Remortgaging is a key part of managing your mortgage over time. Whether your existing product term is coming to a natural end or your circumstances have changed, remortgaging gives you the opportunity to review your current deal and potentially secure something more competitive. However, with a wide range of mortgage options available on the market, understanding what may be right for you is not always simple.
In this guide, we explain how remortgaging works, when to start considering your options, what you can expect throughout the process, and why professional guidance is essential to help ensure you select a product that is right for you and your loved ones.
What is remortgaging?
Remortgaging is the process of taking out a new mortgage with a new lender to replace your existing mortgage deal, ideally before your current deal ends.
This process can help you save money by preventing you from being moved onto your lenders standard variable rate (SVR), which is typically higher than fixed or tracker deals and could lead to increased monthly repayments.
Many homeowners tend to remortgage when the term of their current deal is coming to an end, but lenders will allow you to remortgage early. However, this will be subject to lender criteria, and you may be subject to Early Repayment Charges (ERCs) for exiting your current deal before the agreed term end date.
How does remortgaging work?
The remortgaging process is often more straightforward than many expect. While it can vary depending on your circumstances, the process will typically involve the following steps:
1. Review your current mortgage.
Start by reviewing your current deal, including your interest rate, when your product ends, and whether any ERCs will apply if you would like to remortgage before your term ends.
If you are thinking of exiting your current deal early, it is important to consider whether the overall savings from your new deal outweigh the cost of an ERC.
2. Start exploring your options early.
Many lenders allow you to secure a new deal up to six months in advance of your current deal ending. Reviewing your options in advance can help you avoid being moved onto your lenders SVR and determine what deals are available to you, both with your current lender and across the wider market.
Cooper Associates Mortgages offer tailored, whole-of-market advice, meaning we can help you assess the full range of products available to you and help ensure your new deal is appropriate for your personal circumstances and wider financial objectives.
3. Apply for your new mortgage.
Once you have chosen a deal, the next step is to submit an application to the lender. This process is effectively the same as your original mortgage application and will usually involve providing details of your income, outgoings, current mortgage, and supporting documents so the lender can assess your eligibility for the new deal.
4. Lender checks and valuation.
The lender will then carry out affordability assessments and a credit check, much like they did when you first took out your mortgage. This helps the lender confirm that the new deal is sustainable for you and, in some cases, they may also arrange a property valuation to check its current market value.
If you choose to proceed with a product transfer, provided you are not releasing equity, affordability, credit checks and valuations will typically not be conducted.
5. Offer issued.
If your application is successful, the lender will issue a formal mortgage offer confirming the terms of your new deal. If you are switching lenders, a solicitor or conveyancer will handle the legal elements of the process. However, this service may be included as part of the deal with the new lender.
Conversely, a product transfer will not require a conveyancer or solicitor as this process tends to be more straightforward as it purely involves transferring your current mortgage product onto a new deal with your existing lender.
6. Your new deal begins.
Once everything has been approved, your new mortgage will replace your existing one.
If you secure a new deal with your existing lender prior to your existing term ending, your new mortgage will start on at the end of your current deal, or earlier with some lenders if your new rate is lower than your current.
If you choose to remortgage to a new lender, the new mortgage will start on the date that your current mortgage term ends, as starting earlier than this would likely incur Early Repayment Charges.
What are the potential benefits of remortgaging?
Remortgaging is an essential part of maintaining a mortgage and avoiding your lender’s potentially costly SVR. However, there are several important product and timing considerations to be aware of when remortgaging, which could offer additional benefits.
Access to more competitive rates and reduced monthly repayments
If you are currently on a variable or tracker mortgage, depending on the mortgage market, you may be able to switch to a new product that offers significant savings and, if fixed, security from a fixed rate.
A lower rate can reduce your monthly repayments and the overall interest paid over the life of the mortgage, potentially leading to significant long-term savings.
The option to release equity
Releasing equity involves borrowing more than your current outstanding mortgage balance when moving to a new deal. The additional borrowing is secured against your property and will typically be released to you as a lump sum.
This can be a beneficial option as it allows you to access funds tied up in your property without having to sell or downsize your property. Additionally, the funds can be used for a variety of purposes, such as supporting loved ones financially, home improvements, a holiday or other larger expenses.
However, releasing equity is a long-term financial commitment that should be considered alongside your wider financial planning to ensure this option is appropriate for your personal circumstances.
Greater flexibility and more favourable terms
Remortgaging gives you the flexibility to select a different product (e.g. fixed-rate product for stability) or secure more favourable terms (e.g. shorten the mortgage term to pay off the outstanding balance sooner or extend the term to lower your monthly repayments).
This flexibility can help you align your mortgage with changes in your financial situation, such as income fluctuations or family needs.
Making the most of your property’s value
If your property has increased in value, this means your equity in the property is likely to have increased, leading to a lower Loan-to-Value (LTV).
This means you may be able to access a wider range of products with more competitive rates and terms as these products are reserved for lower LTVS (e.g. 60%) as they pose less risk to the lender due to your loan being smaller.
What are the costs and considerations of remortgaging?
Although remortgaging can be a financially beneficial decision, there are still costs and considerations to be aware of before proceeding with this process:
Early repayment charges (ERCs)
An ERC is a charge you may incur if you choose to make overpayments that exceed the lenders annual allowance (typically 10% of your outstanding balance each year), choose to remortgage or repay your mortgage before your current deal comes to an end or sell the property.
ERCs are often calculated as a percentage of your outstanding mortgage balance, typically ranging between 1% and 5%. They can taper over time, although some will remain at the same rate for the duration of the products term.
Product fees
Remortgaging involves taking out a new mortgage product, which may come with arrangement fees and booking fees. These fees are charged by the lender and cover the cost of setting up your new mortgage but provide a lower rate than opting for a product without.
Legal and valuation costs
Remortgaging often requires a property valuation to confirm the current market value of your property and legal fees to cover the cost of securing your mortgage.
These fees will vary depending on the complexity of the product and the lenders policies. Most remortgages provide both for free, subject to standard legals.
Affordability checks
If you remortgage, the lender will typically conduct fresh credit checks and affordability assessments to confirm that you can still comfortably afford to make repayments on the new mortgage.
However, a product transfer does not usually involve these checks, making it a popular option amongst homeowners who may have experienced changes in their financial circumstances since they first secured their mortgage.
What remortgaging mistakes should I be aware of?
Being aware of the following common mistakes will help ensure you can approach the remortgaging process with confidence:
| The common mistake | What to do instead |
| Automatically accepting your current lender’s offer: While staying with your existing lender can be simpler, it may not always offer the most competitive or suitable option. | Take the time to compare what products are available across the wider market. This will enable you to make a more informed decision. |
| Leaving it too late to start looking: Waiting until your current deal has ended can mean you are automatically moved on to your lenders SVR. | We typically advise to start considering your options 3 to 6 months prior to the end of your current deal. This gives you time to lock in a more competitive deal and avoid unnecessary costs. |
| Not reviewing your wider financial situation: Remortgaging is an opportunity to reassess your mortgage in the context of your current and future circumstances (e.g. you will be on maternity leave at the time of remortgaging). | When looking at a new mortgage product it is important to consider if switching to a different product may be more appropriate for your future plans. For example, if you are planning to grow your family soon, a 5-year fixed may be a suitable option for the stability they offer. |
| Focusing only on the interest rate: Although a lower interest rate can be appealing, it does not always mean the overall deal is the most cost-effective. | When determining which mortgage product may be right for you, ensure you look at the full picture including any associated exit fees, overpayment charges, incentives, and the overall cost over the products term. |
Taking the time to explore your options fully and understand what is available can make a noticeable difference when it comes to remortgaging, helping you secure a deal that works for you both now and in the future.
Remortgaging FAQs
Do I need a deposit to remortgage?
No, you do not need a deposit when remortgaging if you are staying in the same property and not moving. The most significant factor is how much equity you have in your property, as increased equity will lead to a lower LTV and potentially, better rates.
Can I remortgage if my credit score has decreased?
Although there is no fixed score required to get a mortgage, it is important to be aware that a lower score can lead to more stringent conditions, less favourable offers and can make approval more challenging as lenders prefer to see evidence of responsible borrowing.
How long does remortgaging take?
The process can vary, but it generally takes a few months from application to completion.
Can I remortgage early?
Yes, you are able to remortgage before your existing products term ends. However, you may be subject to ERCs.
Will I need a solicitor?
If you are remortgaging with a new lender or releasing equity from your property, a solicitor will be required to ensure everything is legally accurate and correctly processed.
However, if you choose to proceed with a product transfer, you will not need a solicitor.
How can Cooper Associates Mortgages help?
While the prospect of remortgaging may feel daunting, seeking advice from a mortgage adviser will help ensure the process runs smoothly and that any decisions you make are informed and aligned with your personal circumstances.
Our expert advisers provide holistic, fee-free advice and will help ensure you can approach your remortgage with confidence and clarity.
To book a no-obligation consultation get in touch and start preparing for your remortgage today.
