Remortgage guide

What is a ‘remortgage’?

Remortgaging is when you take out a new mortgage on a property that you own and already have a mortgage for.

It is NOT the same thing as taking out a second mortgage. When you remortgage, you switch your current mortgage to a new deal. You pay your old mortgage off with the proceeds of your new mortgage and use your property as security. 

You can do this with your existing lender or you can transfer to another one.

Basically – it’s the process of shopping around for a better deal.

Why remortgage?

For most people, their mortgage is their biggest financial outgoing. So reducing this cost will likely help you make the biggest saving

Each person will have their own unique reasons for choosing to remortgage, but from our experience, they usually fall into one of these four categories.

  • Fixed rate comes to an end. The typical time offered for a fixed rate mortgage is around two years. When this comes to an end, your bank or lender will put you on their normal variable rate (SVR) – which is usually higher. If this is the case then you should consider remortgaging for a better deal. 
  • To decrease your monthly repayments. You may want to look for deals that let you reduce the amount you pay each month, although this will often be done by extending the term of your mortgage. 
  • To shorten your mortgage term. On the flip side, you may want to decrease your mortgage term so you can be mortgage-free faster. 
  • To borrow more money. If your home has risen in value, you may want to release the equity that has built up to spend on other things – such as university fees for your children or home improvements. Some people also choose to use this money to cover other debts; as mortgage interest rates tend to be cheaper than credit cards, for example. 

Is it easy to remortgage?

In most cases, yes; the mortgage process is straightforward. Like with your mortgage, you find the product you want and apply with your broker, but the process itself is a lot simpler as there are no contracts to exchange and fewer searches to be carried out.

It usually takes around 4-6 weeks.

Can I remortgage with bad credit?

It depends on the severity of your credit issues and the Loan To Value (the percentage of the property value you want to borrow). For example, the more severe your issues and the higher your LTV, the less likely you are to get a better deal.

How much can I remortgage for?

Again, this depends on the LTV but many lenders will allow you to remortgage up to 90%. 

You may find it difficult to remortgage if you don’t have much left to pay off. Some lenders won’t offer a deal on anything less than £25,000.

Can I remortgage early?

It will depend on your mortgage deal. In many cases, you will be legally required to have owned the property for 6 months before you can start thinking about remortgaging. 

You may also face early repayment charges if you remortgage before your fixed-rate has come to an end. In some cases, the saving of remortgaging will not cover these charges and it will be more financially viable to wait. 

How to remortgage

Around three months before your fixed rate comes to an end, you should start doing your research.

You can use our Beat Your Bank calculator to determine if there are deals out there that will allow you to save time and money on your current mortgage.

Then, you can contact us at PropertyPal Mortgages and we’ll get the ball rolling for you.

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Last modified: 21/10/2021