How to Remortgage and Save Money on Your Home Loan Costs

Sorting out your mortgage can feel like a big task, but remortgaging doesn’t have to be overwhelming. Whether you’re looking to save money, release equity, or simply find a better deal, understanding how to remortgage could make a real difference to your finances. It’s all about making your mortgage work harder for you.

With interest rates and lenders’ offers constantly changing, it’s worth knowing when and how to take advantage of a remortgaging opportunity. Ready to take control of your mortgage and possibly save some cash? Let’s break it all down into simple steps, so you know exactly what to expect.

What Is Remortgaging?

Remortgaging is the process of switching your existing mortgage deal to a new one, either with your current lender or a new one. It often involves paying off your current loan and replacing it with a new agreement that better fits your financial needs. People usually consider remortgaging when their initial fixed-rate term ends, and they shift to a variable rate or to get better terms that save money.

Why Remortgage?

You might remortgage to save money if your lender's standard variable rate (SVR) is higher than deals from other providers. Reducing monthly payments by securing a better interest rate is one of the main reasons. For example, if you're currently on a 5% SVR, you could find a new fixed-rate deal at 3%, saving hundreds annually.

Releasing equity is another common goal. If your property's value has significantly increased, remortgaging allows you to borrow additional funds against your home, which you could use for renovations or large expenses. This applies best when your outstanding mortgage is lower than the current value of your property.

Consolidating debt can also make remortgaging beneficial. By combining high-interest debts, such as credit cards or loans, into your mortgage, you can manage payments more efficiently. However, doing this extends repayment over your mortgage term, so thoroughly weigh the overall costs.

When to Remortgage?

Timing matters when remortgaging. Start looking for new deals around three to six months before your current deal ends. Early preparation avoids falling into your lender's SVR, which is often less competitive. Comparisons between your current lender and alternative ones, such as those through a UK mortgage broker, help secure the best rates.

Switching mid-term makes sense in some cases, particularly if current rates are much lower than those when you signed up. Keep in mind that breaking your term might involve early repayment charges (ERCs), so calculate whether the savings outweigh those costs.

Reasons To Remortgage

Remortgaging offers several advantages, depending on your financial goals and circumstances. Understanding these reasons can help you make more informed decisions when exploring mortgage options or working with a UK mortgage broker.

Lower Interest Rates

Securing a lower interest rate is one of the most common reasons to remortgage. If rates have decreased since your current mortgage started, switching to a better deal could reduce monthly repayments and overall interest costs.

For example, changing from a standard variable rate (SVR) to a fixed or tracker rate could save hundreds annually. Always compare options using an online calculator or consult a mortgage broker to determine potential savings.

Accessing Equity

You can release equity from your property when remortgaging to fund significant expenses. For instance, equity can be used for home renovations, buying another property, or paying for events like weddings.

This process increases your mortgage balance and monthly repayments, so it's essential to assess your long-term budget. A professional, like those you'll find through a service like Mortgage Connector, can guide you toward suitable lenders and equity release products.

Debt Consolidation

Remortgaging is sometimes a solution for consolidating high-interest debts into one manageable monthly payment. By extending the repayment term and taking advantage of potentially lower mortgage interest rates, you may reduce financial stress.

However, consolidated debts are secured against your home, which could be at risk if payments aren't made. A broker can provide insights on whether this is the right path based on your circumstances.

Ending A Fixed Term

Fixed-term mortgage deals typically end after two to five years. When this happens, you'll often revert to the lender's SVR, which is typically higher. Remortgaging before this transition can help you lock in a competitive deal. It's advisable to start looking for new offers three to six months before your fixed rate ends, ensuring a seamless switch with no time on the SVR.

Steps On How To Remortgage

Remortgaging can feel overwhelming, but breaking it into clear steps makes the process manageable. Learn how to assess your current mortgage, secure the best deals, and complete the process smoothly.

Assess Your Current Mortgage Terms

Start by reviewing your current mortgage's key details, such as the interest rate, monthly payments, early repayment charges, and the remaining balance on your loan. This helps you understand where you stand financially and whether moving to a new deal offers benefits.

For example, if your fixed-rate term is close to ending, or your current interest rate is high compared to market averages, it might make sense to remortgage. If early repayment charges apply, factor them in when evaluating a potential switch.

Research New Mortgage Deals

Explore mortgage options by comparing deals from lenders or using Mortgage Connector to find suitably matched brokers. Focus on interest rates and consider associated costs like arrangement fees, valuation fees, and legal fees, as these affect the total cost.

Use online comparison tools or consult brokers to identify competitive rates tailored to your needs. If you're looking for specific benefits, like longer fixed-rate terms or lower monthly repayments, ensure these align with your financial goals. Timing is vital—start researching three to six months before your current deal ends.

Check Your Credit Score

Check your credit score to understand how lenders may view your application. Lenders rely on your credit history to determine rates and approval, particularly for remortgaging. Access scores for free through services like Experian or ClearScore, and review your file for inaccuracies.

Take steps to improve your score by paying bills on time, avoiding excessive borrowing, or closing unused accounts. A stronger credit score improves your chances of securing better mortgage deals.

Apply For A New Mortgage

After finding a new deal, submit your application to the selected lender. Prepare essential documents, such as proof of income, ID, details of your current mortgage, and bank statements, before starting.

If you're using a broker, they'll help streamline this step and liaise with lenders on your behalf. Applications involve checks of your financial situation, so a stable income and reasonable debt levels are ideal. If approved, you'll receive a mortgage offer outlining terms and conditions.

Finalise The Switchover

Once you've accepted the mortgage offer, the switchover process begins. Your solicitor will handle the legal work, including transferring funds to pay off your existing mortgage. This process typically takes a few weeks, after which your new mortgage becomes active.

If you've worked with a broker, they'll assist every step of the way to ensure no details are overlooked. Planning ahead avoids delays and helps you transition seamlessly to your new mortgage agreement.

Costs Involved In Remortgaging

Remortgaging comes with various costs, which you should consider when weighing up the benefits of switching to a new deal. Understanding these expenses upfront helps you budget effectively and avoid surprises during the process. Here's a breakdown of the key costs:

Early Repayment Charges

Lenders usually impose early repayment charges (ERCs) if you exit your current mortgage deal before its term ends. These fees typically range between 1% and 5% of the outstanding loan amount, depending on how early in the term you exit. For instance, if your mortgage balance is £150,000 and your ERC is 3%, you'll pay £4,500.

ERCs usually apply to fixed-term deals like 2-year or 5-year fixed-rate mortgages but may not affect you if you're already on a lender's standard variable rate (SVR). Check your mortgage agreement or consult with a UK mortgage broker to confirm if ERCs apply to your situation.

Valuation Fees

To approve a remortgage, lenders often require a property valuation to confirm its current market value. Valuation fees typically range from £150 to £1,500, depending on the property size and the lender's requirements.

Some lenders offer free valuations as part of their remortgaging deals, so look out for these when comparing offers. If you're switching lenders, ensure their valuation aligns with your expectations and negotiate if discrepancies arise.

Legal Fees

Solicitor or conveyancer fees cover the legal work required to transfer your mortgage to a new lender. These fees generally fall between £300 and £1,000, depending on the complexity of the process. Most remortgages involving the same homeowner and no property changes are straightforward, keeping costs relatively low.

Some lenders provide free legal services to attract borrowers, which can save you money. Verify the terms of such offers to ensure they cover all necessary legal tasks.

Taking expert advice can simplify the process and clarify these costs. A service like Mortgage Connector, which matches you with a suitable broker, gives you access to personalised support and better deals.

With the right help, you can understand the expenses involved, negotiate effectively, and find the most cost-efficient option for your circumstances.

Conclusion

Remortgaging offers you a valuable opportunity to take control of your financial future, whether you're aiming to save money, access equity, or secure a better deal. By understanding the process and planning ahead, you can ensure a smooth transition and avoid unnecessary costs.

Take the time to assess your current mortgage, research options, and seek expert advice if needed. With careful preparation and informed decisions, you can make remortgaging work to your advantage and achieve your financial goals with confidence.

Frequently Asked Questions

Does remortgaging affect my credit score?

Yes, remortgaging can impact your credit score as lenders will run credit checks. Ensuring a strong credit score increases the likelihood of securing favourable rates.

Can I remortgage if my current terms have early repayment charges?

Yes, but you’ll need to consider the early repayment charges (ERCs). If the savings from a new deal surpass the ERCs, remortgaging may still be worthwhile.

Is using a mortgage broker for remortgaging beneficial?

Yes, a mortgage broker can provide expert advice, compare multiple deals, and help navigate complex situations, streamlining the remortgaging process.

What documents do I need to remortgage?

You’ll typically need proof of income (e.g., payslips or tax returns), bank statements, identification, and information about your current mortgage and property.

Can I release equity through remortgaging?

Yes, remortgaging can allow you to borrow more than your current mortgage balance, providing access to equity for home improvements, large purchases, or other expenses.

Is remortgaging advisable for consolidating debts?

Remortgaging can consolidate high-interest debts into one payment, potentially lowering monthly outgoings. However, it secures debts against your home, meaning missed payments risk your property.

How long does the remortgaging process take?

The process typically takes 4-8 weeks, depending on the complexity of your application and the lender's speed. Starting early ensures a smooth transition.