are long-term commitments, in most cases you don’t have to stick to the same product for its entire length.
Generally, your mortgage product, whether fixed or variable, will revert to the standard variable rate after a number of years – normally between two to five – and at this point it might be worth shopping around, looking for a new mortgage, and remortgaging.
Remortgaging is essentially switching what you owe on your current mortgage into a different mortgage product, either with the same bank or a different lender altogether.
Many homeowners decide to remortgage their homes for a variety of reasons: to reduce the cost of monthly repayments, to switch the type of mortgage they are on once their current deal comes to an end, or to release equity from their property if it has gone up in value, or if their income has gone up.
They could also be influenced by their view on future interest rates; if they believe interest rates will fall in the future, they may want to switch to a variable rate rather than a fixed rate, or if they believe they will rise, they may wish to do the reverse.
How do I remortgage my home?
The way you remortgage your property is similar to how you got the mortgage for when you first bought your home.
You should start to think about remortgaging your property a few months before the end of your current product to make sure you’re well-informed ahead of time and are clued up on all the different options.
It’s advisable to speak to your current bank and see what deals they have available. As always, it’s also recommended that you shop around and see what else is on offer at the time to see if you are getting a good deal.
If you find a deal elsewhere that’s better than what your current lender is offering, it’s still worth giving them a call: they may be keen to match the terms in order to keep your business.
You can also speak to an independent financial advisor or a mortgage broker, who, as well as arranging your new mortgage, can work out whether remortgaging will save you money or whether you are better off sticking to your current product.
As you did when you first took out your mortgage, you’ll have to complete the necessary application forms and credit checks, and provide proof of earnings. You’ll likely need recent bank statements, pay slips, a P60 form, a proof of address and an ID document such as a passport.
You may also need a solicitor to handle the legal side of the deal. If you have an adviser or mortgage broker on hand, they usually help deal with the administrative side of the proceedings, and will be on hand to aid you with your application forms.
The lender may also wish to survey your home to establish its value.
What should I look out for when remortgaging my home?
As you did when you first took out your mortgage, bear in mind that what seems cheapest may not always be best.
Look to the future: if you’d struggle to keep up repayments in the event of rising interest rates, you should secure a fixed rate product, so you can be certain about your monthly repayments.
If you’d rather stick with a floating, or variable, product, do your research into what different lenders offer to make sure you’re getting a good deal not just for now, but for the duration of your mortgage product period.
Could remortgaging end up costing me money?
When remortgaging, make sure you do all your sums to make sure the benefits of switching are worth the costs.
Whether you research current products yourself using comparison websites or you speak to an adviser, make sure you read the small print to make sure there are no early redemption penalties if you remortgage before the expiry of your mortgage product.
These penalties tend to be associated with fixed rate mortgages and could be costly, therefore removing all the gain from remortgaging early.
You should also take other charges into account, such as arrangement fees, legal fees and valuation fees, when assessing how much money you will save by remortgaging.
It’s also worth assessing whether your personal circumstances have changed since you first took out your mortgage, such as whether you have recently changed jobs or decided to become self-employed.
Changes such as these may have an impact on your ability to get a new mortgage.
Assess the value of your house, too, as if your home has gone down in value, you may not be able to borrow as much as you were previously able to.
However, if your property has gone up in value, you may be able to get better and cheaper deals if you decide to remortgage.
It is important to keep these factors in mind to avoid any costly mistakes.
What happens next?
As with your original mortgage offer, if your application is successful, you will once again be issued with a formal mortgage offer.
Don’t forget to read the small print thoroughly to make sure you fully understand the terms and conditions you are committing to.
What if I’m turned down for a remortgage?
If you’re turned down, don’t panic and send out more applications: too many applications can negatively affect your credit score.
It’s worth asking your lender why they turned you down so you can make any necessary changes before applying to a different lender again.