What does remortgaging mean? Simply put, it means negotiating a new mortgage contract with either your existing lender or a new lender. You can remortgage early, or you can remortgage when your fixed-term rate ends.

What is a remortgage example

Here are a few examples of remortgaging:

• You were on a five-year fixed-term rate and it ended. You enter a new agreement with your lender for another five-year fixed-term rate.
• Your fixed rate term ends. You get a new fixed-term rate agreement with a new lender.
• You break your current agreement early and remortgage with a new lender for a better rate.

How remortgaging works

How does a remortgage work exactly? What happens when you remortgage?

Remortgaging means entering into a new mortgage agreement. This may be with your existing lender or with a new one. When you remortgage with your existing lender, you simply move your mortgage product from the variable rate back into a fixed rate. When you remortgage to a new lender, that new lender pays off your first mortgage, and you open a new loan.

When can you remortgage?

Can you remortgage at any time? How early can you remortgage? Technically, you can remortgage at any time, though you may not want to.

So, how soon can you remortgage before the fixed rate ends? As stated, you can remortgage at any time, but realistically, remortgaging early is only worthwhile six months or so before your mortgage ends.

This is because there are early repayment charges (ERC) when you remortgage early, usually between 1 and 5% of your loan amount. The more years that are left, the higher the ERC percentage is.

How long does it take to remortgage and release equity?

How long does a remortgage take? To remortgage just your property, expect the process to take between four and eight weeks.

Reasons to remortgage

There are many reasons why remortgage makes sense. So, if you were wondering why do people remortgage, know it’s likely because of one of these top four reasons:

• Remortgaging when house value has increased: If your home is now worth a lot more than when you bought it, then your loan to value has decreased, and you may be able to get a better deal.
• Mortgage to buy another property: You want to buy a property worth more than your current one.
• How to remortgage to release equity: You can get a mortgage, equity release mortgage, or a lifetime mortgage to get a lump sum from your lender without selling your home.
• Debt consolidation remortgage: If you have outside debts you can remortgage to combine all those debts into one loan repayment.

Frequently asked questions

1.    Is it easy to remortgage?

It is generally easier to remortgage than it is to get your first mortgage. This is because you will have built up equity in your property and brought the loan-to-value down. Not only that, but you usually don’t need to go through as many checks and balances if you stick with the same lender. If you remortgage to a new lender, it may take longer since they need to start their checks from scratch.

2.    Do I need a solicitor to remortgage?

Do you need a solicitor to remortgage? Not necessarily. You won’t need a solicitor if you remortgage with your current lender. This is because it’s technically a product transfer. You will need a solicitor if you’re adding or removing someone from the mortgage or if you want to remortgage to a new lender.

3.    How much does it cost to remortgage?

How much it costs to remortgage depends on when you do it, and with who.

If you want to remortgage early, you can expect to pay an early repayment charge of 1 to 5%, as well as various exit charges (the amount depends on how many years you have left on your deal). This can end up costing you thousands depending on how much outstanding mortgage you have.

If you remortgage at the end of your fixed rate term, there are no early repayment charges. Instead, there is the following:

• Arrangement fee: Can be priced from £1000+, depending on the lender.
• Booking fee (rare): This is between £100 to £300.
• Valuation fee: Most lenders offer a valuation for free. If there is a fee, it’s usually between £300 and £500.
• Conveyancing fee: Legal fees to swap lenders. Usually free, otherwise it costs around £350.
• Broker fee: Brokers may charge you a fee. Fees can be fixed (like £300) up to 1% of the loan amount.

If you stick with the same lender, many of these fees won’t apply.

4.    I own my house outright, can I remortgage?

If you own your house outright, you won’t need to remortgage again unless you want to take out equity. You can do this by taking out an equity loan or a lifetime mortgage.

These types of loans give you a lump sum of cash and the loan amount and interest you accrue only need to be paid back after you pass on or are moved into a full-time care facility and your house is sold.

5.    How much can I remortgage my house for?

How much you can remortgage your house for depends on:

• Your property’s value
• Your finances
• The Loan to Value (LTV) ratio

Those with more equity in their properties will be able to remortgage for a higher amount, which they can then use to reinvest in their property or use elsewhere.

6.    Do you need a deposit to remortgage?

You don’t need a deposit to remortgage, though if you do have a lump sum you want to use to pay off your loan before you remortgage, it is a good time to do it. There are no early repayment charges if you pay off your principal outside of a fixed rate term.