When should you remortgage?

At a glance

• Remortgaging is when you take out a new mortgage to replace an existing arrangement, often at the end of an initial fixed or discounted rate.
• In times of economic uncertainty, moving to a fixed rate for a set term can be a good way of ensuring your monthly payments stay the same for a specified period.
• It’s important to consider both the financial benefits and drawbacks of moving to a new deal, especially if there is a penalty for leaving your current deal early.

Remortgaging is when you take out a new mortgage on your home to replace an existing deal. This can be with the same lender (known as a product transfer) or a new one, giving you the opportunity to take advantage of a mortgage with better features, fixed repayments or lower interest rates than you have currently.

But when should you remortgage, and is there ever a time when it’s best to stay put? We take a look.

When is the best time to remortgage?

There are a few key occasions when it would be recommended to remortgage, and they all have one thing in common – they can help you save money.

When you’re coming to the end of a fixed deal

This is perhaps the most obvious time to remortgage, as once you’re at the end of a fixed deal you’re no longer tied in and there won’t be any early repayment charges to think about. In fact, failing to remortgage at this stage could end up being a lot more expensive – if you did nothing you risk going onto your lender’s standard variable rate (SVR), which would likely be far higher than the best fixed mortgage rates available and means your repayments would increase accordingly.

When you’re on a lender’s SVR

If you’re already on a standard variable rate, you’ll probably want to remortgage as soon as possible. While some may value the flexibility of SVRs – you’re not tied in so can move at any point, which can be useful if you’re thinking of moving, for example – the majority of borrowers would benefit far more by remortgaging.

When interest rates are favourable

There are two scenarios where rates might encourage you to remortgage even if you’re still in a fixed or discounted variable deal – either interest rates are predicted to rise and so you remortgage to another fixed rate to protect from rising costs for another term, or interest rates have fallen and they’re now significantly lower than your current deal, and so you could save money by remortgaging onto a cheaper rate to bring your monthly repayments down.

However, you could face early repayment charges with either of these options, so it’s vital to factor these into your calculations to make sure it’s still worth it.

Find out if you could benefit from a lower rate by comparing the best remortgage deals currently available, and use our mortgage calculator for an idea of how much you could save.

How soon can you remortgage?

Theoretically you can remortgage whenever you wish, even if you’ve only just locked into a new deal, though many lenders expect you to be on the property deeds for a minimum of six months first. Yet even if they’ll let you remortgage sooner, it may not be wise to do so. This is because remortgaging when you’re still in an initial term essentially means you’re breaking your mortgage contract, and there will likely be both exit fees and early repayment charges to consider, which could completely outweigh any benefits of remortgaging to a cheaper deal.

And the costs can be significant. Many early repayment charges (ERCs) are worked out on a percentage basis, typically around 3% of the mortgage advance. Let’s say you had a mortgage of £200,000 and wanted to remortgage – this could leave you with an ERC of £6,000, as well as an exit fee of another few hundred pounds, not to mention the additional costs involved in setting up the new mortgage.

That’s not to say you have to wait until your initial term is up before you can start the remortgaging process.

In fact, it’s typically recommended to start your search for a new mortgage deal around three-six months before your current deal comes to an end, which can be a particularly good move if rates are starting to rise as you’ll be able to lock in at a lower rate before your current deal finishes. Make sure to spend time comparing the best remortgage rates, or speak to a broker for additional support.

Should you stay with the same lender or switch?

One of your biggest considerations is likely to be whether to stay with your current lender or switch to a new one. While the answer will often come down to the rates available, there can be other things to consider as well. Find out more in our guide on whether to switch mortgage lenders.

Is it worth remortgaging early?

If you’ve done the sums and worked out that the savings you’d make by remortgaging early would outweigh the early repayment charges and any additional costs involved, then yes, it may be worth remortgaging early.

There are a few other scenarios when it might be worthwhile as well, such as:

• If you want to borrow more, perhaps for essential home improvements, and don’t want to wait until your current deal expires.
• If you’re in a position to overpay your mortgage – perhaps you’ve recently got a significant lump sum from an inheritance, for example – which would mean you’d be able to access a cheaper mortgage deal with a lower loan-to-value (LTV).
• If you’re locked in a long-term deal and your home’s value has increased significantly, you may be able to secure a lower-LTV (and therefore cheaper) deal by remortgaging. This is just one reason why it’s important to carefully consider how long to fix your mortgage for at the outset – there’s a lot to bear in mind!

When it may be a bad idea to remortgage

While remortgaging can often be beneficial, there are times when it may not be worth remortgaging after all. These can include:

• If you’ve nearly paid off your mortgage, as the fees of remortgaging could make it more expensive than staying on a lender’s SVR for a month or two (though always make sure to work it out; speak to a broker if you need support).
• If there’s any other situation where the fees would outweigh any potential saving.
• If you’re planning to move house soon it can sometimes be worth holding off, though a lot of deals will allow you to port your mortgage to a new property, so make sure to run through all the options.
• Any situation where you’d struggle to be approved for a mortgage, such as if you’ve fallen into negative equity, your income has dropped or you’ve had any other financial issues. Make sure to check your credit score in advance to get a better idea of what to expect.

What is the remortgaging process?

The process of remortgaging is largely the same as getting a fresh mortgage, but there are a few additional factors to bear in mind.

1. Know where you stand

The first thing to do is check your credit score so you know the likelihood of being approved for a new deal. Next, try to find out what your home is worth and how much you have left on your current mortgage balance – these factors will determine the amount you’re looking to borrow and the LTV you’ll be eligible for, and from there you’ll have a better idea of the remortgage options available to you and how much your repayments are likely to be.

2. Apply for a mortgage in principle

Getting a mortgage in principle is an important step, even if you’re staying with your current lender. You’ll get a more accurate idea of the amount you’ll be able to borrow based on your unique circumstances, so make sure to have all important documents lined up (such as bank statements and proof of income).

3. Lender arranges a valuation

Your lender will arrange a valuation to make sure the property is worth what you say it is. Sometimes the cost will be covered as part of the mortgage, but if not you may be expected to pay for it. Note that a valuation isn’t the same as a survey, which you shouldn’t need if you’re staying in the property.

4. Apply for a full mortgage

Next you can apply for the mortgage, which is where things like full credit checks take place and you can finalise the terms of the mortgage deal. If you’re staying with your current lender this should be a fairly quick process, but if you’re moving lenders you’ll likely need to provide more details.

5. Mortgage completion

If your application is approved, the final step is remortgage completion. If you’re staying with your lender it’s simply a case of transferring the product, but if you’re moving lenders you’ll need a solicitor/conveyancer to undertake the additional legal work involved. Either way, you’ll be notified of the completion date – when your old mortgage is repaid and your new one starts – and will be given a repayment schedule to help you keep up to date.

The whole process typically takes between four and eight weeks, but this can vary depending on your circumstances and whether you’re moving lenders or not.

What if rates fall before I complete the remortgage?

While it can often be helpful to lock in a new rate earlier, if the market goes the other way and rates start falling, you may be worried that you’ll end up paying far more than you need to. Luckily, if this happens you should be able to switch to the lower rate before your new mortgage completes, provided you do so at least 14 days in advance. Bear in mind that you may lose out on any fees you paid to secure the mortgage, so make sure to talk it through with a broker if you’re unsure.

Speak to an award-winning mortgage broker today

Mortgage brokers remove a lot of the paperwork and hassle of getting a mortgage, as well as helping you access exclusive products and rates that aren’t available to the public. Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and are required to pass specific qualifications before they can give you advice.