For most people their mortgage is their single largest monthly expenditure, which is why it is important to review to avoid paying over the odds. To help you understand how remortgaging works, we've put together a range of guides to help you. If you want to see if you can save money on your mortgage, our expert advisers are on hand to help 7 days a week. No need to make an appointment – our award-winning fee free mortgage advice is just a phone call away.
The subject of mortgages can feel complicated enough as it is. Trying to arrange one by yourself whilst juggling all your everyday demands can even feel rather daunting!
We also understand that there may be lots of questions you may have or things you feel you want to know more about.
We are here to help you and are happy to give you expert, fee-free advice at all stages of the journey – whether you’re remortgaging, buying a new home or have a rental property.
And, in the meantime, if you’d rather do a little self-learning, or there’s a question we can answer right here, we’ve also put together a range of mortgage guides for you to read if you have a spare 10 minutes. If there’s something you need to know which we haven’t covered in our guides, then just let us know! We’ll either create a new guide for you or help you direct via email or phone.
How to remortgage
When you remortgage your property, you’re essentially switching from one mortgage to another.
This might be a new deal with your existing lender, or you might decide to move to a new mortgage with an entirely different lender.
There are lots of reasons why you might decide to remortgage. You may, for example, have found a cheaper deal which can help you reduce your monthly outgoings, or want to increase the amount you’re borrowing, perhaps to fund home improvements.
In this guide, we explain how remortgaging works, when to remortgage, how the different types of remortgage deal work, and how much remortgaging is likely to cost you. We’ll talk you through the process step-by-step, so you’ll know exactly what to expect when moving to a new deal.
How to remortgage
When you remortgage your property, you’re essentially switching from one mortgage to another.
This might be a new deal with your existing lender, or you might decide to move to a new mortgage with an entirely different lender.
There are lots of reasons why you might decide to remortgage. You may, for example, have found a cheaper deal which can help you reduce your monthly outgoings, or want to increase the amount you’re borrowing, perhaps to fund home improvements.
In this guide, we explain how remortgaging works, when to remortgage, how the different types of remortgage deal work, and how much remortgaging is likely to cost you. We’ll talk you through the process step-by-step, so you’ll know exactly what to expect when moving to a new deal.
In this guide
In this guide
How does a remortgage work?
The process of remortgaging works by you taking out a new mortgage deal that replaces your existing one.
The first thing you need to do if you’re looking to remortgage is to check that there aren’t any early repayment charges (ERCs) for leaving your existing deal, as if there are you may be better off waiting until it finishes.
If there aren’t any charges, you’ll then need to think about what type of mortgage you want, for example a fixed or tracker deal (more about these later). Seek expert advice if you need help choosing the right remortgage deal for your individual circumstances.
Once you’ve chosen a remortgage deal, you can then submit your application to your new lender. You’ll need to provide them with evidence of your income and outgoings, as well as details of your current mortgage.
The lender will carry out a credit check and arrange for your property to be valued. You’ll need a solicitor who will handle all the legal paperwork and sort out the transfer of funds in order to complete the remortgage.
Why remortgage?
The main reason homeowners choose to remortgage is to make sure they’re always on the most competitive deal possible so that they are not paying more than they need to.
After all, your mortgage payment is likely to be your biggest monthly outgoing, so it makes sense to keep costs to a minimum. Remortgaging can often save you hundreds (if not thousands) of pounds a year, especially if you’re moving from your lender’s standard variable rate (SVR). The SVR is the rate you typically move onto once your current deal finishes and is usually much more expensive than remortgage rates.
Other reasons to remortgage include helping to pay off your mortgage earlier, or to raise capital.
When Should I Remortgage?
A remortgage is when you pay off one mortgage with the proceeds from a new mortgage from a different lender, using the same property as security.
The best time to begin looking for a good deal on your remortgage is roughly 3 to 4 months before your current mortgage deal is due to expire, in the case of fixed interest mortgage rates. This will ensure that you do not end up paying the higher Standard Variable Rate monthly payments. If you are already on a Standard Varable Rate mortgage rate, you can switch to a new remortgage deal at any time.
When Should I NOT Remortgage?
If you are already on a low interest rate deal and there isn’t anything better in the market, then the best course of action would be to stay in your existing deal until something better comes along. However, please remember that you may not be able to access the best deals in the market, but we can help you find a better range of deals across the whole of market, completely free of charge.
Another reason not to remortgage is if your existing Mortgage deal has an Early Repayment Charge/Exit Fee on it. In such cases, it is best to wait until your deal is about to run out, so that you are not out of pocket by paying this fee.
When might remortgaging not be a good idea?
Remortgaging isn’t always a good idea, so if you’re not sure if it’s the right decision for you, seek professional mortgage advice before you go ahead.
Some of the reasons it might not be advisable to remortgage include:
You’ve only got a couple of years to go before your mortgage is paid off
If you’re approaching the end of your mortgage term, you’ll need to weigh up whether the costs of remortgaging might outweigh the benefits. That’s because the smaller your mortgage is, the bigger the impact of any arrangement fees, so you’ll need to do your sums carefully to find out whether it’s worth it.
Your credit score isn’t up to scratch
If you’ve missed debt repayments in the past, this will have had an impact on your credit score, which lenders look at to help them decide whether to offer you a mortgage. This means any mortgage application you make may be refused. However, it’s still worth checking as your existing lender may offer you a better deal than the one you’re currently on.
You’ll pay high early repayment charges
Before remortgaging, check to see whether you’ll have to pay any early repayment charges when you leave your existing mortgage. If these are high, this could wipe out the benefit of switching to a deal with a lower rate.
Your property’s value has fallen
If your property is now worth less than you paid for it, then you may find that you don’t have enough equity in your home to be able to remortgage. If this is the case, you may have to sit tight and wait for prices to go up again before you can remortgage. It’s worth speaking to your existing lender though, as they might still be able to offer you a new deal.
How much could you save by switching to a better deal?
The amount you can save by remortgaging will vary depending on the size of your mortgage, your mortgage term, and how much lower your new rate is compared to your old one.
Savings are likely to be biggest if you’re moving from your lender’s standard variable rate (SVR) to a new deal and could potentially run into hundreds or even thousands of pounds of year.
For example, saving 2% on a £150,000, 25 year repayment mortgage would cut the monthly payments by about £160 a month, or nearly £2,000 over a year.
What happens when you remortgage?
There are several steps in the remortgage process. Once you’ve found a deal you want to move to, you’ll need to complete the remortgage application forms and supply any additional information that the lender might require. This will include things such as payslips and bank statements showing your outgoings.
If your new lender doesn’t provide a legal service, you must appoint a solicitor who will deal with the basic legal work of transferring your mortgage across. Your property will need to be valued by a surveyor and this is usually arranged by your new lender.
On completion day, your new lender will release funds to pay off your mortgage and you will be moved across to your new remortgage deal.
WHAT DOES A MORTGAGE MEAN?
Once you start planning to buy your own home, your search for the perfect mortgage will inevitably follow.
A mortgage is a legally binding contract between you and your lender, where you are borrowing money from the lender to buy a property. The terms and conditions of your mortgages, the interest rate, the term of loan and the mode of repayment are all laid out in this contract.
Repayment Mortgages
In this type of mortgage, you will be paying back both the capital and interest in monthly instalments. By the end of the mortgage term, you will have paid off the entire mortgage (including the capital and interest) and the home belongs to you, which is why a lot of people prefer this type of mortgage.
TRY OUR MORTGAGE CALCULATOR here
Interest-only mortgages
In these mortgages, as their name suggests, you will be paying only the interest, not the capital. So at the end of the mortgage term, you will still owe the entire capital that you borrowed.
This type of mortgage is popular because the monthly payments are lower than repayment mortgages.
What are the different types of mortgage?
There are two main types of mortgage
- Fixed rate mortgages
- Variable rate mortgages, which include
- Tracker mortgages
- Discounted rate mortgages
- Capped rate mortgages
Fixed rate mortgages
Fixed Interest rate
In fixed interest rate mortgages, the lender ‘freezes’ your interest rate for a fixed period of time, usually for 2 or 5 years. A few lenders may offer fixed rate mortgages for 10 years too.
During the fixed interest rate period, you will pay the same interest rate. This has the advantage of keeping your rate the same even if overall rates rise. However, most fixed interest rate mortgages have an exit fee (also known as an Early Repayment Charge), which will charge you a penalty amount if you want to change your mortgage deal before the fixed rate period is over.
If you have to move home before your fixed interest rate comes to an end, there are ‘portable’ mortgages which let you apply your existing mortgage rate to your new home.
The allure of fixed rate mortgage is that, you know exactly how much you will be paying every month, which helps you to budget and does not give you any surprises, ie. Monthly payments going up.
Variable rate mortgages
In variable rate mortgages, your monthly mortgage payments can rise or fall according to the raise and fall of the interest rates
Lenders usually have a Standard Variable Rate (SVR), which is the interested rate charged when a fixed interest rate mortgage deal comes to an end. Standard Variable rate mortgages typically have no Early Repayment Charges (ERCs).
There are 3 different types of variable rate mortgages:
- Tracker mortgages
- Discounted rate mortgages
- Capped rate mortgages
Tracker mortgages
These mortgages track the Bank of England base rate, plus a percentage set by the lender, for a set period of time. When the base rate goes up, your mortgage rate will rise by the same amount, raising your monthly payments. When base rate falls, your rate will go down and so will your monthly mortgage payments.
Lenders usually set a minimum rate below which your interest rate will never drop but there’s usually no limit to how high it can go.
Discount rate mortgages
Discounted mortgages give you a discount on the lender’s Standard Variable Rate (SVR) for an initial period of two to five years. This type of mortgage can be one of the cheapest deals but, as they are linked to the Standard Variable Rate, your monthly mortgage payments will go up and down according to the fluctuation of the interest rates.
Capped rate mortgages
Capped mortgage rates can go up and down as well, but unlike the discounted mortgage rates, there is an upper limit above which the interest rates do not go. This is why this type of mortgage is more popular than the discounted mortgage rates, as it ensures that your monthly mortgage payments will ever rise above a certain amount.
The downsides to the capped rate mortgage are that the interest rates are usually slightly higher than other mortgages and that there is usually an Early Repayment Charge associated with it.
Offset mortgages
An offset mortgage lets you combine your savings account and your mortgage account into one account, so that your savings go towards your mortgage payments. The interest that you earn from your savings go towards paying the interest on your mortgage.
Here is an example: If you have a mortgage of £200,000 and savings of £10,000, your mortgage interest is calculated on £190,000 for that month.
The advantage of this type of mortgage is that clients still have access to their savings and can withdraw money at any time.
Buy to Let mortgages
Buy to Let mortgages are most suitable if you want to buy a property as an investment, ie. To rent out.
The advantage of this type of mortgage is that the monthly repayment amounts are low compared to other types of mortgages. However, you will still owe the entire capital amount at the end of your mortgage term.
What will my Remortgage cost?
There are certain fees to be paid during the course of your remortgage application and these form the cost of your mortgage. Not all fees are applicable in all cases, for example, you might get a remortgage deal where the legal fees do not have to be paid.
The fees that you usually need to pay are the lender’s arrangement fees, legal fees, valuation fees, Stamp Duty and Land Tax (SDLT) and early repayment charges (if applicable). At Ever North Mortgages Limited, we do NOT charge any broker fees, so this will not be added to your costs.
Our expert mortgage advisers will always find the best and cheapest remortgage deals for you.
Using a Remortgage Calculator
The simplest way to calculate your remortgage cost is by using our remortgage calculator, which will give you a pretty accurate idea about your remortgage costs in a matter of seconds.
Just enter the following information into the calculator to get your results:
- We will scour the UK mortgage market and find the perfect mortgage for you.
- We will deal with all the paperwork for your mortgage application.
- Our services are FREE - there are no hidden costs or fees to pay!
TRY OUR MORTGAGE CALCULATOR here
Calculating mortgage payments
Calculating your mortgage cost has never been easier. All you have to do is enter the amount of money you are borrowing, the term in years you are borrowing for and the interest rate into the calculator. The mortgage calculator will do the math and tell you exactly how much it will cost you for your remortgage.
Here is an example: if you want to borrow £200,000 over a 25-year term at an interest mortgage rate of 1.84%, your monthly payments would be £832, provided the interest rates remain the same. The total amount you’ll pay over the term is £249,665, made up of the £200,000 capital you borrowed and £49,665 in interest.
If you reduced your term to 20 years, borrowing the same amount at the same interest rate, your monthly payments would go up to £997. The total amount you’ll repay would be £239,204, including £39,204 in interest.
Don’t forget that it is most likely you will NOT be paying the same interest rate throughout the entire mortgage term. Once your fixed rate with your lender ends, you will revert the lender’s standard variable rate and pay more in monthly instalments.
What Will Be My Mortgage Interest Rate?
Your mortgage interest rate will depend on the type of mortgage deal you are on with your particular lender. Most lenders will give you a deal with a lower interest rate for a fixed period of time. During that period, your interest rate will remain the same. However, once the fixed period ends, you will revert to the lender’s default standard interest rate, which is higher.
At Ever North Mortgages Limited, the remortgage calculator will calculate your mortgage costs assuming that your interest rates will stay the same over the whole period of your mortgage. When your mortgage rate changes, you can calculate the new costs by putting in the new interest rates.
You can see the effect of higher and lower interest rates on your monthly mortgage payments by using our interest rate calculator.
Other Mortgage Costs
Your remortgage costs will comprise of the fees and charges you will need to pay.
The fees that the lender will charge you may include a booking fee and an arrangement fee. The booking fee is a non-refundable fee which lets you reserve your mortgage with the lender. The arrangement fee is the fee the lender charges you to set up the mortgage on your behalf. This fee is charged when your mortgage completes, so if your application is declined, you will not need to pay this fee.
You will also need to pay for the valuation fees for your property.
The other fees you may need to pay are the legal fees for the conveyancing of your property that the solicitors will carry out. In some cases, the lenders may offer a free legals package, in which case you will not need to pay this fee.
You may need to pay an Early Repayment Charge/Exit Fee if you are remortgaging before your fixed mortgage interest period is over.
You may also need to pay Stamp Duty and Land Tax (SDLT) charges.
Am I eligible to remortgage?
To be eligible to remortgage, you’ll need to have at least 5% equity in your home. The more equity you have, the better the remortgage rates you’ll be able to access.
You’ll also need a good credit score and must be able to demonstrate to your new lender that you’ll be able to keep up with your repayments.
Your monthly income will also be a key factor that lenders will look at, along with any debts you might have. If, for example, you have lots of other outstanding loans and credit card debts, they may limit the amount you can borrow.
Compare remortgage deals & start the process online
Ready to start your remortgage? You can compare all the best available remortgage deals via our Online Mortgage Finder tool.
All you need to do is enter your property value, the mortgage term you want, and whether you’re looking for a repayment or interest-only remortgage, and it’ll come up with all the deals that are currently available. You can narrow your selection down by indicating whether you want to go for a fixed or a variable deal, and how long you want your deal to last.
Once you’ve chosen the deal you want, simply enter a few more details and we’ll show you all the remortgage deals you’re likely to qualify for, and how much they’ll cost. Don’t forget, if at any point you want to chat anything through with one of our advisers, you can call us on 0333 888 0238.
