Complete Guide to Remortgaging

What is remortgaging?

If you currently have a mortgage, or own your property outright, you can remortgage your home which means getting a new mortgage, either with your existing lender or a new one. Even if your current mortgage has a duration of 30 years or more, you don’t have to stay tied to the same one for that length of time.

Remortgaging is common and can help you to get the right deal for you. You can see it as re-evaluating your finances and making sure you’re not paying more than you need to. Just like you might do with your utility bills.

How much equity is in your property, it’s current value and what kind of loan-to-value (LTV) percentage you want. Working with an experienced, specialist remortgage broker is the best way to make it simple and easy to get the right deal. Our Mortgage Experts can do just that. Get started. 

Why would I need to remortgage?

There’s a number of reasons why you might want to remortgage. Whether you want to get a better deal or take out some extra cash, remortgaging can work for lots of situations.

Save money with a better deal

If you’re remortgaging to get a better deal and lower your monthly repayments, you have two options:

Get a ‘product transfer’ with your current lender

You’ll basically be swapping the mortgage you have for another one, without borrowing more money. This one’s pretty straightforward.

Get a new mortgage with another lender

When you go to someone else for another mortgage, your new lender will pay the outstanding loan you owe to your old lender (done through a solicitor). You’ll then pay back your new lender under the new agreement. 

When you remortgage this way, you’re usually limited by a 90% loan-to-value (LTV). So you’ll need to own at least 10% of your home outright (known as equity), or put down a cash deposit.

Borrow more money

If you’re remortgaging to take money out of your home, the process is the same as if you were swapping your mortgage. But any extra money that you borrow needs to be handled by a solicitor.

Again, you’ll be limited by the lender’s LTV. And the amount they offer could vary depending on what you plan to use the money for. 

Pay off debts

Depending on your situation, remortgaging can be a way to consolidate your debts. Lots of people do this to clear credit cards and loans and pay everything from one place. Because mortgage terms are so long, it can reduce your monthly bills.

What you’ll end up paying will all depend on how much you want to borrow and what interest rate you get. You’ll need to be mindful of how much debt you’ll be rolling into your mortgage, as if your monthly repayments increase by too much then you risk not being able to afford them.

Think carefully before securing any other debts against your home - it could be repossessed if you don't keep up repayments on a mortgage or other debt secured on it.

Can I remortgage if I’m on a fixed rate deal?

You can remortgage if you’re on a fixed rate deal, but you’ll probably have to pay an early repayment charge. These can be pretty steep, sometimes in the thousands of pounds, so you’ll need to weigh up whether your new mortgage is worth the high charges. 

It’s sometimes better to wait until your fixed rate deal’s ended before getting another mortgage. If you’re looking to change while still in your current deal, you should speak to a Mortgage Expert to find out your options. 

How long does it take to remortgage?

Remortgaging can be quicker than the first time around. Generally, you can expect the whole process to take around four to six weeks. If you don’t have any issues like bad credit or complex income then it could be even faster. 

A good way to speed up the process is to get all your paperwork ready ahead of time. A mortgage broker can help you do this, and they’ll be able to recommend the lenders most likely to accept you. If you have bad credit history or a complex income then it’s especially important to get help from an advisor. Our Mortgage Experts have seen it all. Make an enquiry to find out your options.

How much does it cost to remortgage?

There’s a few costs you’ll need to consider before remortgaging:

Arrangement fee

You’ll need to pay your lender a fee for setting up your new mortgage. What you’ll pay will depend on the type of mortgage and which lender you go to. You can either pay the fee upfront or add it to your mortgage.

Booking fee

Not every lender will charge this, but some will need a booking fee along with your arrangement fee. It’s normally a non-refundable upfront cost of around £100-£200. When hunting for deals, make sure you check for this charge. 

Solicitor’s fee

You’ll need a solicitor - also known as a conveyancer - to sort out the legal stuff for your remortgage. Typically, the fees for a remortgage are less than if you were buying or selling a home as there’s less work involved. Some mortgage deals come with free legal work, so it’s worth shopping around. 

Valuation fee

Not all remortgages will need you to get a valuation, but if you’re going with a new lender then it’s likely they’ll ask for one. They do this to be assured of your home’s worth, as it’s technically an investment for them. Some mortgage deals come with a free valuation, but if not then you’ll have to pay for it. 

Early repayment charge

If you’re remortgaging before your current mortgage deal is finished, then you might have to pay a fee for getting out of it early. This is usually the case if you’re on a fixed-rate mortgage deal. If you do end up having to pay, it could be quite a lot! If that’s the case, you’d need to weigh up the savings you’d get by remortgaging against the cost of the early repayment charge.

Exit fee

Sometimes called ‘mortgage completion fees’, exit fees are the admin costs for when you’ve paid your mortgage off in full. When remortgaging, the new lender pays your old lender off in full, incurring the fee. 

Broker fee

A good mortgage broker can save you money in the long run by finding you the right mortgage for your needs. When you work with us, the fee you’ll pay depends on your individual circumstances and how complex your case is.

Remortgaging can be really confusing, but our Mortgage Experts know the market inside-out. They'll help you find the right deal for your situation. Make an enquiry to find out your options.

How to remortgage, step by step

Remortgaging can be daunting, but there’s four main steps for getting the job done:

1. Work out your loan-to-value (LTV)
   Loan to value (LTV) is a ratio that shows the size of mortgage a lender will offer you in relation to the value of the property you want to buy or remortgage.

   For example, if a lender offers a mortgage deal which has a maximum 90% LTV, that means they will lend you up to 90% of the property value. Here’s a quick calculation you can do to work out your LTV:

   Amount you want to borrow ÷ how much your home is worth x 100 = your LTV

2. Check your affordability
   Having an existing mortgage doesn’t guarantee you’ll be accepted the next time around. And each lender has different criteria. 

   An affordability check is an assessment that a mortgage lender e.g. a bank does to work out how much they’re willing to lend you on a mortgage loan. 

   A lender wants to know you can make the mortgage repayments without struggling. That's why the affordability checks are so in-depth. They'll see how you would cope if there was a drop in income or your debts increased.

   Use our Remortgage Calculator to see what you could afford to borrow.

3. Decide your mortgage type
   You’ll have a few options when it comes to the type of mortgage you want. You might want to stay on a similar deal, such as a fixed-rate mortgage, or move from a repayment mortgage to an interest-only deal. 

   Whatever you choose, you’ll need to think about your options carefully. It’s best to work with an expert mortgage advisor who can look at your options.

4. Find the right deal for you
   Once you know how much you can borrow, and what type of mortgage you want to go for, then it’s time to hunt for a deal. 
   
   The mortgage market can be really confusing, so it’s best to work with an expert mortgage broker who can do the leg-work for you. It’s especially important if your situation isn’t straightforward, e.g. if you have bad credit or a complex income. 

   Most brokers charge a fee for their services, but they’ll save you time and money in the long run. Make an enquiry to find out your options.  

Do I need a deposit to remortgage?

When it comes to remortgaging, you won’t need to save for another deposit. You can use the equity you already have in your home as a deposit.

Equity is the cash difference between how much your home is worth, and how much you have left to pay on your mortgage. Let's say you sold your house for £500,000 with £300,000 still left to pay on your mortgage. Your equity would be £200,000. You won't have equity from an interest-only mortgage unless your house has gone up in value.

Will remortgaging affect my credit score?

If done right, remortgaging can be a good way to rebuild your credit history. If you’re using your new mortgage to consolidate debts, you’ll probably find it easier to keep track of your repayments. 

You can also save money if you’re currently paying a lot of interest. Mortgages usually have far lower interest rates than credit cards or loans, so you could end up with more cash in your pocket each month. 

Read our Guide: Debt Consolidation Options for Homeowners 

*Think carefully before securing any other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.

Can I remortgage with bad credit?

Yes, you can remortgage with bad credit! You just might need a bit more help getting the right mortgage compared to someone with a better credit score. 

Most mortgage lenders and banks will look at your remortgage application in the same way they would if you were applying for the first time. Many high street lenders will look at a bad credit score as an indicator that you’re not great with credit and might decide they don’t want to take the risk. But it’s a big misconception that if you try to remortgage with bad credit then it’s an automatic ‘no’. This isn’t the case.

There are plenty of specialist lenders who’ll look at your mortgage application in detail, rather than automatically reject you based on your credit score. The specialist mortgage market isn’t well known because often specialist lenders aren’t available directly to borrowers. They don’t advertise because they’re only available through specialist mortgage brokers who can help people that have a complex situation. 

We specialise in bad credit mortgages. Our Mortgage Experts have seen it all and will never judge. Get in touch to find out your options.  

Should I take out a loan instead of remortgaging?

If you need a lump sum of cash, you might not necessarily need to remortgage. There’s a couple of options: 

Second charge mortgage

A second charge mortgage means you can use any equity you have in your home as security against another loan. It means you’ll have two mortgages on your home. 

Equity is the percentage of your property owned outright by you, which is the value of the home minus any mortgage owed on it. A second charge mortgage allows you to use equity in your home as security against another loan. 

To take out a second charge mortgage, you need to be a homeowner, but you don’t need to live in the property. This means if you’re a landlord, then you may be able to use your rented property against your loan. 

But just like any mortgage, if you don’t keep up with the payments, then you run the risk of losing your home. Your initial mortgage always takes precedence over a second charge one in these scenarios.

Personal loan

Because a personal loan isn’t secured against a property, you won’t risk losing your home if you can’t repay it. However, interest rates for personal loans are usually higher than mortgages, and you can’t usually borrow as much. The length of the loan is shorter too, so your monthly repayments are likely to be higher. 

Can I remortgage if I own my house outright?

Yes, you can absolutely remortgage your home if you own it outright. This is what’s known as an ‘unencumbered mortgage’.

If you’re looking to take some cash out of your home - known as releasing equity - then remortgaging is a great way to do it. You’re in a good position, so will likely have a wide choice of lenders and mortgages to choose from.