Remortgaging: How does it work?

Mortgage rates are constantly changing, meaning that millions of homeowners are paying more than they need on their home loan. Many of these people could potentially save thousands of pounds by switching to another deal.

In this blog, we will focus on the remortgaging process, looking at what it is, as well as when and why you should consider changing your mortgage deal.


What is Remortgaging?

Remortgaging is the term given to the process of switching onto a new mortgage deal – either with the same or a different lender.

A mortgage and a remortgage are essentially the same thing, a long-term loan secured against the value of a property, but there is a range of different products available for remortgage customers.

It usually happens when you’ve come to the end of your mortgage deal – but there can be many reasons to switch.


Why should you consider Remortgaging?

There are a wide variety of reasons why a homeowner may typically want to consider restructuring their mortgage, these include:

  • Your current mortgage is coming to an end
  • Your own a larger percentage of your property
  • You are looking for a better deal than your current mortgage
  • You are looking to release some of the equity in your property by borrowing more
  • You want to beat a hike in rates


When should you start to think about Remortgaging?

It is important to be aware of when your initial fixed or tracker rate is set to come to an end so that you know when to look around at the market and see what sort of rates are available.

Your mortgage lender will generally write to you a few months before you move onto the standard variable rate to warn you that your rate could increase and invite you to consider remortgaging.

It usually takes between four to eight weeks to complete the remortgaging process.



What are the fees involved?

When you are switching deals several fees could apply depending on the circumstances around the change of mortgage.

If you switch deals during the initial fixed or tracker period, then you will likely have to pay an Early Repayment Charge (ERC).

The ERC is calculated as a percentage of the outstanding debt and can be quite significant if you are still in the early stages of your current mortgage.

Most lenders will also charge an Exit Fee to cover the administration cost of closing the account, although this is usually around £50-£100.

There may also be a cost involved with opening the new mortgage. This is in the form of an Arrangement Fee and is often around £1,000. This can be added to the mortgage balance, but by doing so means you will pay interest on it, so it will cost you more in the long run.

When you are remortgaging, the assistance of a conveyancer is needed throughout the process so there will be an additional charge for their Legal Fees. However, the fees will be much lower than moving into a new property.


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

For help and advice with remortgaging, contact one of our experts today.


Orginal Source: Which