Last updated on 27 January 2017
If you’re unhappy with your mortgage or your current deal is coming to an end, now might be a good time to think about remortgaging.
What is remortgaging?
This is when you switch to a new mortgage deal. It could be with your existing lender or a new mortgage provider.
Why do it?
There are all sorts of reasons why you may want to remortgage:
- To get a better deal than the one you have.
- To get a more flexible deal. Many mortgages now have more flexible features than they used to. These include allowing you to overpay, underpay, take payment holidays, repay capital lump sums and change the term of your mortgage.
- To raise extra cash. You may want to spend this on home improvements or helping your children get on the property ladder.
- To move to a mainstream mortgage. If you have an expensive mortgage, perhaps because you had a poor credit history or are self-employed, you may be able to remortgage to a cheaper standard mortgage when your circumstances change.
When to do it
If you're coming to the end of your current mortgage deal you may be looking for a new deal. If you've been on a fixed-rate, discount, tracker or capped-rate deal you'll probably have to move back to your lender's standard variable rate (SVR) once the deal comes to an end. Your lender will almost certainly have some deals with a lower rate of interest than its SVR. You may also want to look at what other lenders are offering.
Another good time to consider remortgaging is if interest rates change a lot. If you're on a fixed rate and interest rates fall you may find you're paying over the odds. Whereas if interest rates look like they're going to rise and you're on a variable rate of interest, you may want to switch to a fixed rate.
How to do it
First check if there are any early repayment charges on your current mortgage. Also find out exactly how much you owe by asking your lender for a written redemption statement.
Next decide if you want to change the terms of your loan. For example, do you want to extend the term or borrow more money?
Consider what type of deal you want. For example, if you're choosing a new mortgage do you want a fixed rate or variable rate, and if so, what type? Then look at what's available, allowing plenty of time before your current deal comes to an end. If you want help, visit a mortgage adviser.
Once you've found a deal you're interested in, compare the repayments with your current ones. Also make a note of all the costs associated with the new mortgage, such as arrangement fees. The charges should be included in the annual percentage rate of change (APRC) quoted by the mortgage lender. However, the APRC quoted also assumes you will hold the mortgage for the full term, so the APRC is not always the best rate to use when comparing mortgages. Then contact your existing lender and let it know you are thinking of remortgaging. See if it can match or better the deal you're considering.
What to consider
Once you have all these details, work out exactly how much it will cost you to remortgage. Look at:
- any penalty fees for leaving your current deal
- all fees associated with the new deal
- any legal fees for remortgaging
- any fee if you use a mortgage broker.
Look at how much the new mortgage deal will cost compared to your existing deal. Or if you are coming to the end of a deal compare the cost of a new deal with your existing lender and with a new lender.
Remortgaging can be a hassle, so you want it to be worth it.