Remortgage Guide

When, Why & How to Remortgage

Your mortgage doesn't necessarily need to stay with the same lender or on the same product for its entire term.

For many homeowners, there comes a point when it makes sense to review the mortgage they already have.

This often happens when a fixed or introductory deal is approaching its end, but there can be other reasons to review your mortgage too — perhaps your circumstances have changed, your property has increased in value, you want to change the mortgage term, or you need to raise additional funds.

Remortgaging can be useful, but changing lender isn't automatically the right answer.

Sometimes staying with your existing lender and switching products may be more appropriate. In other circumstances, doing nothing may be reasonable.

The important thing is to understand your options, the costs involved and how any change fits your circumstances.

What Is a Remortgage?

A remortgage usually means replacing the mortgage on your existing property with a new mortgage, typically with a different lender, without moving home.

For example, you may currently have a mortgage with one bank but arrange a new mortgage with another lender.

The new mortgage is used to repay the existing mortgage, and your borrowing continues with the new lender.

This is different from simply taking a new mortgage product with your existing lender.

What Is a Product Transfer?

A product transfer generally means moving onto another mortgage product with your existing lender rather than remortgaging to a different lender.

This can sometimes involve a simpler process because you're remaining with the same lender.

However, that doesn't automatically mean it is the most appropriate option.

Before proceeding, it can be useful to compare what your existing lender is offering against other mortgage options available to you.

When Should I Start Reviewing My Mortgage?

Don't wait until the day your current mortgage deal ends.

Starting the conversation in advance gives you time to understand your options.

You can establish:

• When your existing deal ends

• Whether Early Repayment Charges apply

• Your outstanding mortgage balance

• Your approximate property value

• Your current loan-to-value

• What your existing lender may offer

• What alternatives may be available elsewhere

• Whether your circumstances have changed

Exactly how early you can secure a new mortgage will depend on the lender and product.

The important point is to give yourself enough time to make an informed decision rather than leaving everything until the last minute.

How Do I Find Out When My Current Deal Ends?

Check your original mortgage offer, most recent mortgage statement or online mortgage account.

Look for the end date of your current product rather than the end of the overall mortgage term.

These are two very different things.

For example, you could have a mortgage with many years remaining but only a few months left on your current fixed-rate deal.

Your lender or mortgage adviser can also help establish the relevant dates.

What Happens When My Fixed Mortgage Ends?

Your mortgage doesn't become immediately repayable simply because your fixed-rate period has finished.

If you don't arrange another mortgage product, you would normally move onto the lender's applicable reversion rate specified under your mortgage terms.

This is often a Standard Variable Rate, although the exact arrangement depends on your lender and mortgage contract.

Because the interest rate may be different from your existing fixed rate, your monthly mortgage payment could also change.

This is why reviewing your mortgage before the existing product expires can be useful.

Why Do People Remortgage?

There are many reasons someone might review or remortgage their mortgage.

These can include:

• Their existing mortgage deal is ending

• They want to investigate a different interest rate

• Their property value has changed

• Their mortgage balance has reduced

• Their loan-to-value has improved

• They want to change the mortgage term

• They want greater payment certainty

• Their financial circumstances have changed

• They want to raise additional funds

• They want to consolidate certain borrowing

• They want to change the structure of their mortgage

Not every reason will be appropriate for every borrower.

The costs and consequences should be considered before making a change.

What Is Loan-to-Value and Why Does It Matter?

Loan-to-value, or LTV, compares your mortgage balance with the value of your property.

For example:

Property value: £300,000

Mortgage balance: £180,000

Loan-to-value: 60%

As you repay a repayment mortgage, your outstanding balance generally reduces.

If your property value has also increased, your loan-to-value may be lower than when you originally arranged the mortgage.

Mortgage lenders commonly offer different products at different LTV bands.

This means changes in your mortgage balance and property value could affect the products potentially available when you remortgage.

How Do I Know What My Property Is Worth?

You can start by looking at recent comparable property sales and local market information.

However, an estate agent's estimate, online valuation and mortgage lender's valuation aren't necessarily the same thing.

When you make a mortgage application, the lender will normally assess the property value for its own lending purposes.

The lender's valuation is the figure that matters when it determines the loan-to-value for that particular mortgage application.

What Are Early Repayment Charges?

Before remortgaging, check whether your existing mortgage has an Early Repayment Charge, commonly abbreviated to ERC.

An ERC can apply if you repay your mortgage during a specified period.

This is particularly common with fixed-rate mortgage products.

The charge can sometimes be significant, so it should be considered before deciding to leave your existing mortgage.

Your mortgage statement or original mortgage offer should provide information about applicable Early Repayment Charges.

Can I Remortgage Before My Fixed Rate Ends?

Potentially, yes.

But that doesn't necessarily mean you should.

If an Early Repayment Charge applies, the cost of leaving your current mortgage needs to be considered alongside any potential benefit of changing mortgage.

There may also be other fees associated with the new mortgage.

The calculation therefore isn't simply:

Old rate vs new rate.

The overall cost of changing needs to be considered.

What Costs Can Be Involved in Remortgaging?

Depending on the mortgage and lender, costs could include:

• Early Repayment Charges

• Mortgage product fees

• Valuation fees

• Legal or conveyancing costs

• Adviser fees

• Other lender charges

Some remortgage products may include incentives or assistance with certain valuation or legal costs.

The exact benefits and conditions vary between products.

A mortgage with a lower interest rate but substantial fees isn't automatically cheaper overall.

Should I Stay With My Existing Lender?

Sometimes staying with your existing lender can be a suitable option.

Your lender may offer you a new mortgage product through a product transfer.

Potential advantages can include a more straightforward process and, depending on the lender and circumstances, fewer underwriting or legal requirements than moving to another lender.

But convenience shouldn't be the only consideration.

It can still be useful to understand how the existing lender's offer compares with other options available to you.

Is a Product Transfer Always Easier?

It can be, but the process depends on the lender and what you're trying to achieve.

A straightforward product transfer where the mortgage balance and structure remain broadly unchanged may involve fewer steps than a full remortgage.

However, if you want additional borrowing, changes to borrowers, significant changes to the mortgage term or other alterations, further assessment may be required.

Always check what your lender actually requires rather than assuming the process will be automatic.

Will I Need Another Affordability Assessment?

If you're remortgaging to a new lender, the new lender will normally need to assess the application against its lending criteria.

This can include considering your:

• Income

• Employment

• Credit commitments

• Household circumstances

• Credit history

• Mortgage term

• Property

• Overall affordability

Even if you've maintained your existing mortgage perfectly, another lender isn't automatically required to accept the application.

Its own lending criteria will apply.

Will My Credit History Be Checked Again?

A new lender may carry out credit checks as part of assessing a remortgage application.

Your credit position can therefore remain important even though you're already a homeowner.

Before applying, make sure your financial information is accurate and tell your mortgage adviser about any significant credit issues.

Avoid assuming that having an existing mortgage guarantees acceptance for another one.

What Documents Might I Need?

Depending on the lender and your circumstances, you may need documents such as:

• Identification

• Proof of address

• Recent bank statements

• Recent payslips

• Evidence of other income

• Self-employed accounts or tax documents

• Existing mortgage statement

• Details of credit commitments

Requirements vary between lenders and applicants.

For a more detailed explanation, read our Documents Needed for a Mortgage guide.

Can I Change My Mortgage Term When I Remortgage?

Potentially, subject to lender criteria and affordability.

For example, you may want to reduce the remaining mortgage term.

A shorter term generally means higher contractual monthly payments on a repayment mortgage but can reduce the amount of interest paid over the remaining life of the mortgage.

Alternatively, extending the term can reduce the contractual monthly payment.

However, borrowing for longer can increase the overall interest paid.

The monthly payment shouldn't therefore be considered in isolation.

Can I Change From a Two-Year to a Five-Year Fixed Rate?

Potentially, yes.

When arranging a new mortgage product, you can consider the fixed-rate periods available at that time.

You aren't necessarily required to choose the same fixed period you had previously.

Whether a shorter or longer fixed period is appropriate depends on factors such as:

• Your future plans

• Payment certainty

• Available rates

• Product fees

• Early Repayment Charges

• Your likelihood of moving

• Your wider financial circumstances

Our Mortgage Rates & Fixed Deals Explained guide provides more information about comparing different mortgage structures.

Can I Borrow More When I Remortgage?

Potentially.

This is sometimes known as capital raising or additional borrowing.

You might consider additional borrowing for purposes such as home improvements or other significant expenditure.

The lender will consider factors including:

• The reason for the borrowing

• Your income

• Affordability

• Property value

• Existing mortgage balance

• Proposed loan-to-value

• Credit history

• Its own lending criteria

Just because you have equity in your property doesn't automatically mean you can borrow the equivalent amount.

Affordability and lender criteria still apply.

Can I Remortgage for Home Improvements?

Potentially, subject to affordability and lender criteria.

Some homeowners consider raising additional mortgage funds for improvements such as extensions, renovations or other significant property works.

However, increasing your mortgage means increasing borrowing secured against your home.

You should understand how much the additional borrowing will cost and how long it will take to repay.

Can I Remortgage to Consolidate Debts?

Some mortgage lenders may permit additional borrowing for debt consolidation, subject to their criteria.

However, this requires particularly careful consideration.

Moving unsecured borrowing onto a mortgage can reduce the apparent monthly payment because repayment may be spread over a much longer period.

That doesn't necessarily mean the debt becomes cheaper.

You could pay interest for considerably longer, and borrowing that was previously unsecured would become secured against your home.

The overall cost, term and risks need to be carefully considered.

What If My Income Has Changed?

Changes in income can affect a remortgage application.

For example, you may have:

• Changed employer

• Become self-employed

• Become a company director

• Reduced your working hours

• Started receiving variable income

• Retired

• Experienced another significant change in circumstances

Different lenders assess income in different ways.

Tell your mortgage adviser about changes before an application is submitted so the relevant lender criteria can be considered.

What If I've Become Self-Employed?

Being self-employed doesn't automatically prevent you from remortgaging.

However, the way your income is assessed may be different from when you were employed.

Depending on your circumstances and the lender, information could include accounts, Tax Calculations, Tax Year Overviews or other evidence.

Company directors, sole traders, contractors and partners can also be assessed differently.

The appropriate approach depends on how your income is structured.

What If My Credit History Has Changed?

Your credit position may be different from when you originally took your mortgage.

If you've experienced missed payments, defaults, County Court Judgments or other credit difficulties, tell your mortgage adviser before making a new application.

Different lenders have different criteria for previous credit issues.

The type of issue, amount, date and current status can all be relevant.

What If My Property Value Has Fallen?

A lower property value can increase your loan-to-value.

This could affect the mortgage products available.

In some circumstances, your existing lender's product-transfer options may therefore be particularly important to investigate alongside potential remortgage options.

Don't assume that an estimated online property value will necessarily be the value used by a mortgage lender.

Should I Add Mortgage Fees to the Loan?

Some mortgage product fees can potentially be added to the mortgage.

This can reduce the amount you need to pay upfront.

However, adding a fee to the mortgage increases the amount borrowed, and interest may be charged on that fee while it remains outstanding.

Whether paying a fee upfront or adding it to the mortgage is appropriate depends on your circumstances.

Can I Make a Lump-Sum Payment Before Remortgaging?

Potentially.

Reducing the outstanding mortgage balance could change your loan-to-value.

However, check your existing mortgage's overpayment rules first.

Paying more than the lender permits during an Early Repayment Charge period could result in a charge.

You should also consider whether using a significant amount of savings to reduce the mortgage is appropriate for your wider financial position.

Should I Remortgage With the Same Mortgage Term?

Not necessarily.

A remortgage is an opportunity to review the remaining term.

For example, if you originally took a 30-year mortgage and five years have passed, simply arranging another 30-year mortgage could extend the total period over which you're borrowing.

That may reduce your monthly payment but could increase the total interest paid.

Consider the term deliberately rather than automatically selecting the longest available option.

What Happens During a Remortgage?

A typical remortgage to another lender can involve several stages.

1. Review your existing mortgage

Establish your balance, current rate, deal-end date and any Early Repayment Charges.

2. Review your circumstances

Your income, expenditure, credit commitments, property value and future plans should be considered.

3. Research mortgage options

Your existing lender's options can be considered alongside relevant alternatives.

4. Submit the mortgage application

If you're moving lender, a full mortgage application will normally be required.

5. Property assessment

The new lender will need to be satisfied with the property and its value.

6. Underwriting

The lender assesses your circumstances and supporting information.

7. Mortgage offer

If approved, the new lender issues its mortgage offer.

8. Legal work

The necessary legal work is completed.

9. Completion

The new mortgage funds are used to repay the existing lender, and your mortgage moves to the new arrangement.

The exact process varies depending on the lender and circumstances.

Product Transfer vs Remortgage

A useful way to think about the decision is:

Product Transfer

You remain with your existing mortgage lender but move onto another mortgage product.

Remortgage

You arrange a new mortgage, normally with another lender, which repays your existing mortgage.

Neither route is automatically better.

The comparison should consider the available rate, fees, overall cost, criteria, flexibility and your circumstances.

Don't Compare Interest Rates Alone

A mortgage advertised at a lower interest rate isn't automatically the cheaper option.

Consider:

• Product fees

• Early Repayment Charges

• Valuation costs

• Legal costs

• Adviser fees

• Incentives

• Mortgage term

• Monthly payment

• Overall cost over the relevant period

Sometimes a product with a slightly higher interest rate can work out differently once fees are included.

This is why comparing the overall mortgage rather than just the headline rate matters.

Remortgage Checklist

Before reviewing your mortgage, gather:

☐ Latest mortgage statement

☐ Current mortgage balance

☐ Current interest rate

☐ Current monthly payment

☐ Fixed or introductory deal end date

☐ Early Repayment Charge information

☐ Remaining mortgage term

☐ Approximate property value

☐ Recent income information

☐ Details of loans and credit commitments

☐ Information about any changes to your circumstances

Then consider:

☐ Do I want payment certainty?

☐ Do I expect to move home?

☐ Do I want to change my mortgage term?

☐ Do I need additional borrowing?

☐ Has my property value changed?

☐ Has my income changed?

☐ Has my credit position changed?

☐ What is my existing lender offering?

☐ What alternatives are available?

☐ What are the costs of changing mortgage?

Don't Leave Your Mortgage Review Until the Last Minute

Your existing mortgage deal ending is a useful opportunity to review your position.

The mortgage market may have changed since you originally borrowed.

More importantly, your life may have changed too.

Your income, family, property value, mortgage balance, plans and priorities may all be different.

A mortgage that was appropriate several years ago shouldn't automatically be assumed to remain the most appropriate arrangement today.

Starting the review before your existing deal ends gives you time to understand the options and make an informed decision.

Ready to Review Your Mortgage?

Cambs Ely Mortgages can help you review your existing mortgage, understand what your current lender is offering and investigate alternative mortgage options based on your circumstances.

We help homeowners in Ely, Cambridge, Cambridgeshire, East Anglia and across England, with appointments available remotely.

You can also explore our other Guides & Resources, including the Mortgage Rates & Fixed Deals Explained, Mortgage Process Guide, Mortgage Glossary and Mortgage Calculators.

Building Blocks for a Brighter Future.

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Important Information

This guide is for general information and educational purposes and shouldn't be treated as personalised mortgage, financial, legal or tax advice.

Remortgaging may not always be appropriate. Early Repayment Charges, product fees and other costs may apply. Mortgage availability depends on your circumstances, property, affordability and lender criteria.

Think carefully before securing other debts against your home. Extending the term of borrowing may increase the total amount repaid.

Your home may be repossessed if you do not keep up repayments on your mortgage.