What is a remortgage? It's when you change your mortgage deal, either by switching to a different lender, or staying with your current lender but getting a different rate from them.
The idea behind remortgaging is simple. Most people do it to either:
- Reduce their monthly mortgage payments, or
- Unlock the cash tied up in their property by borrowing more money against it (also known as “releasing equity”).
You might even be able to do both. Really, it’s just the same as switching your energy, mobile, or broadband provider – if you can get a better rate, you stand to save more. And when it comes to your mortgage, those savings can be significant.
For example, homeowners on a standard variable rate mortgage (SVR, the rate determined by your lender) can spend around £3,500 a year more than those who remortgage to a new fixed rate deal.
So, how does remortgaging work?
The actual process of remortgaging is pretty straightforward.
Finding and applying for a new mortgage deal can be quick and easy – but whether you stay with your current lender or switch to a different one will often determine how long your application takes.
Searching for a new mortgage lender can add a few weeks (or sometimes months) to your timeline. That’s why we always recommend starting the remortgage process around 6 months before your fixed rate deal ends.
Here’s how it works for both options:
Remortgaging with your existing lender
Moving from one mortgage deal to another with the same lender (also known as a “product transfer”) is usually the easier of the two options.
Your current lender knows everything they need to know about you and your property, so sticking with them won’t typically involve any additional legal work, surveys, or fees.
Instead, on your new deal’s start date, your lender simply switches you over, and you start paying your new (hopefully cheaper) monthly fee.
Remortgaging with a new lender
Remortgaging with a different lender will bring those first-time mortgage memories flooding back. Like last time, you’ll need to gather together your up-to-date personal and financial info: proof of income, bank statements, the lot. Here’s a quick refresher of everything you need for a mortgage application.
Armed with this info, your new lender will check your credit history to make sure they’re happy lending to you. Then they’ll arrange a property valuation to check your home is worth what you’re remortgaging it for.
Note: You’ll most likely need a conveyancing solicitor to handle the paperwork if you’re switching to a new lender. But lots of remortgage deals come pre-packed with a free valuation and legal work – using a broker (like Habito!) can be useful, because we look at all the costs of remortgaging combined, including things like free legal work, to work out the best deal for you.
Once you’ve signed on the dotted line, your new mortgage provider will pay off your old mortgage, and you’ll start making your new monthly repayments.
Remortgaging with a new lender can be a little more involved than sticking with your current lender, with the whole process usually taking around 4-8 weeks usually (with the current rush due to the government’s stamp duty relief, which ends 1 October, timelines could be a little longer – up to 3-6 months). But as long as you’re saving money, all that extra paperwork will be worth it in the end.
If you’re not sure whether to stay put or move to a new lender, a broker (like Habito) can help you find the best remortgage deal for your situation.
Why should I remortgage?
Lots of people remortgage to save money, but that’s not the only motivation for switching to a new mortgage deal. Here are three more reasons why you might want to remortgage:
- You want to change to a different type of mortgage. Maybe you have a tracker mortgage and want to switch to a fixed rate, or you’re on a repayment mortgage but want to switch to an interest-only mortgage. Remortgaging lets you change your mind about what kind of mortgage you have, and even some of the basics – like making your mortgage term longer or shorter.
- You want to overpay your mortgage. Some mortgage deals are more flexible than others, allowing you to overpay (that is, make additional payments over and above your monthly mortgage payment) without being charged any penalties.
- You want to unlock equity in your property. If you’ve got your eye on some home improvements, like a fancy new kitchen or a loft conversion – or you want to help a kid or grandkid onto the property ladder – you can access the cash tied up in your property by remortgaging. This is where you benefit from the increased value of your home, borrowing more of that higher value and pocketing the difference. Read more about releasing equity in your property here.
How much can I remortgage my house for?
Remortgaging to borrow more money? The amount you can borrow will depend on a few factors, like your credit score, how much you earn, and how much money you have after paying your regular financial commitments.
Lenders will also look at your LTV (loan-to-value) ratio – the size of your mortgage as a percentage of the current value of your property. For example, if your mortgage balance is £150,000 and your home is valued at £250,000, your current LTV ratio would be 60%.
LTV calculation: 150,000 / 250,000 = 0.6 * 100 = 60%
The lower your LTV, the more likely you’ll be able to borrow more. To get an idea of how much you can remortgage your home for, check out our handy remortgage calculator.
Can I get a buy-to-let remortgage?
Definitely! Any property can be remortgaged. For a buy-to-let, your lender will want to make sure you’ve got enough equity in your property, and that the rent you’re planning to charge your tenant is higher than your monthly mortgage repayments.
Here’s more about remortgaging your buy-to-let.
Should I remortgage?
There are a few scenarios where remortgaging might not make sense.
That said, if your credit score is healthy, and you’re either almost at the end of your current mortgage deal or your current deal doesn’t have any pricey early repayment charges (an ERC is a penalty for leaving a mortgage deal before it ends), remortgaging can be absolutely worth it. Especially if you’re in the first situation – almost at the end of your current deal – and about to end up on your lender’s more expensive standard variable rate.
By remortgaging to a better deal, you can save a lot of money – on average, we save people about £341 a month* when they switch their mortgage deal with Habito. Imagine that.
Ready to remortgage? Get started for free with Habito.