Remortgaging explained

If your mortgage deal is coming to an end, or your circumstances have changed, you may have heard that it is worth "remortgaging". It sounds more complicated than it is. This short guide explains what remortgaging actually means, the common reasons people do it, when to start, the costs to watch for, and what the process looks like — so you can decide whether it is worth exploring.

What remortgaging is

Remortgaging means taking out a new mortgage to replace your existing one, either with your current lender or a different one, while staying in the same property. You are not moving home — you are simply changing the loan secured against it. Most people remortgage when an existing fixed or discounted deal ends, to avoid slipping onto their lender's standard variable rate (SVR), which is often higher.

It is worth knowing that staying with your current lender on a new deal is usually called a "product transfer" rather than a full remortgage. A product transfer tends to involve less paperwork and often no new affordability check, but you are only seeing that one lender's deals. A full remortgage to a new lender opens up the wider market but involves fresh checks and legal work. Which works out better depends on the deals available and your circumstances, and it is exactly the sort of comparison an adviser can run for you.

Common reasons to remortgage

People remortgage for several reasons, and often more than one applies at once:

• To get a better rate. When an introductory deal ends, moving to a new deal can reduce your monthly payments compared with sitting on the SVR.
• To avoid the standard variable rate. The SVR is the default rate you move to when a deal expires. It can be higher and can change at the lender's discretion, so many people switch before that happens.
• To release equity. If your property has risen in value or you have paid down the balance, you may be able to borrow a little more against it — for home improvements, for example. Borrowing more increases your debt and the interest you pay, so it deserves careful thought.
• To change the mortgage itself — for instance moving from variable to fixed for certainty, adjusting the term, or freeing up the flexibility to overpay.

Timing: when to start

The best time to look at remortgaging is before your current deal ends, not after. A new mortgage offer is often valid for a number of months, so many people start the process a few months ahead — as a rough guide, around three to six months before their existing deal expires. That leaves time to arrange a new deal that begins the moment the old one finishes, avoiding a spell on the SVR. Starting early also gives you room to shop around rather than rushing a decision. Exactly how far ahead you can lock in a rate varies by lender.

Costs and fees to weigh up

Remortgaging can save money, but it is not automatically free, so weigh the savings against the costs. Depending on the deal, these can include:

• Early repayment charges if you leave your current deal before it ends — these can be significant, so always check before switching.
• Arrangement or product fees on the new mortgage, which are sometimes added to the loan.
• Valuation and legal costs, though many remortgage deals include these or offer them free as an incentive.
• Exit or admin fees from your existing lender.

The key is to compare the total cost of switching against the total saving over the deal period, rather than looking at the headline rate alone. A good adviser will do this maths with you.

How the process works

A typical remortgage follows a familiar path: you review your current deal and goals, compare what is available, apply to the chosen lender, the lender values your property and checks affordability, and — if all is well — issues an offer. Solicitors then handle the legal switch from the old lender to the new one, and the new mortgage takes over. It usually takes a few weeks rather than days, which is another reason to start in good time. If you would rather not do the comparison yourself, our regulated partners can handle it for you — you can learn more on our mortgages and lending page or simply get in touch.

Remortgaging is one of the more straightforward things you can do to keep your borrowing working for you, but it is still a secured loan — your home may be repossessed if you do not keep up repayments on a mortgage secured against it. Understanding the reasons, the timing and the true cost of switching helps you judge whether it is worth it in your case. This guide is general information, not mortgage advice; a regulated adviser can give you a recommendation based on your circumstances.