Remortgaging: everything you need to know

Tens of thousands of people on fixed rate mortgage deals are about to see their monthly repayments jump due to rising interest rates. To avoid any further shocks, many will be looking to remortgage.

But how does it work, can it save you money and what’s the difference between remortgaging and a product transfer?

We explain the ins and outs of switching to a new deal.

In this guide we set out:

• What are the pros and cons of remortgaging?
• Should I use a financial adviser to remortgage?
• How do I find the best remortgage deals?
• How soon can you remortgage after buying a house?
• Can you remortgage early?

Read more: Why are mortgage rates rising?

What does it mean to remortgage?

Remortgaging means moving onto a new mortgage deal while staying in the same property.

When you take out a mortgage, you will normally get a deal that lasts between two and five years. This is different to the term of the loan which can be anything up to 40 years. However, you can get some mortgage deals with an interest rate that is fixed for up to 40 years.

Homeowners usually decide to remortgage when they have come to the end of a deal and want to avoid their lender’s expensive default rate – known as the standard variable rate (SVR).

You can either:

• Switch to a new lender, which is called remortgaging
• Or take out a new deal with your existing one, called a product transfer

In this article we mainly discuss remortgaging. If you’re looking to do a product transfer, see our guide.

Bear in mind that you can lock in a new mortgage deal to run straight after your current one expires. This means you can avoid your lender’s standard variable rate. It also means you’ll avoid any early repayment charges.

As interest rates have been rising, lots of homeowners have been remortgaging to lock in a fixed rate for a set period. Find out the average mortgage rates.

Getting a fixed rate mortgage ensures that their repayments will be predictable and could help save thousands of pounds during the deal. Try out our free mortgage comparison tool to find the best deals for you.

Ready to remortgage? See our list of top mortgage providers.

Reasons to remortgage

About two million homeowners on a variable-rate mortgage have seen their monthly repayments increase because of the Bank of England interest rate rises.

A homeowner who has a fixed-rate mortgage won’t be affected by these hikes until their deal ends.

At that point, they should look to remortgage to avoid being rolled onto a costly standard variable rate.

While everyone’s reasons for remortgaging will be different, here are six perks to switching your mortgage deal:

1. Remortgaging can save you money

If your current mortgage deal is coming to an end, the chances are you will be moved onto your mortgage lender’s expensive SVR.

A new mortgage deal could save you money, particularly as interest rates will probably climb higher, at least in the near term.

Bear in mind that if you have more equity in your property than you did when you took out your old mortgage deal (because you have paid off a big chunk) then you might be able to secure a new deal with a lower interest rate.

This is because your loan-to-value ratio has gone down. The lower your LTV, the less of a risk you pose to your mortgage provider and so the cheaper the rate tends to be. 

A general rise in property prices at the time your home is revalued for a remortgage would achieve the same effect. Of course, a decline in house prices could have the opposite effect.

2. It can give you financial security

If you have a fixed-rate mortgage deal then the Bank of England base rate might not concern you right now.

This is because your interest will be fixed for a number of years (though if you’re coming to the end of your deal, think about remortgaging now).

If you have a variable-rate mortgage, you could be affected by rising interest rates. You might want to switch to a new mortgage deal to fix your rate so that your repayments are predictable.

This could also help you get a handle on your monthly outgoings, which have increased for most households over the past year.

From fixed-rate to variable deals, read about the different types of mortgage.

3. You can switch to a better interest rate

If you didn’t remortgage or do a product transfer after your last deal came to an end, you will probably be paying your lender’s default rate.

This means you will be paying over the odds so it’s a good idea to shop around for a new deal with a cheaper rate. This might also include looking for a new product with your existing lender.  

Opting for a fixed-rate mortgage could help you beat any future rate rises for the duration of your deal.

4. You can overpay your mortgage

If you have extra money and want to use it to overpay your mortgage, your lender may not allow it or may restrict your overpayments to small amounts. Most mortgage holders can repay up to 10% of their loan a year penalty-free, though this ultimately depends on the terms of your contract.

If you are remortgaging and you now have more equity in your home, you can use your windfall to lower your mortgage debt and pay less interest. 

Find out more in our guide on overpaying your mortgage.

5. You can benefit from flexible mortgage features

There are lots of mortgages that come with flexible features.

For example:

• Perhaps you want to regularly pay more back than you need to
• Or you might want to take a payment break from time to time
• Or you are thinking of linking your savings account to your mortgage to reduce the amount of interest you pay

Whatever the benefit, expect to pay a slightly higher rate of interest for a mortgage with added features. 

6. It allows you to borrow more money

One of the most common reasons for remortgaging is to borrow extra cash to fund home improvements that can increase the value of a property.

Lower interest rates on new deals can tempt homeowners to do this, particularly if they are a better proposition for lenders because they now own more equity in their property.

But to get a bigger home loan, you would have to prove you could afford it.

Whenever considering new debt that is secured against your home, be aware that falling behind on payments could cause you to lose your home.

The pros and cons of remortgaging

There are upsides and downsides to remortgaging.

The pros of remortgaging

It means you can potentially:

• Switch to a cheaper mortgage deal to avoid paying your lender’s expensive default rates
• Release equity built up in your home by increasing the size of your mortgage when you switch
• Choose a mortgage deal that suits your current financial needs
• Extend or shorten you mortgage term, depending on your circumstances
• Consolidate more expensive debts, such as credit card balances, onto your mortgage to streamline your monthly repayments. You can do this where the LTV on your property has come down and you can use your increased equity as a negotiating tool.

The cons of remortgaging

But there are disadvantages too, such as:

• When switching to a new mortgage deal to save money, you may be hit with fees such as an early-repayment charge of up to 5% from your old lender – if you leave before the deal is due to end – and administration fees with the new one. These could outweigh the benefits of moving to a cheaper rate.
• If you secure extra debt against your property and fail to keep up with the mortgage repayments, your home may be repossessed. 
• If you consolidate short-term debts onto your mortgage and stretch them out for a much longer term, you may pay back a lot more interest.
• Remortgaging can take weeks or even months depending on your circumstances, so you need to be committed to complete the process.
• Remortgaging requires a solicitor – this can sometimes be as high as £500. Most lenders will cover these charges if you remortgage through their chosen solicitor. Others may offer cashback to cover these costs so always do your research. Product transfers don’t typically require a solicitor.

Find out more: How soon can you remortgage?

Remortgaging and product transfers: what’s the difference?

When your mortgage deal is about to expire, you can either:

• Remortgage by switching to a deal with a new lender
• Or get a product transfer which is where you switch to a new deal with the same lender

While your choices may be more limited with a product transfer, the process is typically:

• Quicker and simpler as there tends to be less paperwork involved compared to remortgaging
• Cheaper as there might be fewer fees to pay compared to remortgaging

Your lender might also offer exclusive deals that are only available to existing customers to reward loyalty.

So you might be able to find a cheaper rate by staying with your current lender rather than moving elsewhere.

How does the remortgage process work?

Here’s a step-by-step guide:

1. Do some research

Start off by researching the market to get an idea of the kind of mortgage deal you want to take out.

As a starting point you might want to try out our free mortgage comparison tool to give you an idea of the best deals available.

You could also consider using a mortgage adviser to research deals for you.

Our pick of the best mortgage brokers may help you decide.

If improving your rates is a big motivation for remortgaging, first check if your existing lender has competitive deals to offer. There are advantages to doing a product transfer rather than a full remortgage as we explain above. 

2. Get an agreement in principle for a remortgage

If your existing lender is competitive, ask for an online agreement in principle, which you can usually get online.

An agreement in principle isn’t a guarantee but it can give you an idea of how likely you are to be offered the money that you need.

You don’t need to pick a specific deal when you receive an agreement in principle – but once you have it, you can start the remortgage application.

3. Consider costs

Check whether your lender charges fees as these could eat into the amount of money you raise or save on a cheaper rate.

If you’re switching to a new lender you might need to pay conveyancing fees so take these into account too.

We explain more here about the extra costs of buying a house.

4. Apply for your new mortgage

When applying, bear in mind you may have to provide evidence of your income and outgoings.

You may also have to provide evidence of your reason for borrowing more money, such as quotes from builders for home improvements.

Once the bank or building society has all the information that they need, they will carry out a full credit check on you and arrange a property valuation. This is much the same as if you were buying a new house.

A property solicitor (also known as a conveyancer) is needed to handle the transfer to a new lender, but some lenders offer this service for free. 

It is always recommended to seek independent mortgage advice to make sure you get the best deal for your circumstances. 

See here for your guide to the best mortgage brokers in the UK.

Should I use a financial adviser to remortgage?

If you chose to go it alone, you can speak to your own bank to find out what rates it offers. Some banks keep their lowest rates for their existing customers, who are willing to move to a new deal but stay with them – this is called a product transfer.

But banks can only recommend their own mortgage deals, so you may not be getting the best price on the market.

You might want to:

• Use a price comparison websites to compare mortgage deals or try our free mortgage comparison tool
• Hire a mortgage adviser can take the hassle out of the search and the application process. Some brokers charge an upfront fee but many get paid directly by the lender.

If you opt for a mortgage broker then choose one with access to the whole market so that they don’t just have the choice of a small handful of lenders.

Even then, there are deals that lenders will only offer directly to the borrower and not through a broker.

Mortgage brokers also have access to specialist mortgage lenders that are authorised and regulated by the Financial Conduct Authority just like mainstream lenders. They may consider newly self-employed borrowers and those with blemishes on their credit files.

If your circumstances have changed since you took out your last mortgage deal, a good adviser should be able to find you lender that is sympathetic to your needs.

We help you decide whether it’s worth hiring a mortgage adviser.

How do I prepare to remortgage?

Here are some tips to help you get ready to remortgage:

• Check your credit score before the lenders do.
• Avoid applying for credit just before a mortgage.
• Consider starting the remortgage process early – most deals can be agreed in advance of an application. Many lenders will let you do this up to three months before you start paying them, so you could secure that rate now to protect against the threat of more hikes amid the cost-of-living crisis.
• Estimate your property’s value.
• Pick your remortgage date carefully to avoid fees.

Sort your paperwork to speed up the process

You will need:

• Your last three months’ bank statements
• Last three months’ of payslips
• Or last three years’ accounts/tax returns (if self-employed)
• Proof of any bonuses
• Your latest P60 tax form (showing income and tax paid from each tax year)
• ID (usually a passport)
• Proof of address such as utility bills

Remortgaging if you’re self-employed

If you’re self-employed, you will have to do more preparatory work before a lender will be willing to offer you a mortgage.

This is because lenders generally find it harder to assess the finances of those who work for themselves, and so they want more detailed evidence that you can afford to remortgage than if you were on a regular payroll.

As a result you may need to provide three years of financial records, as well as evidence of future work. 

Check your credit score before you apply because a good credit history shows that you have a history of responsible borrowing, meaning you are more likely to get the money you ask for. Your credit report will also highlight any actions that you could take to improve your score.

Remember, though, that different lenders look for different things, so don’t be put off just because you have been turned down by one mortgage lender.

Nevertheless, if you apply with multiple lenders and each one does a hard credit check, this could impact your credit score. 

It might be worth speaking to a mortgage adviser who is able to look across the market and find the best remortgage deal for your individual circumstances.

When should I start the remortgage process?

It can be a good idea to see if you can lock in a new mortgage deal before your current one has expired.

This means that you can roll onto your new mortgage quickly and avoid your lender’s standard variable rate.

Mortgage offers are usually valid for three to six months, so you could start the remortgage process several months before your current deal ends. If you’ve found a deal in advance, check if the terms will allow you to exit penalty-free if a cheaper deal comes along between hen and the new term starting.

The remortgaging process can take between a few weeks and a couple of months after you apply, but it all depends on your circumstances and how complicated your application is.

A remortgage is treated the same way as a new mortgage application, meaning your property will need to be valued and you have to go through the relevant checks.

Lenders want to know that not only are you able to make the repayments now but also in the future should interest rates rise.

Those whose jobs have changed since getting the initial mortgage, or who become self-employed, may have to provide more evidence of income, which may slow the whole process down.

How to get the best remortgage deals

Getting the best remortgage deal involves some legwork and a lot of thought, but it could also be worth a lot of money in the long run.

It is important to consider the following:

1. Why do you want to remortgage?

Is it to save money, to have the flexibility to pay off your loan sooner or to get a lump sum? Would you prefer a fixed rate or a variable-rate mortgage? Do you want a repayment or an interest-only deal?

Think about your current situation and needs, but also how they may alter in the future.

2. Do the costs add up? 

Work out how much it will cost to leave your current mortgage and weigh up how much you could save moving to a new remortgage deal or how much equity can be released from your home.

See if there are any early-repayment or exit charges and make sure you have the money to pay for any of the fees involved.

3. Are you in financially good shape? 

Have a look at your credit score and see if there are any improvements you could make to ensure you are a more attractive option for lenders.

It’s also important to check that the details on the credit report are accurate, as even small mistakes can make a big difference.

4. How much could you borrow?

You can get an online Agreement in Principle from most lenders to see how much money you could be offered.

Our mortgage repyaments calculator can give you an indication of how much you could afford to borrow and what your monthly repayments might be. Consider how a change in interest rates might affect you in the future.

5. How long will it take?

Make a note of when your current deal comes to an end and think about remortgaging several months ahead of this date. Many remortgage offers are valid for between three and six months from the date they are issued.

So even if you’ve got five months left to run on your existing deal, you can apply for your new mortgage now. It can then be arranged to begin as soon as your current deal finishes.

6. Compare deals

Compare mortgage deals from different lenders.

Don’t just head to your current bank or building society and accept a product transfer. Consider using a broker who can scour the market for a deal that is right for you and your individual circumstances.

Make sure they are qualified, authorised and regulated by the Financial Conduct Authority, and ask what they charge for their mortgage advice.You can also look at different deals yourself with our mortgage comparison tool.

What fees will I have to pay to remortgage?

You may have to pay fees to arrange the new mortgage deal, so factor these costs into your calculations:

• A product, or arrangement, fee (typically between £1,000 and £1,500)
• A valuation fee
• Legal fees

Remortgages with lender fees tend to have a lower interest rate which look more attractive than those with zero fees. However, the lender fee is usually added to the mortgage debt which means the cost of your mortgage may be more over the deal term, despite the lower rate.

Lots of lenders offer remortgage packages, which often include a free valuation and free legal services to complete the conveyancing of your property.

If you are thinking about exiting your current mortgage deal early, you have to question whether these extra costs and any early repayment fees would be trumped by the savings you would get from switching to a lower interest rate.

Use a mortgage calculator first.

What if I get turned down for a remortgage?

If you have been turned down for a remortgage, don’t panic.

You should avoid applying to lots of different lenders as this can show up on your credit report and damage your credit rating. If you haven’t already, speak to your current lender.

If you’re trying to borrow more then the bank might think you are not in a financial position to do so. But it might consider offering you a deal without increasing your mortgage debt.

But if you are not applying to borrow more money and simply want to switch rates, the lender is unlikely to run a new credit check on you.

Providing you have kept up to date with your past mortgage payments they will offer you a new deal.

Should I remortgage to release equity?

With this approach, your objective will be to raise money from the value of your home by increasing the mortgage loan.

You might want to use the cash borrowed to pay for home improvements that can add value to the property.

We have more information on this in how to remortgage to release equity.

If I remortgage to release equity will my interest rate change?

It’s likely that if you remortgage to release equity then the size of your debt and monthly payments would likely increase. This means that your interest rate could also be higher.

The higher the loan-to-value (LTV), the higher the mortgage interest rate tends to be.

For example:

• Say your lender’s advance was for £200,000 on a property valued at £270,000, meaning you had put down a deposit of £70,000 – the LTV of the mortgage would be about 75%.
• If you remortgaged to release an additional £50,000 of the value tied up in your home, the debt would rise to £250,000 and the LTV would increase to more than 90%.
• The amount you pay in interest is likely to rise because you would now have less equity in your property 

But what if you have paid off £50,000 of the mortgage balance since you bought the property? And what if the property has been valued recently at a price £80,000 higher?

The sums change quite a lot – the loan is £150,000 now and your home is worth £350,000, meaning the loan-to-value is 50%. 

Release that same £50,000 and it goes up to nearly 60% – but that’s still a lot less than the 75% you started off with. That means you should qualify for a cheaper interest rate while raising money to put towards something else.

Is it a good idea to remortgage for home improvements?

One way of paying for an renovation project is to remortgage and gain access to extra cash.

However, as the calculations above demonstrate, whether it makes financial sense to go down this route depends on other factors too, such as whether you have paid down your mortgage and the up-to-date value of your home. 

It also depends on the interest rate.

Weigh up the costs of using your mortgage to fund home improvements against the cost of instead taking out a personal loan, where the rate of interest might be 10% or more but will apply to a smaller sum than a mortgage debt. 

We have some tips on how to add value to your home.

Can I remortgage to pay off debt?

Yes, you can borrow more money against your home to pay off your debts at a cheaper rate than you will be paying on your credit cards, for example.

But remember that this will increase the size of your mortgage, so your lender will have to make sure you meet its affordability requirements, and it may be restricted in the loan-to-value it offers.

You should also think carefully before consolidating expensive debts onto your mortgage. You may wind up repaying more interest if you spread the debt over the life of your home loan.

Also remember that if you can’t make your payments, you risk losing your home altogether.

When it is a good idea to remortgage to pay off debt?

It can make sense if you want to streamline a jungle of debts into one manageable monthly payment – and also if some of them come with much higher interest rates than you find with mortgage deals.

Credit cards, for example, tend to charge more than 20% if you don’t clear the outstanding balance each month.

When it is a bad idea to remortgage to pay off debt?

When your debt doesn’t have long left to run. By remortgaging to clear them, you could be stretching those transferred debts out over 25 years or more, which means you pay back lots more interest in the long run. 

How soon can you remortgage after buying a house?

Most lenders won’t let you switch to a new deal until you have had your mortgage for six months. Wait longer and you will have a better choice of remortgage offers.

But if you are in a hurry – perhaps because you have bought with someone else’s assistance and they want their money back – some lenders are more flexible than others. So check with a mortgage broker, who can search the market for you.

If your home has a low loan-to-value, or you have spent money refurbishing it, a lender is likely to be more approachable in how soon a remortgage might be granted. They will carry out a revaluation of the property before a decision is made.

Here are two circumstances when banks may offer you a remortgage in less than six months:

If you’re a property investor

Property investors who buy cheap, run-down properties at auction use a type of expensive short-term finance called a bridging loan. This allows them to buy an uninhabitable home that a mainstream bank would not lend on.  

The interest rate on bridging finance can be anywhere upwards of 6%, according to the consumer group Which?, so property investors will want to carry out renovation work straight away and then remortgage as soon as possible to a standard mortgage deal to secure a lower rate.

In this case, a bank will send a surveyor to value the property after the refurbishment. Provided the lender is satisfied the property has been genuinely improved, it may well offer a remortgage earlier than six months after the original loan.

If you’re using a self-build mortgage

If you built your own home using a specialist self-build mortgage you would also need to remortgage quickly after the build was completed.

Our self-build mortgages guide explains more.

How soon can you remortgage to release equity from your home?

You’re unlikely to be able to release equity until you have had your mortgage for six months.

If you wait for longer you will have more choice of mortgages.

However, some mortgage lenders are more flexible than others, so it is worth checking with a mortgage broker who can search the market for lenders that are willing to offer you a remortgage sooner.

If the value of your mortgage is low compared to that of your home, a lender is likely to be more flexible with how soon they will remortgage you.

If you have spent money improving the value of your home and you want to release that newly-created equity, expect the bank to:

• Scrutinise your application
• Carry out a new full valuation before a decision is made

Can you remortgage early?

Remortgaging early means switching to another mortgage deal with a new lender before the term of your current deal is up.

Doing so could mean you have to pay an early-repayment charge. These tend to range between 1% and 5% of your mortgage debt but can be higher.

Within the first year of a mortgage, the penalty will likely be at its highest and will gradually come down over the term of the deal. So, say you have a five-year fixed-rate mortgage: if you leave in year three, the charge will be 3%.

Why remortgage early?

There are several reasons you may need or want to remortgage before your current mortgage deal expires:

• Your home improvement project has run over budget and you need to borrow more
• You face an unexpected large bill or need to repay expensive debt
• Or you took out a specialist mortgage which you now need to pay off

Normally, it’s not advisable to remortgage early just to chase a cheaper interest rate because the early repayment penalties could far outweigh any monthly savings.

However, the Bank of England has increased the base interest rate nine times since December 2021, and it’s likely to keep climbing. This in turn pushes up mortgage rates.

If you’re in a fixed deal that’s approaching expiry, you might want to lock in a new mortgage now, before prices escalate further. If you choose to do this, consider speaking to a broker and make sure you do the calculations, as any potential savings you make will need to outweigh the exit fees.

You can also remortgage up to six months before your deal ends. That means you can lock in a deal now, that takes effect next March.

Research from May 2022 shows that homeowners would be prepared to pay more than £2,310 in fees to get out of their current mortgage deal early in order to switch to a better rate fixed for longer.

This comes in light of rising interest rates.

FAQs about remortgaging

I own my own house outright, can I remortgage?

Yes, you might be able to take out a new mortgage. Except that for all intents and purposes, you would be applying for a new mortgage. A property without a mortgage is called unencumbered. 

Families or first-time buyers may inherit an unencumbered property after a loved one dies. In these circumstances, the owner has 100% of the equity but not much cash.

By taking out a mortgage on the property, they can unlock some of that equity. If the home has been inherited, banks are less likely to insist the property has been owned by the beneficiary of the inheritance for six months before the mortgage is approved.

It’s worth checking mortgage lenders’ minimum loan restrictions when you are shopping around for a mortgage on an unencumbered property.

It is common for lenders to offer mortgages of £25,000 or more on mortgage-free properties. If you don’t need to borrow this much money, consider speaking to a financial adviser about alternative sources of finance.

If you bought the property for cash and now need to take out a mortgage, the six-month rule usually applies.

What’s an SVR?

When your existing mortgage deal reaches the end of its term, unless you have already arranged a replacement, you will be shifted onto your current lender’s standard variable rate. This will typically be more expensive than your previous deal or another that you could find elsewhere on the market.

It’s important to bear this in mind so you can get a new deal in place in good time.

Does remortgaging affect credit rating?

A remortgage in itself should not affect your credit score. What can damage your rating, however, is applying to multiple lenders in a short time.

When you apply for any loan, the lender will carry out a search on your credit file to see if you are a trustworthy borrower. This leaves behind a “footprint” and, should you be rejected for a mortgage, other lenders can see that.

This may count against you when you apply for a remortgage.

Here’s what you need to know about credit scores