How to Remortgage a House

Most homebuyers have heard of remortgaging, but they might not know what it actually entails or whether it’s a viable option for them. In this guide, we go through how it works and when you should – and shouldn’t remortgage.

Remortgaging can help you save money on your monthly repayments, raise the money to pay off some existing debts or fund something like a home improvement project. It’s not suitable for everyone though. We explain when it's an option, what happens, the process you go through and the costs you may incur below.

In today's competitive market, many borrowers choose to switch their mortgage every few years to take advantage of the new rates on offer. Those that remain on their lender’s SVR (standard variable rate) after their initial product ended could lose out on a range of potential benefits, not least the opportunity to reduce their monthly payments, which could be a significant margin in some cases.

We’ve listed some of the main reasons why people remortgage below.

Remortgaging takes, on average, about 4 - 6 weeks but it can take less. It’s much more straightforward than buying a new home; the deeds of the property are already registered in your name when you remortgage meaning that a large administrative portion of the mortgage process is eliminated.

When considering which mortgage to choose, you should look at all the current deals on offer and the relative advantages these present to your circumstances. Lenders want you to remortgage with them, which means they want you to switch to them from your current lender. They need to give you a reason to change lenders, so they offer competitive rates of interest and free features to make the switch as easy and cost-effective as they can. Deals will vary and what’s best for someone else might not suit you – and vice-versa.

You can compare remortgage rates on our website for an idea of what to expect, or see Mortgage Types Explained to learn about the different products available.

Before you start looking at mortgage rates, you need to estimate what your property is worth. It’s important that you’re realistic, as your lender will eventually conduct their own valuation to confirm your estimate – this will be via an online desktop valuation or internal inspection.

You can arrange your own valuation with an independent surveyor to find out the value of your property, but this can be expensive and the lender will still need to instruct their own valuation anyway. You’re better off talking to some local estate agents and using property websites like Zoopla, Rightmove, or On the Market to come to a figure.

Remortgaging often costs less than buying a new property. A lot of the charges that come with the purchase of property either don’t apply to you or are lower.

A remortgage can lead to a reduction in the price of:

• Legal fees - solicitors’ costs should be lower than when buying the property, since the legal process for a remortgage is less complex
• Stamp Duty Land Tax – you only pay SDLT when you buy a property so you won't be liable for this as you already own your property
• Homebuyer's report or survey - you're unlikely to repeat this exercise as you currently own the property so you know what state it’s in

The costs of remortgaging may include:

• Early repayment charges - these are only applicable if you remortgage before your current deal ends, but there might be a “final administration fee” for closing the account
• Lender's booking and arrangement fees - these depend on the product you choose
• Broker fees – it’s best to use a broker when you remortgage as they can find you the best deals on the market that are suitable for you and your situation
• Valuation fees - you may have to pay valuation fees, but often the lender will do a free valuation
• Legal fees - you’ll definitely require a legal service however lenders will often offer a free standard remortgage legal service or cashback to cover such costs

Before you settle on remortgaging, you should look into the fees you’ll have to pay, especially if there’s an early repayment charge on your existing deal. The extent to which these could reduce the potential savings could undermine the whole process. You ideally want to remortgage when it’s most suitable and when you can maximise any savings.

Most lenders are looking for evidence that you can keep up to date with your repayments.

• Reduce gratuitous spending - Lenders won’t only look at your ability to pay bills when looking for evidence that you can meet the monthly repayments. They’ll also look at your income and how much of it you’re spending. Consider how important your regular outgoings are. Do you need a morning coffee every day? Are you actually using that gym membership? If you think it’s an unnecessary expense, cut it to increase your disposable income.

• Meet monthly bills - Consistently meeting your current mortgage repayments, in addition to other monthly bills and credit commitments will showcase your ability to manage your finances. It’ll build up your credit score, which will increase the likelihood that you’re accepted by the lenders with the best deals.

You can remortgage early, but you’ll usually have to pay an ERC (early repayment charge) to your existing lender. An early repayment charge is a penalty fee that’s applied if you repay your mortgage during the introductory deal period. The charge is usually a percentage of your outstanding mortgage debt and can amount to a significant sum.

Remortgaging can be tricky, especially if you want to leave your current deal early. At John Charcol, we’ll walk you through the process, explain your options to you and find the best deal for your situation. Our advisers can tell you everything you need to know.

Many borrowers have the potential to save money through remortgaging, but it’s not the right choice for everyone.

We’ve listed some examples of when it might not be suitable below. If you fit one or more of these descriptions, give us a call. We'll help you figure out what your options are.  

People with High Early Repayment Charges

If you’ve only recently taken out a fixed rate mortgage or a discount mortgage, you may find that your early repayment charges make remortgaging prohibitively expensive.

Those Who Need a Very Small Loan

Many lenders only accept remortgage applications when the loan required is above a minimum level of £25,000. Fees can reduce any savings you might make. In this situation, you may be better off taking a new deal with your existing lender.

People Whose Employment Status Has Changed Recently

Lenders need assurance that you can repay your loan, which is why they ask for your likely future income. If you’ve recently changed your work status from employee to self-employed but haven’t yet had the time to build up a reasonable track record, you may find it difficult to find a lender who can accept your situation. 

Those with Payment History Problems or Adverse Credit

If you’ve had some problems maintaining credit agreements in the recent past, you may find you’re ineligible to mainstream lenders.  In this case, you may be better off staying with your current lender and taking a new product with them.  We suggest you talk to a broker first as we can check the likelihood of a successful remortgage or arrange a product transfer for you. Adverse and Bad Credit Mortgages are available from specialist lenders with whom John Charcol act as a broker.

People Who Have an Interest-Only Mortgage with a High LTV

Most lenders will decline those who currently have an interest-only mortgage with a high LTV (loan to value ratio), e.g. if your mortgage balance is above 75% of the value of your property most lenders will decline the application on the basis that there isn’t enough equity in it to realistically downsize at the end.  It may be best to stick with your current lender and take a new deal with them.  Your mortgage adviser can tell you the likelihood of a successful application.

You can compare remortgage rates on our website for free. We’ll give you a better idea of which remortgage product actually suits you as the best option may not be the cheapest. 

Why not also try our free mortgage comparison calculator? It compares the monthly costs of your current mortgage against the other rates on the market, showing you how much you can save.

Finally, give us a call on 0330 433 2927 and speak to one of our expert mortgage advisers or make an enquiry. We’ve arranged hundreds of remortgages, so feel confident that we’ll find you the best one to suit your needs.