Remortgaging at the right time can save you thousands. This blog explains what remortgaging is, when it makes sense and what to watch out for before you switch.
If you're a homeowner, there's a reasonable chance you're paying more on your mortgage than you need to. Not because you made a bad decision, but because life gets busy, your deal rolls on and questioning whether a better one exists can slip down your list of priorities.
Many people think remortgaging is complicated or assume it's only worth doing in certain circumstances. In reality, it's a routine financial decision which, when done at the right time, can make a meaningful difference to your repayments each month.
This blog explains what remortgaging is, when it makes sense, when it doesn't, and what to think about before you switch.
What is remortgaging?
Remortgaging means switching your existing mortgage to a new deal, without moving home. You can do that with your current lender or with a different one.
There are two typical options. A product transfer means staying with your existing lender but moving onto a new deal. It tends to involve less paperwork and legal work.
A full remortgage means switching to a new lender, which can take a bit more time but opens up the whole market rather than just the products your current lender is willing to offer you.
Both have their place. The right option for you will depend on how competitive your current lender's rates are, your personal circumstances and what's available elsewhere.
Why do people remortgage?
The most common trigger is the end of your fixed-rate period. But that's often not the only reason.
Some people remortgage because their property has gone up in value, which changes their loan-to-value (LTV) ratio and can unlock better rates. Others want to release the equity they've built up in their properties to fund home improvements, help a child onto the property ladder or manage their other financial priorities.
Some remortgage because their circumstances have changed. They may have received a pay rise, cleared their debts or moved from self-employment to employment, which means they now qualify for products they couldn't access before.
When does remortgaging make sense?
In most cases, remortgaging isn't driven by a single factor. It's a combination of what the market is doing and what's changed in your own situation. There are a handful of situations where the numbers are likely to work in your favour. Recognising them early gives you the best chance of acting at the right time rather than missing the window. Remortgaging might be right for you when:
Your fixed-rate deal is ending
Most fixed-rate mortgages run for two, three or five years. When they end, your lender automatically moves you onto their standard variable rate (SVR), which is almost always higher, sometimes significantly so.
For example, the difference between a competitive fixed rate of 5.35% and the average SVR of 7.15% on a £300,000 loan could run to several hundred pounds a month. Remortgaging before that switch happens will help you avoid such a jump.
Your LTV has improved
Lenders price based on risk. The less you owe relative to the value of your property, the less risk you represent. If house prices in your area have risen, or if you've paid down enough of your mortgage to drop into a lower loan-to-value bracket, you may now qualify for better rates than you could when you last applied. Moving from 85% LTV to 80%, or from 80% to 75%, might not sound dramatic. But in a competitive mortgage market, those thresholds can open up much better deals.
Interest rates have dropped
If interest rates have fallen since you last fixed your mortgage, a new deal at a lower rate could reduce your monthly payments and the total amount you repay over time. Whether the saving justifies any switching costs depends on the numbers, which is where an experienced mortgage broker can run the comparison for you.
You want to release equity
If you've built up equity in your home and want to access some of it, for home improvements, to consolidate other borrowing, or for another purpose, remortgaging can be cheaper than taking out a personal loan or using your credit card. It increases your borrowing, so you'll need to give it some careful thought, but for the right purpose, it can make financial sense.
When remortgaging might not be worth it
Remortgaging isn't for everyone. In some situations, the cost and hassle of switching can outweigh the benefits.
If you're mid-way through a fixed-rate deal, leaving it early will usually trigger an early repayment charge (ERC). These are typically calculated as a percentage of your outstanding balance, often between 1% and 5%. In many cases, it can make switching before your deal ends harder to justify.
Arrangement fees, legal costs and valuation fees can also add up. If you're switching a relatively small balance, the savings on your current monthly repayments may not cover the cost of switching within a reasonable timeframe. Running a proper cost comparison that factors in all your fees, not just the headline rate, is the only way to know whether a switch makes financial sense.
And if you're close to paying off your mortgage and your remaining term is short, you may only make a modest saving by switching to a better rate. Combined with your switching costs, the numbers sometimes don't stack up. It's still worth checking, but it's worth being realistic about, too.
How often should you review your mortgage?
Many mortgage advisers suggest reviewing your options six months before your current deal expires. That gives you time to compare the market, apply for a new deal and complete your switch without rushing, which is important because mortgage applications can take time.
Beyond that, it's worth treating your mortgage the way you'd treat any significant outgoing. It's worth revisiting when your financial circumstances change or when the market shifts. A rate or product that wasn't worth switching to 18 months ago might look very different today. The mortgage market moves quickly, and staying informed means you're more likely to act at the right moment rather than defaulting onto your lender's SVR by accident.
How can FG & Cook help?
Remortgaging at the right time and for the right reasons can save you a meaningful amount of money. It's not a complicated financial manoeuvre, but you do need to understand when the numbers work in your favour, and act before you end up on a rate you never chose.
That's where FG & Cook can help. As a whole-of-market broker, we have access to thousands of remortgage products, including deals that aren't available directly from lenders. Our lead broker, Jason Cook, and his team have more than 50 years' combined experience in the mortgage market. That kind of knowledge means we know where the best rates are, which lenders will look favourably on your circumstances, and how to get your application in the best possible shape.
So, if your current mortgage deal is coming to an end, or you're not sure whether you could be on a better rate, a conversation with our team is a good place to start. There's no obligation, and you'll come away with a clearer picture of where you stand. Book a consultation with our team today.