When should you think about remortgaging your home?
Most people arrange a mortgage and then, quite understandably, get on with life. But mortgages have a shelf life. The deal you agreed to when you bought your home may not be the most suitable arrangement for your situation today, and at some point it is likely worth reviewing whether your current terms still make sense. Knowing when to start thinking about remortgaging, and what to consider when you do, can help you approach the process with clarity rather than uncertainty.
What does remortgaging actually mean?
Remortgaging simply means switching your existing mortgage to a new deal. That new deal might be with your current lender or with a different one entirely. It does not mean moving home. The property stays the same, but the terms of your borrowing change.
People remortgage for different reasons. Some are coming to the end of an introductory rate and want to avoid moving onto their lender's standard variable rate. Others have seen their circumstances change and want to borrow more, reduce their monthly payments, or take equity out of their property for a specific purpose. The right reason to remortgage depends entirely on your own situation.
The most common trigger: your fixed rate is ending
If you took out a fixed-rate mortgage, your monthly payment was locked in for a set period, typically two, three, five years or longer. When that period ends, most lenders automatically move you onto their standard variable rate, which is generally higher and can change at the lender's discretion.
This is the point where many homeowners find it worthwhile to review their options. Moving onto the standard variable rate without reviewing alternatives can mean paying more each month than you might otherwise need to. It is generally worth starting to look at what is available around three to six months before your current deal expires, since some mortgage offers can be secured in advance and take time to arrange.
Worth knowing: If you do nothing when your fixed term ends, you will usually roll onto your lender's standard variable rate automatically. This rate is not fixed and can go up or down, which may introduce a degree of uncertainty into your monthly outgoings.
When your circumstances have changed
Life does not stay still, and neither does the financial picture that sits around your home. Several common life changes can make it worth reviewing your mortgage.
Your income has increased. You may be in a position to overpay, or move to a shorter mortgage term, which could reduce the total amount of interest paid over the life of the loan.
Your household income has decreased. If your circumstances have become tighter, it may be worth exploring whether there are deals with lower monthly payments, though it is important to consider the overall cost and any implications of extending your term.
You want to raise money for home improvements or other significant costs. If equity has built up in your property, some homeowners choose to release a portion of it through remortgaging. This increases the amount you owe, so the costs and risks should be considered carefully.
You want to consolidate other debts. Some people use remortgaging to roll other borrowing into their mortgage, though this means turning shorter-term debt into long-term secured debt, which is a significant financial decision and not one to approach lightly.
How much equity you have can matter
When you remortgage, lenders look at the loan-to-value ratio, which is the size of your mortgage compared to the value of your property. The more equity you have built up, the lower your loan-to-value tends to be. Lenders generally reserve their more competitive rates for borrowers with a lower loan-to-value, so if your property has increased in value since you bought it, or you have been paying down your mortgage for a number of years, you may find that more competitive rates are available to you now than when you first borrowed.
It is worth noting, however, that property values can fall as well as rise, and that the rate you are offered will depend on your individual circumstances at the point of application.
When might it not make sense to remortgage?
Remortgaging is not always the right move, and there are situations where the costs or restrictions involved mean it may be better to stay where you are, at least for the time being.
Early repayment charges. Many fixed deals charge a fee for leaving early. This can sometimes outweigh the benefit of switching, so it is worth checking what your current deal says before doing anything else.
Small remaining balance. If your mortgage is nearly paid off, the fees involved in remortgaging may not be justified by the potential saving.
Recent changes to income or employment. Lenders carry out affordability checks. A change in income, employment status, or credit position may affect your eligibility for a new deal.
Negative equity. If your property is worth less than what you owe, your options for switching may be limited.
What are the costs involved?
Remortgaging is not entirely free, even when the saving looks straightforward on paper. Costs can include arrangement fees on the new mortgage, valuation fees, and sometimes legal fees, though some lenders offer deals with these included or waived.
When comparing deals, it is important to look at the overall cost rather than just the headline rate. A lower interest rate with a higher arrangement fee might cost more in total than a slightly higher rate with no fee, depending on the size of your mortgage and the length of the deal. Comparing the full cost over the term of the product, rather than just the monthly payment, tends to give a clearer picture.
How far in advance should you start looking?
As a general guide, it is worth starting to review your options around three to six months before your current deal ends. Some lenders allow you to secure a rate in advance, which can provide a degree of certainty even if completion takes time. Starting the process early also means you have time to explore the market properly, gather the documents lenders typically require, and consider your options without feeling rushed.
If you are on a standard variable rate already, you can typically remortgage at any time, subject to your lender's terms.
Frequently asked questions
How long does remortgaging take? The timeframe varies depending on the lender and your individual circumstances, but the process typically takes between four and eight weeks from application to completion. Some straightforward cases can be quicker, while more complex situations may take longer. Starting the process before your current deal expires gives you more flexibility.
Will remortgaging affect my credit score? Applying for a new mortgage involves a credit check, which will appear on your credit file. A single credit check is unlikely to have a significant impact, but making multiple applications in a short period may have more of an effect. Using a mortgage broker who can search the market on your behalf can help reduce the number of direct applications made.
Can I remortgage if I am self-employed? Yes, self-employed applicants can remortgage. Lenders will typically ask for at least two to three years of accounts or tax returns to assess income. The documentation required may differ from what is asked of employed applicants, but the process itself is broadly similar.
What is a product transfer and how does it differ from remortgaging? A product transfer means switching to a new deal with your existing lender, rather than moving to a different one. The process is usually simpler and quicker, with less paperwork involved. However, staying with your current lender means you are only comparing the deals they offer, rather than the wider market. Whether a product transfer or a full remortgage is more appropriate will depend on your circumstances and what is available at the time.
What documents will I need? Lenders typically ask for proof of income (such as payslips or tax returns), recent bank statements, proof of identity and address, and details of your current mortgage. If you are employed, your P60 is often requested as well. Having these documents ready in advance can help the process move more smoothly.
Can I borrow more when I remortgage? It may be possible to borrow additional funds when remortgaging, depending on how much equity you have in your property and whether you meet the lender's affordability requirements. Borrowing more increases the total debt secured against your home, so the costs and risks involved are worth understanding fully before proceeding.
A final note
Remortgaging is not something most people need to think about constantly, but it is worth revisiting at the right moments, particularly as a fixed rate approaches its end or when your financial circumstances change. The mortgage market changes over time, and the deal that was right for you several years ago may not be the most appropriate arrangement today. Taking time to review your options, understand the costs involved, and consider how different deals compare over their full term tends to put you in a better position to make an informed decision.