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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 21st October 2020*

Whether you want to remortgage to cut your costs by moving to a better deal, raise some extra cash, or release some money from your property for another purpose this guide provides the information you need to make the process quick and easy.

People remortgage for a variety of reasons. While remortgages work in a similar way to traditional mortgages, the process for getting one is slightly different.

Whether you find the most competitive deal by making a switch to a new mortgage with your current lender or through a new lender, this guide explains everything you need to know to help you make the right decision. 

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What does it mean to remortgage?

You can consider remortgaging any property you own, whether you have a current mortgage or already own your property outright. When you remortgage you switch away from your current mortgage to a new deal. You can do this through your existing lender or move to a new provider. 

Why should I remortgage?

There are a variety of reasons people look to arrange a remortgage. Whether you want to cut your costs by moving to a more competitive rate or simply need to raise some extra cash, remortgaging can work for all kinds of purposes.

Cut your costs with a better rate

There are two options when changing your rate: 

  1. Make a product transfer with your existing provider; this is when you swap the mortgage you have to another one without borrowing more cash.
  2. Swap to a new lender; your new lender will pay the capital owing to your old lender via your solicitor. You then continue to pay the new mortgage according to the terms of the agreement. These remortgages are usually limited to a maximum loan-to-value (LTV) of 90%, so you’ll need enough existing equity in the property or a 10% deposit ready.

As with any financial market, the mortgage business changes constantly. For more information and to see if a remortgage is a good move for you right now, get in touch and we’ll connect you with one of the expert whole-of-market remortgage brokers we work with.

Get cash by borrowing more money

If you want to remortgage to release equity from your property, the process is the same as a mortgage swap. The important difference being that the additional money you borrow is paid to you via your solicitor.

When you’re borrowing more money, most lenders will limit the loan-to-value (LTV) they’ll offer depending on what you intend to use the extra money for. This will affect the equity you will need to have to meet the lending criteria. 

The table below gives a rough outline of what’s usually possible:

Remortgage type Most lendersSpecialist lenders
Debt consolidation mortgage80%90%
Remortgage for home improvements80%90%
Mortgage swap (No additional £)90%95%
Buy furniture, electrical or white goods80%90%
Buy car, caravan or boat80%90%
Pay for school fees80%90%
Pay for medical expenses80%90%
Other personal consumption80%90%
Buy final share in shared ownership90%90%
Buy a self build home75%80%
Remortgage to buy a second home80%90%
Buy a holiday home80%90%
Buy freehold or new extended Lease80%90%
Buy a share in the freehold80%90%
Buy land to extend security80%90%
Invest, save, or share purchaseNot usually allowed90%
Invested for business purposesNot usually allowed90%

Is now a good time to do it?

At the time of writing, now is an exceptional time to consider remortgaging. In the aftermath of Brexit and the global turmoil created by the Coronavirus pandemic, interest rates are at their lowest level in history (0.1%). Many lenders are currently offering mortgage deals at super low levels which could make it a really good time to make a switch. 

The stability offered by a low fixed rate might be a wise move as we are likely to enter a period of financial uncertainty.

To find out what kind of rates you might be able to get by remortgaging your property or to understand how much money you might be able to raise through remortgaging your property, speak to one of the mortgage brokers we work with. 

As whole-of-market experts they are in constant touch with all the UK lenders and will be able to advise you of your options, taking full account of all the circumstances.

Is it a good way to pay off debts?

In the right circumstances, it definitely can be. Many of our customers remortgage to clear debts. With the right remortgage deal it’s possible to take your debts from expensive high rates and steep monthly repayments to much lower rates, spread over a longer term, resulting in far more manageable monthly outgoings.

The cost of remortgaging to pay off debts will depend on your specific situation, how long you wish to secure the debt, the type of mortgage you get and the interest rate you’re on. Depending on the terms, you could end up paying more over time, so it pays to do all the sums before committing to a remortgage plan.

Get in touch for a free, no-obligation chat and we’ll connect you with one of the remortgage experts we work with. They will be happy to answer your questions, and help you get a clear picture of all the costs involved. They will then be able to use their whole-of-market access to find a remortgage deal to suit your specific needs.

Is it easy to remortgage?

Remortgaging is usually very easy, especially compared with getting a mortgage to purchase a property. If you want to remortgage you simply need to find the mortgage you want, make your mortgage application, and your solicitor and lender will take care of the rest. 

There’s no chain to worry about, no house to buy or sell, no contracts to exchange, fewer searches required (if any), and the general legal process of registering the charge with the new lender is far more simple too.

Although many remortgages will require a valuation, some lenders have automated services for properties at lower loan-to-value ratios and will remove the need if a property or deal is clearly a safe bet.

How quick is it to remortgage?

Compared to getting your original mortgage, remortgaging is usually much faster and easier to complete. From start to finish, a typical remortgage can take between four to six weeks. If your application is straightforward, you have a good credit record and your house is standard brick and mortar, it’s sometimes possible to get it sorted even faster.

Having all your documentation ready ahead of making your mortgage application can help speed the process up. Having an expert broker on your side might also make for a faster application, as they may have personal contacts on the inside who they can use to chivvy things along.

Get in touch to talk to one of the remortgage experts we work with and let them help you get a fast remortgage.

How much does it cost?

We all know there’s no such thing as a free lunch, and arranging a remortgage will come with various costs and fees. Before heading into a remortgage deal you should calculate how much it might cost to complete the exercise. Costs you’ll need to take into consideration could include:

  • Arrangement fees; these are charged by the lender to establish your new mortgage, the amount will vary depending on the provider and the mortgage deal you’re applying for. They can be charged as a fixed amount or a percentage of the total sum you’re borrowing. You can either pay this fee upfront as a one-off cost or add it to your mortgage.
  • Booking fees; some lenders will make this charge on top of the arrangement fee and is usually a non-refundable, one-off upfront payment of between £100 and £200. Not all lenders will add this cost, but it’s worth finding out if it applies for the deal you’re interested in.
  • Legal fees; you’ll need to appoint a solicitor or conveyancer to sort out the legal side of your remortgage. Some lenders have remortgage deals which come with free legal work, perhaps because the work is less involved for a remortgage and so the costs are usually a lot less than your original mortgage.
  • Valuation fees; not all remortgages require a valuation but if you’re moving to a new lender they want to get a valuation of your property before agreeing to the remortgage to be sure of the property’s market value. They will usually appoint their own valuer or surveyor but, unless the deal comes with a free valuation, the cost will be passed on to you. Valuation fees vary according to the size of the property but can be anywhere between £250 to £1,500.

The other, sometimes more costly charges associated with remortgaging will depend on the current mortgage arrangement you have. Check with your current lender to find out if either of the following charges might apply:

  • Early repayment charges (ERCs); this is a fee you may need to pay if you want to exit your current mortgage deal before the end of the term. Early repayment charges won’t always apply, but they can be steep, so be sure to check your terms to see if there is one attached to your contract. It’s more likely to apply to fixed rate mortgages so if you’re on a variable rate it’s unlikely to be a problem.
  • Exit fees; also known as a mortgage completion fee, this is an administration cost applied by lenders when you pay off your mortgage in full – in this case due remortgaging with a new lender. Exit fees are also charged when you reach the end of your mortgage term and make your final mortgage payment.

We work with remortgage experts who can help you work out the costs associated with remortgaging and find the deal which makes sense for you, both in terms of upfront costs and long-term savings. Make an enquiry and we’ll match you with an expert for a free, no-obligation chat.

What if I’m on a fixed rate?

If you’re on a fixed rate mortgage and tied in for a number of years, your lender will probably apply an early repayment charge if you leave your deal early. The charge can run into thousands of pounds and is often calculated as a percentage – charged at between 2-5% of the amount you have borrowed. 

On top of the smaller exit fee which your current lender will also apply, it’s wise to make sure the sums stack up before throwing yourself into something which won’t end up paying off like you hoped. This is especially true if you have a large sum outstanding on your mortgage.

If you would like to get advice from an expert, make an enquiry and we’ll match you with one of the whole-of-market brokers we work with. They will be able to answer all your questions and help you understand all the costs which will apply, taking all your circumstances into account.

Can I do it before my current deal ends?

You can, but as mentioned above, be sure you have a clear idea of all the costs and charges involved in doing so. Once you know the sums you’ll be able to calculate whether remortgaging now or later is the better option.

If you would like to get bespoke advice from an expert, make an enquiry and we’ll match you with one of the whole-of-market brokers we work with. They will be able to answer all your questions and help you understand all the costs which will apply, taking all your circumstances into account.

Can I remortgage with the same lender?

Moving to a better rate with the same lender is called a product transfer and, depending on your lender and the mortgage deal you’re on, should be perfectly possible. There are various advantages to doing this, including saving money on legal fees since there should be minimal legal paperwork involved.

 

 

As well as the potential to save money on legal fees, unless you’re borrowing extra money or making major changes to your mortgage, your lender may not need to carry out further affordability assessments or credit checks. 

If your income has decreased, your expenses have increased, or you have become self-employed since you took out your original mortgage, this can make a product transfer a better option for you, but don’t rely on it. Some lenders might require updated details on your circumstances regardless of the information they already have on file.

A product transfer makes sense if it helps you avoid having to pay early repayment charges which you’re more likely to be hit by when switching to a new lender. You would also avoid paying any exit fees when terminating your existing mortgage.

When should I go to a different lender?

Remortgaging with a different lender gives you a greater opportunity of finding a better deal. The more equity you have in your home and the cleaner your credit, the lower the rate you should be able to get with your remortgage. Over the course of a mortgage term you could potentially save thousands of pounds. 

Many lenders advertise competitive rates to attract remortgagers and will also offer incentives, such as free valuations and legal work.

Remortgaging with a different lender might also be a way to pay off a substantial chunk of your mortgage without incurring any overpayment fees which your current lender might charge. 

How do I apply for a remortgage?

There are usually four steps involved in making a remortgage application:

  1. Establish your loan-to-value (LTV)
    Before you start the remortgage process, calculate how much you want to borrow. Add the amount of enquiry you hold in your current property to any additional borrowing you need and work out what your house is worth (if you have no idea, visit Zoopla or mouseprice).
    Next, divide the loan value by the house value and multiply by 100. For example:
    100k (house) / 75k (loan) x 100 = 75%
  2. Ensure you meet the affordability criteria
    Lenders have different lending rules and each takes different income into account when calculating your affordability. To work out how much you might be able to borrow, calculate your total annual income, subtract your annual outgoings, and then multiply by 4.5. This will give you an approximate maximum loan a lender may be willing to offer you (although some lenders go up to 5x your income and a minority x6).
    An expert mortgage broker, like those we work with, will be able to advise how much lenders may be willing to let you borrow or, for a rough guide, use our mortgage calculator to it work out:
    Affordability Range (3x)
  3. Decide what type of mortgage you want
    Knowing whether you want to remortgage on to a fixed rate or tracker rate on a repayment or interest-only mortgage will help ensure you find the right remortgage deal.
  4. Find the best deal
    Using the LTV you worked out in step 1, search for products that you’re eligible for, or get a whole-of-market remortgage broker to do the legwork on your behalf.
    A whole-of-market expert can help you find the right deal, saving you time, hassle and a heap of potential headaches.
    You may have to pay for a broker but it’s almost always worth it because, by saving money on your payments, the advice can end up paying for itself within a few months of cheaper mortgage payments.

Do I need a deposit?

You don’t need a deposit for a remortgage as you can use the equity you have in your home. If you wanted to get a cheaper mortgage, using a deposit to add to the equity you already own is an option and this will lead to you needing a smaller mortgage.

What documents will I need?

Most lenders will want to see the following documents when you apply:

  • Photo ID (usually a passport or driving license)
  • Proof of address (utility bills, credit card statements etc)
  • Bank statements for the last three months
  • Your last three wage slips
  • Accounts for the last three years, if you’re self-employed (although some lenders will accept as few as 9 months)
  • Proof of any bonuses/commission
  • A copy of your latest P60

Some of the mainstream mortgage providers may insist on hard copies of the above, although printed copies of online bank statements should be acceptable. Sending all of the required documents in one go might help speed up the application process.

Will I need a valuation?

Most lenders will instruct their own surveyor or valuer to value your property as part of the remortgage process. The valuation gives the lender a clear understanding of the value of your property. This will be used to calculate your loan to value, which helps the lender decide the deal they are able to offer you.

Can I apply online?

Mortgage and remortgage applications are often carried out almost entirely online these days and there’s little reason why this shouldn’t be the case for you. As mentioned above, some lenders will need to see hard copies of some of the documentation they require, and should be mailed as per the instructions which will be made clear as you proceed.

Can I get an interest-only remortgage?

Yes, depending on your circumstances and the loan-to-value you’re looking for it may be possible. Interest-only mortgages are harder to secure than repayment mortgages because following the 2007 credit crisis, many homeowners reached the end of their mortgage term without means to repay their loan. This forced the government to step in and introduce strict rules on interest-only lending.

As a result, you have to prove that you have a repayment vehicle in place. It’s no longer possible for you to say you’ll overpay or downsize before the end of the term. 

While some providers have stopped interest-only lending altogether, most lenders who do offer interest-only remortgages will restrict loans to 75% loan-to-value, and some will only go as high as 50%. 
Acceptable repayment vehicles will vary from lender to lender, but the following table gives you an idea of what lenders may be willing to accept…

Repayment methodAccepted by…Criteria
Existing endowment policyMost lendersUsually go on middle projected figure
Stocks/Shares ISAMost lendersUsually take 100% of balance
Savings in the bankFew lenders% of balance may be limited
Other investment bondMost lendersUsually take 100% of balance
Sale of this propertyFew lendersUsually required to have equity over £150k
Sale of another propertyMost lendersUsually ok, often limited to 75% LTV
Pension lump sumFew lendersUsually required to have a large lump sum

If you want to remortgage an interest-only loan, or move from a repayment mortgage to an interest-only mortgage get in touch for a free, no-obligation chat with one of the expert brokers we work with.

Will remortgaging affect my credit score?

Remortgaging might actually be a great way to help rebuild your credit history. By using a remortgage to consolidate multiple debts, you may find it easier to keep track of your repayments. It’s also a good way to show your current, and future, lender that you are able to handle your debts responsibly.

You could even save money because interest on a mortgage is usually charged at far lower rates than you will find with personal loans or credit cards.

What if I’ve been declined in the past?

Don’t despair, if you’ve been declined for a remortgage there are steps you can still take to secure a deal:

  1. Take note of why the lender turned down your application, if they don’t give you a reason, ask them to tell you. It could be because of your credit history or affordability, but knowing the specifics will help you find a deal which will work.
  2. Make an enquiry and chat things through with one of the whole-of-market brokers we work with. Explain what kind of remortgage you’re looking for and the reason you were declined previously.
  3. Sit back and let them search the entire market on your behalf for the lender who is best positioned to help you out where others couldn’t.

Going about things this way could help prevent your credit rating being negatively affected, as approaching several different lenders could leave an unnecessary trail of black marks on your file.

Finding a remortgage specialist who is expert in arranging the type of mortgage you’re looking for is important. Get in touch and we’ll match you with a broker who has helped customers in similar circumstances.

FAQs

Remortgages raise a variety of questions with borrowers, below are the ones we’re asked most often by our customers. If you have a question we haven’t answered, or you’d like some bespoke advice, get in touch and we’ll introduce you to one of the whole-of-market mortgage brokers we work with.

Can I remortgage to raise a cash lump sum?

Yes, it’s possible to remortgage to raise a cash lump sum. The reason you want to raise the cash may affect the lender you can approach but a whole-of-market mortgage broker will be able to help you understand the options you have.

If you are over 55 and own your house outright, you may want to consider an equity release mortgage as an alternative. Whether equity release of this nature is right for you will depend on your specific set of circumstances, and you can learn more in our guide to equity release mortgages.

How much can I raise?

How much you can raise by remortgaging will depend on the loan-to-value, or how much equity you hold in your property. Most lenders allow borrowers to remortgage up to 90%, so if your property is worth 100k, you should expect to be able to borrow 90k. 

You’ll also need to prove your affordability; most lenders will let you borrow around 4.5 times your annual income, although in certain circumstances you can borrow more than this limit.

What if I have no equity?

If you have no equity in your property, you’ll most likely need to borrow more that 90% of the value so you could find it hard to get a better rate than you’re already on.

It may be possible to get a remortgage at 95% but remember to factor in all the associated costs and charges of making a switch as you may find yourself out of pocket even though your original intention was to make a saving.

Are there other alternatives?

Absolutely. If you’re looking to raise capital, a remortgage isn’t your only option and, depending on your circumstances, raising the cash with a remortgage may not be the most cost effective option. A popular alternative you could consider is a second charge mortgage, also known as a homeowner loan. If you want to borrow less than £25,000 an unsecured personal loan might be another possibility.

Remortgage vs. loan: Which is better?

If you’re looking to raise capital through your property, a remortgage may not be the most cost-effective option. A popular alternative you could consider is a second charge mortgage, also known as a homeowner loan. If you want to borrow less than £25,000 an unsecured personal loan might be another possibility.

Second charge mortgage

A second charge mortgage is a loan secured against the equity of a property you already own. It’s a mortgage on top of a mortgage, and may be a more sensible option if you’re locked into a deal with heavy early repayment charges, or if you want to keep the rate you’re already on. 

If you’ve been declined for a main mortgage a secured loan can be another way to raise capital from your property. Second charge lenders tend to be more flexible in their criteria, offering loans to people with more severe credit issues, and more generous assessment of affordability.

Personal loan

Since a personal loan is not secured on a property, your house would not be at risk if you failed to repay. However, interest rates on personal loans tend to be higher than you might find on mortgages or secured loans.

Personal loans are also usually capped at £25,000, and the terms tend to be short in duration meaning the monthly repayments may be higher than the same borrowing across a longer mortgage term.

If you’re unsure whether a secured loan or a remortgage is your best option, get in touch and the advisors we work with will discuss your options, taking all your circumstances into account.

Can I remortgage if I have a secured loan?

Yes, this is possible, and it’s relatively easy to do. If you don’t want to repay the secured loan you’ll need to have enough equity and be able to satisfy the new lender’s affordability requirements. 

Remortgaging could provide you with an opportunity to wrap your second charge mortgage into the same loan so you are only making one loan repayment each month.

To find out what might be best for your own situation, get in touch and we’ll match you with one of the experts we work with for a free, no-obligation chat.

Can I remortgage with bad credit?

Yes, a remortgage with bad credit may be possible. Depending on the severity of your credit issues and your loan-to-value, you could still get competitive rates. 

However, if you have more severe credit issues and a higher LTV, and you’re already on a decent mortgage rate, then you may be better off sticking.

If you’re looking to borrow more cash, remortgaging might still be a better option than taking a personal loan or high rate credit card. If you have equity in your home, you could even look at taking out a second-charge loan.

For the best advice on remortgaging with bad credit, speak with one of the expert advisors we work with. They’ll be able to look at your situation to help you achieve your financial goals.

Should I remortgage if my house has gone up in value?

If your house has increased in value since you bought it then the equity you hold will have gone up too. If you’re in this fortunate situation you could remortgage for a larger amount and release some of the equity as a cash payment.

For example, if you bought your house for £300,000 but it is now valued at £350,000 you could cash in by remortgaging for a higher amount. If you currently owe £200,000 to your mortgage lender, you could remortgage for up to, say, £250,000 and get the additional £50,000 as a cash sum payment.

Should you decide this is a good idea for you, you’ll need to factor in the various fees and charges which will apply.

If your house has gone up in value and you’re considering a remortgage to free up some cash, talk to one of the expert advisors we work with. They will be able to help you work out the costs involved and find you the right remortgage deal with a competitive rate of interest.

Can I remortgage if I own my house outright?

Yes, absolutely. This is often referred to as an unencumbered mortgage.

If you want to release some or all of the equity you own in your home it’s perfectly possible to apply for a remortgage, As a homeowner in this fortunate position you should have a choice of provider to get your remortgage with which should lead to you being able to benefit from the best deals around.

Get in touch to speak to one of the whole-of-market mortgage brokers we work with and they’ll use their knowledge and experience to ensure you get the best available rate, taking all your circumstances into account.

Can I remortgage a buy-to-let?

Yes, depending on your circumstances, it should be possible to remortgage your buy-to-let property. Whether you wish to release some equity to fund renovations or to put towards the deposit for your next buy-to-let property, remortgaging should be an option for you.

To get bespoke advice and an idea of what rates you might be able to qualify for, make an enquiry for a free, no-obligation chat with one of the expert whole-of-market brokers we work with.

Can I remortgage to purchase a buy-to-let?

Yes, it’s possible to remortgage your home to release equity to purchase a buy-to-let property.

It’s also possible to switch your residential mortgage to a let to buy mortgage, which allows you to convert your current home into a buy-to-let and arrange a new residential mortgage on a new home.

If you remortgage to buy a second property that you intend to rent out to tenants, or you intend to let your current property with a let to buy mortgage, affordability is based on the rental income the property can achieve, amongst other factors.

The expert brokers we work with will be able to help you make either type of remortgage arrangement. Get in touch for a free, no-obligation chat to find out how much you could borrow and what rates you could attain.

I’m an expat. Can I get a remortgage?

If you’re looking to remortgage a property you own in the UK, this is generally easier to arrange than if you want to arrange a new mortgage. If you have an up-to-date UK credit history you should be able to get a competitive deal on your expat remortgage.

If you want to remortgage a property you own in another country, you should anticipate the process being a little less straightforward, but not impossible to achieve. When dealing with property abroad you need to make sure you understand all the tax and legal implications that might arise from a UK citizen owning property abroad.

Taking all your circumstances into account, the experts we work with can help make sure you get the right advice on your remortgage and help you find a deal that works for you.

How does a joint remortgage work?

A joint remortgage works in the same way as a regular remortgage, the main difference being that both or all of the people named on the mortgage will be assessed when the lender is carrying out their affordability and eligibility checks. 

All parties named on the remortgage will be held responsible for making the remortgage payments.

What’s a transfer of equity remortgage?

A transfer of equity is when you change the legal ownership of a property. It often happens in a situation where a borrower is added to or released from a mortgage. 

A transfer of equity might occur following a relationship breakdown where a joint mortgage has to be transferred to sole ownership. When this occurs a mortgage lender will want to ensure that the remaining owner of the property can afford the repayments on their own.

This will involve the same affordability and eligibility checks that you would need to have if you were taking out a brand new mortgage in your sole name.

If you are remortgaging to buy someone out of a mortgage, the mortgage lender must give consent to the transfer before releasing the former owner from the mortgage. If the person remaining on the mortgage and in the property can’t prove that they can afford the mortgage repayments alone, the former joint owner may remain liable on the mortgage even after the transfer.

Remortgaging to transfer equity can be complicated. To make things easier get advice from an expert. We work with whole-of-market mortgage brokers experienced in arranging transfer of equity remortgages and are on hand to help you make the transition as smooth and hassle-free as possible.

Can I remortgage a Help to Buy property?

Yes, absolutely. Remortgaging a Help to Buy property isn’t really any different to refinancing a regular mortgage. All of the same criteria and assessments will be the same and your equity loan balance will be carried over.

Speak to an expert

Whatever the reasons you’re considering arranging a remortgage, we work with experts who can help make sure you get the right advice and the best remortgage rates, taking all your circumstances into account.

Call 0808 189 2301 or make an online enquiry for a free, no-obligation chat today.

All the experts we work with are whole-of-market mortgage brokers with access to mortgage providers across the entire UK. They will be happy to answer all your questions and have the tools, experience and know-how to help you get the best available rate on your remortgage deal.

Updated: 21st October 2020
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.