What is Remortgaging and How Does It Work?
If you own a home or an investment property in the UK, you might have heard the term remortgaging but aren’t quite sure what it means or whether it could benefit you.
Remortgaging could help you:
- Save money on your monthly mortgage payments
- Switch to a new mortgage deal
- Release equity from your property
- Move from a variable rate to a fixed rate
- Review your residential or buy-to-let mortgage
In this blog post, we’ll explain what remortgaging is, how remortgaging works, and when it could be a good idea for UK homeowners and landlords.
Whether you have a residential mortgage, buy-to-let mortgage, fixed-rate mortgage or variable-rate mortgage, this plain English guide will help you understand the basics and feel more confident when reviewing your remortgage options.
What is Remortgaging?
Simply put, remortgaging means switching your current mortgage to a new one, either with the same lender or a different lender.
It usually involves paying off your existing mortgage and replacing it with a new mortgage agreement.
People remortgage for different reasons, including:
- Finding a better interest rate to reduce monthly payments
- Changing the type of mortgage, such as fixed to variable or variable to fixed
- Releasing equity to access cash for home improvements or other expenses
- Consolidating debts or managing finances more effectively
- Avoiding a lender’s standard variable rate after a fixed deal ends
Remortgaging does not mean moving home.
It is about changing the mortgage on your current property.
How Does Remortgaging Work?
Remortgaging is usually a step-by-step process. Before making a decision, it is important to understand your current mortgage, your goals and the new remortgage deals available.
Step 1: Review Your Current Mortgage
Start by checking your current mortgage deal.
Look at:
- The remaining balance on your mortgage
- The interest rate you are currently paying
- How much time is left on your deal
- Any early repayment charges
- Any exit fees or admin fees
- Whether your current deal is fixed, tracker, discounted or standard variable rate
Many fixed-rate mortgage deals have early repayment charges if you leave before the end of the fixed period.
This could affect whether remortgaging will actually save you money.
Step 2: Consider Your Remortgage Goals
Before comparing remortgage deals, ask yourself what you want to achieve.
You may want to:
- Reduce your monthly mortgage repayments
- Secure a more stable fixed-rate mortgage
- Release equity from your home
- Switch from a tracker mortgage to a fixed-rate mortgage
- Review your buy-to-let mortgage costs
- Avoid moving onto a higher standard variable rate
- Adjust your mortgage term
Your goals will affect the type of remortgage deal that may be suitable for you.
Step 3: Compare Remortgage Deals
Once you know what you want to achieve, the next step is to compare remortgage deals.
You can use comparison sites or speak to a mortgage adviser to see what options are available.
Different lenders may offer different rates, terms and lending criteria.
When comparing remortgage deals, consider:
- Interest rates
- Arrangement fees
- Valuation fees
- Legal fees
- Early repayment charges
- Overpayment options
- Payment holiday features
- Mortgage term length
- Whether the deal is fixed, variable or tracker
The lowest interest rate is not always the most suitable option if the fees are high or the deal does not fit your circumstances.
Remortgage Comparison Table
| Remortgage Factor | What It Means | Why It Matters |
|---|---|---|
| Interest rate | The rate charged on your mortgage borrowing | A lower rate could reduce monthly repayments |
| Arrangement fee | A fee charged by the new lender for the mortgage deal | A low rate with a high fee may not always be better |
| Early repayment charge | A fee for leaving your current mortgage early | This can affect whether remortgaging is worthwhile |
| Property value | The current value of your home or rental property | This affects your loan-to-value and borrowing options |
| Loan-to-value | The percentage of your property value being borrowed | A lower loan-to-value may give access to better deals |
| Mortgage term | The length of time left to repay the mortgage | A longer term may reduce monthly payments but increase total interest |
| Fixed or variable rate | Whether your payments stay stable or can change | This affects payment certainty and future budgeting |
| Residential or buy-to-let | Whether the property is your home or a rental property | Lenders assess these mortgage types differently |
Step 4: Apply for the New Mortgage
Once you choose a remortgage deal, you will apply with the lender.
The lender will review your:
- Income
- Outgoings
- Credit history
- Property value
- Existing mortgage balance
- Employment or self-employment details
- Affordability position
For buy-to-let remortgages, lenders may also review rental income and rental stress testing.
If the lender is satisfied, they may issue a remortgage offer.
Step 5: Completion and Switching
If your remortgage is approved, your new lender will pay off your old mortgage.
You will then start making payments to the new lender under the new mortgage terms.
If you remortgage with your existing lender, this may be called a product transfer.
If you move to a different lender, this is usually a full remortgage.
Types of Mortgages You Can Remortgage
You can remortgage different types of mortgage products, depending on your circumstances and lender criteria.
Residential Mortgages
A residential mortgage is a mortgage on your main home.
Many UK homeowners choose to remortgage when their fixed-rate mortgage deal is coming to an end. This can help them avoid moving onto the lender’s standard variable rate, which may be higher than their current deal.
Buy-to-Let Mortgages
A buy-to-let mortgage is used for a rental property.
Landlords may remortgage a buy-to-let property to:
- Find a more suitable interest rate
- Release equity for future investment
- Review rental property cashflow
- Move from a variable rate to a fixed-rate mortgage
- Prepare before a current mortgage deal ends
Buy-to-let remortgage options depend on lender criteria, rental income, property value and affordability checks.
Fixed-Rate Mortgages
With a fixed-rate mortgage, your interest rate stays the same for a set period.
This is commonly 2, 3, 5 or 10 years.
Remortgaging allows you to switch to another fixed-rate mortgage if your current deal is ending, which may help provide more certainty over monthly repayments.
Variable-Rate Mortgages
A variable-rate mortgage can change over time.
This includes tracker mortgages and standard variable rate mortgages.
Remortgaging from a variable rate to a fixed rate can help provide more predictable monthly payments, especially if you are concerned about rate changes.
When Does It Make Sense to Remortgage?
Remortgaging may make sense when it supports your financial goals and the costs do not outweigh the benefits.
Here are some common examples.
Example 1: Saving Money on Your Mortgage
Sarah has a fixed-rate mortgage of 3.5% for 3 years on her home, but she has 2 years left on her deal.
After reviewing the market, she finds a new fixed rate of 2.2% for 5 years.
By remortgaging, Sarah could save around £100 per month on her mortgage payments.
Before proceeding, Sarah checks her lender’s early repayment charge of £800.
She calculates that over 2 years, the £2,400 saved in interest outweighs the fee, making remortgaging worthwhile.
This is an illustrative example only. Actual mortgage rates, savings and fees will depend on the lender, property, credit profile and market conditions.
Example 2: Releasing Equity for Home Improvements
John and Lisa have built up equity in their home after 10 years of paying their mortgage.
They want to remortgage to release £20,000 to extend their kitchen and add a garden room.
Their remortgage deal allows them to borrow more than their current mortgage balance, accessing cash while moving to a new rate.
This helps John and Lisa fund their home improvements without using savings or personal loans.
Releasing equity increases borrowing and may increase monthly repayments or the total amount repaid over the mortgage term.
Example 3: Switching from a Variable to Fixed Rate
Mike has a tracker mortgage that tracks the Bank of England base rate.
When rates increased, his monthly mortgage payments went up significantly.
To get more certainty, Mike decides to remortgage to a 5-year fixed-rate mortgage.
This allows him to lock in a stable monthly payment despite future interest rate changes during the fixed period.
Things to Watch Out For Before You Remortgage
Before you remortgage, it is important to check the full cost and not just the headline interest rate.
Key things to consider include:
- Early repayment charges: Some lenders charge fees if you leave before your current deal ends.
- Arrangement fees: New mortgage deals may include setup fees.
- Exit fees: Your current lender may charge an admin fee when you leave.
- Property value: Your home’s current value affects how much you can borrow.
- Credit score: Lenders will check your credit history when applying.
- Affordability checks: Your income and outgoings will usually be reviewed.
- Mortgage term: Extending your mortgage term may reduce monthly payments but could increase total interest.
- Debt consolidation risks: Adding unsecured debt to your mortgage may reduce short-term payments but could cost more over time.
Always check the small print and do the maths to make sure remortgaging works in your favour.
Remortgaging Checklist for UK Homeowners
Before applying for a remortgage, review the following:
- How much you currently owe
- When your current mortgage deal ends
- Whether early repayment charges apply
- Your current interest rate
- Your current monthly mortgage payment
- Your property’s estimated value
- Your income and outgoings
- Your credit profile
- Whether you want to borrow more
- Whether you want a fixed, variable or tracker mortgage
- Whether you need residential or buy-to-let remortgage advice
This can help you make a clearer decision before applying.
How BSL Financials Can Help
Remortgaging can be a smart financial decision, but it is important to get it right.
At BSL Financials, we help UK homeowners and buy-to-let landlords explore remortgage options and understand when remortgaging may be suitable.
We provide clear guidance without jargon, helping you compare mortgage deals based on your needs, property and financial circumstances.
Whether you want to reduce monthly payments, review your fixed-rate mortgage, move away from a variable rate, release equity or explore buy-to-let remortgage options, getting advice early can help you make a more informed decision.
Ready to Review Your Remortgage Options?
Ready to explore your remortgaging options or simply want to know if now is the right time?
Speak to BSL Financials for expert remortgage advice and a mortgage review tailored to your needs.
Contact BSL Financials today to discuss your remortgage options and find out what may be available to you.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Buy-to-let mortgages are not usually regulated by the Financial Conduct Authority.
Mortgage approval is subject to status, affordability checks, lender criteria and property valuation.
