How does remortgaging work in the UK?

If you’ve ever thought to yourself, “I know this is probably a stupid question, but what is remortgaging?” you’re not alone. Thousands of UK homeowners feel the same way when their first fixed-term mortgage deal is about to end.

For those who have never remortgaged their home before, the whole idea can sound daunting and confusing. But all you really need to understand is that it’s your opportunity to switch your mortgage to a better deal.

Let’s break down what it means, when to do it, and how a mortgage broker can make life easier.

We promise no sales pitch, no complicated language. Just clear answers to the questions real people ask us every single day.

What Is Remortgaging? An easy explanation in clear English.

Remortgaging is when you switch your current fixed-term mortgage deal to a new one.

That’s it.

You’re not buying a new house, and you’re not taking on extra debt unless you choose to.

You’re just replacing your old mortgage with a new fixed-term deal that (hopefully) saves you money or suits your life better.

You can choose to remortgage with your existing lender or a different one. Most people do this when their fixed-rate deal ends. If you don’t, your lender will move you onto their standard variable rate (SVR), which is usually more expensive and can change at any time because it’s linked to the Bank of England base rate.

Why do people remortgage their homes?

We want you to think of remortgaging as putting money back in your pocket. No one wants to be trapped paying more every month than they need. That’s why you need to know how to remortgage your home.

Here are the most common reasons why homeowners choose to remortgage.

You are remortgaging because… your fixed-term deal is coming to an end.
When you take out your first mortgage, you sign up for an exclusive fixed-term deal with your lender (often between two and five years). The lender will offer you a preferred (and agreed-upon) rate during that time because you are locked in for a specific period. When that initial time-specific deal ends, your lender moves you to their Standard Variable Rate (SVR). The bad news for you is that the SVR is almost always more expensive.

No one wants a nasty surprise when their fixed deal ends, so getting ready a few months before the end of your mortgage term means you could potentially save £££s.

You are remortgaging because…you want to save money.

We’ve all seen the horrors of changing interest rates in the last few years. Those who hadn’t remortgaged at the end of their term and were on their lender’s SVR were severely hit by the interest hikes.

We would hate to see that happen to you.

If you can switch to another fixed-term interest rate, you’ll be protected from those potential rate rises. And as a bonus, if you’ve gained enough equity to drop down to a lower Loan To Value, you’ll be eligible for even better interest rates, which will give you more cash each month to spend on yourself! What more could you ask for?

You are remortgaging because…you want more flexibility.

Remortgaging allows you to choose whether to shorten or lengthen your mortgage term. Perhaps you’ve won that hard-earned promotion and want to put some extra money toward your mortgage each month without incurring penalties for overpayments. Or maybe you want to shorten or lengthen your overall mortgage term because your circumstances have changed.

You are remortgaging because…your property value has changed.
If your home is worth more now, you might qualify for better rates.

Here’s what this looks like in real life

You bought a £250k home, borrowed £220k at 4% for 25 years. Your initial Loan To Value ratio was 88%, as you’re considered a relatively high-risk borrower. Two years later, you still owe about £209k on your mortgage, but your home’s value has risen to £300k. Lucky you – this means your LTVdrops to 69.8%. That means you’re now eligible for an interest rate of 3.5%, lowering your mortgage payments from £1161 per month to £1105 per month. That’s a whopping £670 a year difference in savings that you could benefit from – all because your property value has increased!

Remember, you’re only repaying the loan that you’ve taken out from the bank or building society. If your property has grown in value, that’s your money, not the lender’s.

You are remortgaging because…you need to release equity.
You may be considering remortgaging to access the cash tied up in your property’s value. We get it. If you need funds to pay for significant home improvements, debt consolidation or university fees, it makes perfect sense.

It’s about finding the right match for you and your family.

When is the right time to think about remortgaging?

Not everyone wants to remortgage. You might be happy with your lender’s SVR and your monthly repayments. However, you could be putting yourself at risk of a nasty surprise if something causes the rates to spike (as we saw after the disastrous mini-budget in September 2022).

You want to protect your family. And you definitely want to protect your mortgage payments. That’s why we advise people to check their mortgage every now and then to ensure they’re still on the best deal. Life changes. Maybe you’ve started a family, your income has shifted, or your priorities look different now. Taking a few minutes every now and then to review your mortgage could save you from paying more than you need each month.

The best time to remortgage is 3-4 months before your current deal ends. This gives you plenty of time to compare options and avoid slipping into the more expensive SVR.

When should you hold off on remortgaging?

It might surprise you that sometimes, waiting is the smarter move when it comes to saving you money. We know you’re probably surprised to hear us say that, but our focus is on making sure that you have the right deal for you and your family.

Here are a few instances when we recommend pausing your remortgage thoughts.

You don’t want to be hit by early repayment charges

If you’re still in a fixed-term contract, leaving early could result in significant financial penalties. Your paperwork will indicate when your deal becomes eligible for a new feature. If you’re unsure what you are looking for, please give us a call, and we can quickly assess your circumstances.

If you’re about to move house, you might prefer to stick

We often recommend that you stick with your current mortgage (even if you have slipped into the Standard Variable Rate) until your new house completion date. That’s because sticking with a current deal might avoid fees or complications later.

If you’ve got low equity, credit issues or a falling property value

Lenders will offer the best rates to property owners with a low LTV. If you’ve only minimal equity built into your home, or you have fallen into negative equity, you may be financially better off sticking with what you’ve got than risking a lender only agreeing to lend at a higher amount each month.

Do you need to use a mortgage broker to remortgage your property?

Generally speaking, remortgaging is straightforward. If you’re happy with your current lender and they offer you an affordable deal that matches your current monthly payments, you’ll probably feel confident handling the process on your own.

However, if you’re doing it for the first time, your circumstances have changed, you’re self-employed, you’ve got a poor credit history, or you’d rather spend your free time with your family than hunting for mortgage deals, then why not talk to a mortgage broker? We’re here to do all the legwork for you, comparing deals and handling the paperwork so you can spend more of your time doing the things you love.

This is our promise to you.

Access to deals across the whole mortgage market. (We can usually find many deals that you won’t see on comparison sites.)

Handle all the paperwork on your behalf, so you don’t have to worry about finding the right documents for lenders, completing eligibility checks, or filling out application forms.

Personalised mortgage advice tailored to your budget and your goals. If you know you can only afford a certain amount per month for your mortgage repayments, we can find a deal that matches your budget.

Remortgaging isn’t complicated, but timing and the right advice matter.

If you’re not sure what’s best, then a quick chat with one of our mortgage brokers can make the numbers (and your stress) disappear. Your home is your biggest investment. You don’t want to let a bad deal eat into your monthly repayments when, for the sake of a few moments on the phone, you could be ready to kick start a new fixed-term mortgage!

Ready to see how much you could save? Speak to The Mortgage Expert today. We promise no stress, no jargon, just better deals.

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