What is remortgaging?
Remortgaging is when you take out an additional or different mortgage on a property you already own. You might consider remortgaging if you discover you’re eligible for a better deal. Alternatively, you might look at remortgaging to borrow money against your property.
Remortgaging need not be a hassle – it’s easier than you might think. In fact, it’s something we should all think of regularly to make sure we’re still on the best mortgage deal.
How does remortgaging work?
Remortgaging simply means replacing your current home loan with a new mortgage – you may not even have to move lender to do it, though you certainly shouldn’t be afraid to move if doing so makes financial sense.
First, work out what the total cost of the loan you are considering would be over the deal’s defined period. This will vary depending on whether you are on fixed, discounted or tracker rate mortgage. Our mortgage repayment calculator can help you to do this. However, remember that the calculation assumes there will be no change in interest rates – so the actual amount you end up paying over the years may vary. You also need to add in any fees your new lender will charge, including arrangement costs, for example, or payments for legal work.
Once you’ve worked out the cost of the alternative mortgage, do the same sums for your existing one. Again, the calculator will assume that rates will stay the same, and you will need to add any administration fees.
When comparing costs, it’s vital to include any early-repayment fees that might be payable. When you switch providers, you use the funds from your new mortgage to repay your previous loan. Early repayment will often incur significant charges, which need to be taken into account.
How long does it take to remortgage?
Remortgaging your house is typically a quicker process than buying a new home but it can still take some time, so plan ahead. Remortgaging usually takes between four and eight weeks, but it can be longer if you are switching lenders.
Our Remortgaging checklist has more information explaining remortgaging timelines.
Why should you consider remortgaging?
The main reason that you might want to remortgage is to save money. But there are a number of other reasons to consider remortgaging:
- Your current deal is about to end
- You want a better rate
- Your home’s value has changed significantly
- You’re worried about interest rates changes
- Your repayment circumstances have changed significantly
- You want to borrow more
- You want more flexibility
Read our ‘Should I remortgage’ guide to understand whether remortgaging is right for you.
How does the remortgage process work?
The remortgaging process is fairly straightforward, with a number of clear steps to follow:
Understanding remortgage rates
The rate you will be offered on a remortgage deal will vary according to a range of factors. These can include:
- The value of the property and whether it has increased since you first took out a mortgage
- How much of the property you own outright
- How much you want to borrow
- Your income
When remortgaging, you’ll need to pass many of the same affordability calculations and criteria that applied when you first bought a home.
The Which? mortgage comparison tables let you search all available deals from all available lenders to choose the best deals based on quality of service as well as cost and benefits.
Compare the best deals and rates on the market using our interactive remortgaging rates and deals table.
Factors affecting remortgage rates
Remortgaging in good economic times
Your circumstances may have changed for the better since you took out your current mortgage. For example, your income may have increased, or a strong property market may have lead to an increase in the value of your property.
As a result, you will have a lower loan to value, meaning you’ll own more of the property compared with the amount you borrowed. This could enable you to get a more favourable remortgage deal.
Remortgaging in poor economic times
If the property market has weakened, you may see your home loose value, and if your income has stayed the same or gone down, you may not have enough equity in your home to move to a better mortgage deal.
This could mean you end up stuck on the lender’s standard variable rate with the inability to move to a better deal and, consequently, a better mortgage rate.
If you are struggling to get a good deal, read our guide on ‘how to cut the cost of remortgaging’ to see what you can do to make remortgaging more affordable.
Finding the best remortgage rates
Since 4 August 2016 the Bank of England base rate has been at a historic low of 0.25%. The base rate and mortgage rates are often closely linked, and the number and kinds of deals available change on a daily basis. This means it’s a great time to speak to an independent broker to see if there is a new deal out there which could help you save on your monthly repayments.
If your deal is close to expiring, it’s important to start shopping around for a new offer before you get transferred onto your lender’s standard variable rate (SVR) – this could be higher than your current rate, given the deals available at the moment. Depending on what rate you’re currently on, you could even save overall by moving to a new mortgage, even if it means paying a fee. Our expert advisers can review this for you and talk through your individual circumstances and needs.
Why not let Which? Mortgage Advisers do some of the hard work for you, and make sure you’ve got the very best mortgage for you. Contact us today to see how we can help.