If you’re wondering what remortgaging your house means, you’ve come to the right place. Remortgaging involves taking out a new mortgage, typically with a different lender, to pay off your existing one, while using the same property as security.
In this guide, we will explore the remortgage process. You will learn about remortgage costs and the various remortgage fees involved, such as early repayment charges, product fees, and valuation fees. You will learn about remortgage benefits, including how you can potentially save money with a new deal, and when it’s advisable to remortgage early.
I will explain what happens during a remortgage house valuation, a crucial step in the process, and whether you can remortgage with the same lender or if it’s desirable to switch to a new one. If you’re unsure about when to remortgage or how to start, my comprehensive guide provides practical remortgage advice to help you navigate the options.
Definition of remortgage
The process of paying off one mortgage with the proceeds from a new mortgage using the same property as security.
What does remortgage mean?
We have the definition of a remortgage above, but when people speak about remortgaging we often get confused with other aspects of lending or options that are available to us as consumers.
So for clarity when I speak about remortgaging here I mean changing your current mortgage ‘deal’ while remaining in the same property. For example you may want to fix your mortgage at a new rate, or you may want to move onto a tracker rate or it may be the case you want to move to a new lender, there are lots of different actions that constitute a remortgage.
Remortgage vs Further advance
People often get these two terms mixed up or combine them together, but they are actually two different things, I am going to explain the difference below
Remortgage
This is where you do not change the amount of money you are borrowing, and you do not change the term of the mortgage (the remaining years left) the only thing that changes is the lender.
For example, you have a £300,000 property with an outstanding £100,000 mortgage, you decide a different lender is offering a better deal for you than your current lender, you decide to remortgage to the new lender, once completed you still have the £100,000 mortgage but it is simply with a different lender now.
Further advance
This is where you borrow more money via a mortgage using your current property as security.
For example, you have a £300,000 property with an outstanding £100,000 mortgage, you may take out a further advance of £50,000 with your lender and you end up with a mortgage of £150,000.
Can I remortgage with my current lender?
Technically no you can’t. You can switch products with your current lender which is basically the same as a remortgage it just is not classified as one ‘technically’
Why do people remortgage?
The most common reason for people to remortgage is to save money. There is no place for loyalty when it comes to mortgages, if another lender is offering a better deal than your current lender why not change?
Should I remortgage?
Yes. Well you should at a minimum be looking at a remortgage once your fixed rate is coming to an end. If you aren’t currently in a fixed period on your mortgage then you should be reviewing your options to remortgage regularly.
There are a ton of options when it comes to remortgaging and it is easy to get confused on what is the best option for you to take, there are a lot of considerations to take into account also, as there can be costs involved with remortgaging which I will explain a little later on.
Can you remortgage early?
Yes.You can remortgage any time you want, if you are in a fixed period you may have to pay an early repayment charge for leaving early, we will be looking into a bit later. If you are in a fixed mortgage at present you can normally secure a new mortgage product with a fixed interest rate 6 months prior to your fixed period ending, then once it ends your new selected product with the new rate will kick in.
What happens if interest rates drop in the 6 months leading up to my new rate?
If a better rate becomes available in this time you will be able to take the better rate, you are not bound by the rate you secure 6 months early. If the rate drops in the meantime, you will be able to take the new improved rate. You can do this as many times as you want in the last 6 months of your current fixed period.
What happens if interest rates increase in the 6 months leading up to my new rate?
You will still get the rate you originally took, the lender can not withdraw an offer because rates have since increased. This is why it is important to try and remortgage as close to the 6 month window as possible.
What happens when you remortgage?
When you remortgage, what essentially happens is you take out a new mortgage with a new lender, this new mortgage is used to clear your old mortgage off. So from your point of view the only thing that really changes is the lender you pay your monthly payment to and possibly the amount that monthly payment is depending on the interest rate of the new product you choose.
If you stay with your current lender and simply choose a new product with them (this technically is not a remortgage as you have not changed lender) then the only change will be the monthly amount providing it is a different interest rate.
Do you need a deposit to remortgage?
No, not normally. Generally you would use the ‘equity’ in your property as the deposit for a remortgage. For example your property is worth £100,000 and your mortgage is £70,000 then you would essentially use the £30,000 equity as a deposit.
If you were in negative equity or below the threshold loan to value for the lender (generally 95%) then you may need to add in extra money to meet this threshold.
Do you need a valuation to remortgage?
Yes, all lenders will do a valuation on your property when you remortgage. The type of valuation completed by the lender may differ, some will be happy to do a ‘desktop valuation’ which is basically doing it online with no physical visit to the property. Others may want to physically go to the property to carry out the valuation, each lender is different.
It is worth noting, if you are staying with the same lender but just switching products, if you believe your property has increased in price bringing you into a lower loan to value therefore having access to a better rate your current lender may want to carry out a valuation on your property confirming they are happy to offer at the chosen loan to value.
Remortgage early repayment charge
You can remortgage at any time you want. However you need to be aware that if you are currently in a fixed product and wish to leave during the fixed period you may be liable to an early repayment charge. Generally the longer you have left in your fixed period the higher the early repayment charge will be.
If you are not currently tied into a fixed period you will not have to pay an early repayment charge.
Remortgage stamp duty
This is not a thing! You do not have to pay any stamp duty when completing a remortgage.
How much does it cost to remortgage?
There are costs associated with remortgaging, these costs vary and you will not know the full amount until you decide to remortgage and choose a product.
Remortgage early repayment charge
As explained above, depending on your situation you may have to pay an early repayment charge.
Deeds release fee
This is essentially an admin fee for your current lender to transfer the deeds of your property to the new lender. Sometimes a lender will charge this when you initially take out a mortgage, others allow you to pay at the end of your mortgage. So it is worth checking with your lender if you are required to pay this and what the amount is. Typically it is between £150 – £300
Product fee
When you remortgage and choose a new product it may have a fee attached to it. These fees can be expensive anything up to £2000 +
Most lenders will allow you to add the product fee onto the mortgage, but remember if you do this then you will be paying interest on it for the rest of the mortgage term!
Booking fee
This fee is not really around anymore but some lenders still charge it. It is a fee charged by the lender to ‘reserve’ the loan for your mortgage or in simple terms an application fee which is non refundable if you don’t take the mortgage or are declined for any reason. A booking fee is extremely uncommon now so you are unlikely to be charged one.
Remortgage valuation fee
A lender is going to want to value your property before lending to you, they generally charge for this anywhere between £200 up to around £1500 depending on the value of the property. The good news is a lot of lenders will not charge this fee for people looking to remortgage with them as they want your business!
solicitors fees
The solicitor fees for a remortgage are generally lower than those when you initially purchase a property, normally a lender will charge around £300 – £500, however again it is worth noting lenders frequently cover the cost of this for people looking to remortgage with them.
broker fee
If you are going to use a mortgage advisor, then they may also charge for their services. Not all do but if they do you will need to take this fee into account. Your advisor will tell you beforehand if they charge a fee and how much it is.
Personally I do not charge a fee so feel free to get in touch here.
As you can see the remortgage costs can quickly add up if you are not careful, just because the interest rate is lower with another lender does not necessarily mean it is the right option for you to switch to them, all the associated costs need to be taken into account when making the decision.
In summary, remortgaging can be a smart financial move, but it’s essential to understand all the details before you proceed. From the definition of remortgaging to how it differs from a further advance, we have covered the main key considerations you should be using when deciding whether remortgage is right for you.
Remember the primary reason people remortgage is to save money, remortgage costs must be taken into account to find out the true savings that can or can’t be made. Seeking remortgage advice from an independent mortgage advisor like myself is a good start, we will be able to do all the hard work for you, taking into consideration all the remortgage costs to give you a final figure on savings that can be made.
If you still have any questions or want to reach out to me for free remortgage advice please get in touch with me here. I don’t charge any fees and get paid by the lender.
