured in this guide should not be relied on or regarded as an authoritative statement of law. While we aim to ensure that all information is accurate, we make no representations about the suitability or reliability with respect to the website as well as any products, information, or services that are featured on the website. Mortgage criteria, policies, and interest rates change regularly and vary depending on the lender and type of mortgage you have. You should speak directly to your mortgage lender for clarification. It should be noted that your home may be repossessed if you cannot keep up with your mortgage payments.
    Adele MacGregor

    Having worked at Compare My Move for over four years, Adele covers topics such as the conveyancing process across the UK, property surveys, home moves and storage.

    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.