Remortgaging

  • Whether you're looking to release equity on your current property, or you're looking for a better deal - remortgaging could be the path that you're searching for. Know Your Money has all of the answers to your frequently asked questions on the complexities of remortgaging, from when to remortgage, to the costs associated with switching to a new deal. Click on a question below to read the answer.

What is 'remortgaging'?

Remortgaging is the term applied to moving the mortgage on your property from one agreement to another, either with the same or different lenders. The term remortgage may also be used when someone takes out a mortgage on a property that they own outright, in order to release equity.

When would I need to remortgage?

Usually, you would look to remortgage, with the same or a different lender, when your current fixed mortgage deal comes to an end. However, you may choose to remortgage before your fixed deal comes to an end if you find a substantially cheaper interest rate with a different lender, or if you see an interest rate rise on the horizon and want to secure a current market rate for a longer period of time than your existing deal allows.

Some people choose to remortgage because they want to take advantage of a more flexible agreement - such as one that provides the opportunity to make overpayments when they have the cash to do so.

Do I have to remortgage when my fixed term ends?

You are not obligated to remortgage at any time, even when your current fixed deal comes to an end. You can instead choose to remain with your existing lender and be moved over to their standard variable rate mortgage deal, as long as no other stipulations were made for any other eventuality at this stage when you first agreed to the deal.

The standard variable rate deal will offer you more flexibility, and will save you remortgaging fees, but may work out to be more expensive overall compared with remortgaging because of a higher interest rate.

Can I remortgage with another lender?

Though many people assume that it's easier to stay with their existing lender when remortgaging a property, you are not obliged to do so. Whether or not you are currently in a fixed deal with your existing lender, you may still be able to switch to another contract. Talk to your provider to see what your options are.

What costs are involved with remortgaging?

When you remortgage you may be subject to fees for setting up the new mortgage deal with the new lender. These would be the same as the fees when you originally set up your mortgage, including legal costs, arrangement, and valuation fees.

However, sometimes lenders offer fee-free deals for those remortgaging in order to secure the custom. They also often offer very attractive interest rates to those remortgaging from other financial institutions, in an effort to draw in extra business.

People who are in a fixed-term mortgage may find that they need to pay an early release fee to their existing lender if they want to switch out to a new deal.

Can I remortgage while I'm still in a fixed term?

You are usually able to remortgage with a new lender while still within a fixed term with your existing lender. However, there will usually be substantial exit fees to pay to your existing lender when you do so.

Some lenders will also enable you to remortgage internally on occasions, but usually only if you are extending your fixed term, rather than reducing it.

Can I remortgage from any mortgage?

With the vast majority of mortgages, you will be able to remortgage to another lender, subject to the terms and conditions laid out such as fees for exiting fixed deals early.

However, there are some mortgage agreements with special circumstances that might prevent you from remortgaging. Check with your current lender whether or not you are free to move.

How much will my early release fee from an ongoing fixed deal be?

An early release fee can be calculated in a number of different ways, usually it is either:

  • A number of months' interest
  • A percentage of the amount already repaid
  • A percentage of the balance owed on the mortgage
  • A percentage of the original loan amount

The details of your early release situation will have been agreed within your terms and conditions when you originally took the mortgage out.

Do I have to pay off early mortgage release fees immediately?

If you remortgage while still within a fixed term, some lenders will allow you to opt to add any early release fees from exiting your existing mortgage to your new mortgage.

Bear in mind that this will mean that you will also be paying interest on the extra money that you borrow for this fee, as well as on the money you borrow for the mortgage itself. You do have the option to pay off the early release fee yourself, separately from the new mortgage.

How can I work out if I can save by remortgaging while in a fixed term?

Working out whether it's worthwhile to remortgage while on a fixed-term contract is important if you're looking to save money. To identify the value of switching, you'll need to calculate the savings you would make with your new, lower interest fee over the period remaining on your fixed deal.

You need to take into account the early release fee from your existing mortgage, including the interest that you'd pay on that fee if you added it to your new mortgage, as well as any fees that apply for setting up your new mortgage.

Am I eligible to remortgage?

The factors that lenders take into account when you remortgage are much the same as when you take out a mortgage for the first time. They include your credit history, salary and economic circumstances, including any other debts you are obligated to service.

With new stringent regulation in place, lenders will now also check on the affordability of your mortgage repayments, taking into account your other monthly outgoings such as bills, childcare, transportation and even your entertainment budget. They will also assess whether the mortgage will be affordable in the event of significant prospective interest rate rises in the future.

One factor that might prevent you from remortgaging is negative equity - where your property has fallen in value since you bought it and you subsequently now owe more on your mortgage than your house is worth.

Can I borrow more money on top of my mortgage when I remortgage?

You may be able to increase your borrowing level and release some of the equity in your home when you remortgage. Reasons why you may wish to do this include to release money to fund renovations or extensions, to release a cash sum for other purposes, or to consolidate other debts.

Your ability to borrow more - and how much - will be dependent on the particular lender and the deal you opt for, as well as your credit rating, the level of equity you have built up on your property, and your other financial circumstances.

Can I remortgage if I own my property outright?

If you don't have a mortgage on your property, either because you've paid it off or because you never had one to begin with, you can still remortgage your property to release some equity and provide yourself a capital sum. If you are taking this route, there won't be the exit fees involved and it can be a useful way to access finance otherwise locked up in your property.

Is it beneficial to consolidate my other debts with a remortgage deal?

If you have other debts aside from your mortgage it is sometimes possible to consolidate them all into a new home loan by remortgaging. This can help you to spread the payments of your other debts over a longer time than with other forms of lending.

Whether or not it is economically most prudent to do so depends on the interest rate attached to your new mortgage, compared with alternatives such as a personal loan, and the length of term you agree with the new mortgage. It's best to think carefully about all of your options, and you may benefit from speaking to a financial advisor if you need additional guidance.

Can I increase or reduce my term when I remortgage?

You may be able to increase your overall mortgage term when you remortgage, meaning that you reduce your monthly repayment commitments or release the equity in your home as capital. By the same token, you may be able to reduce your overall mortgage term by paying down a lump sum from your remaining debt.

I'm moving house - do I need to remortgage?

If you are moving house, you don't usually need to remortgage. You can usually carry your mortgage over to your new property with you, even if you need to borrow more money to fund an upgrade. This is known as mortgage porting. However, the ability to remortgage remains open to you.

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