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Remortgage

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Remortgage

Welcome to today’s episode of The Mortgage Mum podcast, where we are talking about remortgages. There are 1.6 million of you coming off your fixed rate deals in 2025, so listen to this episode to make sure you’re prepared and you’ll know all your options when that time comes.

The remortgage market is set to increase by 33% this year, so it’s essential that we cover this topic. So I’m really glad we’re talking about it today – as usual, Tessa is going to be posing your questions.

What is a remortgage? How does the process of remortgaging work in the UK?

A remortgage is where you are switching your existing mortgage to a new deal, either with your current lender or a new lender. Lots of people will get a mortgage when they purchase a property and sign up for a two-year fixed rate or a five-year fixed rate – or perhaps longer than that.

They often don’t realise that when that rate comes to an end, that’s when they should remortgage. Otherwise they’re going to go on to a standard variable rate with that lender, which often means much higher monthly repayments and a much higher interest rate.

A remortgage is where you switch that deal and get yourself a new one, based on the rates today.

How long does it take to remortgage? How often can I remortgage my property?

You can remortgage your property as often as you like, but it’s going to cost you money to do that within your fixed rate period. Something called an early repayment charge applies if you come out of a fixed rate too early.

If you have booked in a two-year fixed rate, you’ll pay a penalty if you decide to come out of it during that time. The only exception is if you have a different type of rate – where rather than a fixed rate, you have a tracker or perhaps a discounted rate. They often don’t have early repayment charges attached to them, so they’re a bit more flexible and you can remortgage more frequently.

But every time you remortgage, you typically pay an arrangement fee to the lender, so it is still going to cost you money each time you switch. You can do it as often as you like, but generally people do it when their product ends. How long you fix that product will therefore dictate how many times you remortgage in the lifespan of your mortgage.

What are the main reasons why people choose to remortgage? What factors should I consider when deciding whether to remortgage?
There’s lots to consider, but ultimately the main reason to remortgage is to get on the best possible rate for your situation. If nothing else, that’s what you should be doing – so you’re paying as little interest as possible on that mortgage until the day you pay it off.

There are other reasons to remortgage that people don’t always know about. We spoke in the last episode about debt consolidation – where you can remortgage and repay some debts. You can also do home improvements by releasing some equity when you remortgage.

If you’re on a capital repayment mortgage, you’ll have paid off some of the loan in the time you’ve had a fixed rate. Your property price will have hopefully increased, so there’s a pot of money that can be accessed, if you can afford to get it out.

That can be used towards home improvements or other things you want to spend money on. Some people do that to pay for a degree, for example. So equity release is an option.

Perhaps you’re thinking of moving and you need a bit more flexibility with your remortgage. Your deal comes up for renewal, but you’re not sure if you might move in the next two years. You can choose something other than a fixed rate to create more flexibility. You can remortgage to give you that space and pay the cheapest overall price while you’re making that decision.

What happens if I don’t remortgage after my deal expires?

If you don’t remortgage after your deal expires, the lender will just let it go onto their standard variable rate. This is much higher than the fixed and tracker rates on the market.
Your monthly payments will noticeably go up.

You might not be on top of your paperwork – and there’s lots of people like this, we’re all busy and not everyone’s as interested in mortgages as I am. People do just miss it, they don’t have it in their diary and they just roll on to the standard variable rate.

If nothing else, you might notice that new, higher payment coming out of your bank account. If that happens, pick up the phone and call an advisor as quickly as possible. We can look into the best possible deal for you and get you on that as fast as we can.

Too many people look for the shorter, ‘easier’ option and just switch with their current lender without looking into the cheapest deal. But a mortgage is the biggest financial debt that people have. You need to get yourself the best deal, and take time to do it.

What happens to my existing mortgage when I remortgage?

A lot of people are not sure of the process. Essentially, assuming you get a new lender instead of your current one, they will pay off your current mortgage lender.

Let’s say your mortgage is with Barclays, but you’re going to remortgage to Nationwide. On the day of completion, Nationwide will pay Barclays back. If there’s any left over, because you’re doing equity release or debt consolidation, that will be paid to your solicitor and they will pay it to you.

You’ll start making repayments to the new mortgage lender. There is a solicitor involved, but they’re often free.

Can I switch lenders when remortgaging?

Yes, and it’s worth looking at switching lenders. It is easier paperwork-wise to just stay with your current lender and switch your deal, which is called a product transfer. But a remortgage gives you access to the whole market and will help make sure this is the right deal for you.

Can I remortgage to consolidate my debts?

We have just recorded an episode on consolidating your debts with a remortgage – and it is a topic I am very passionate about. I know the weight of debt. I’ve felt it myself. I’ve helped many clients over the years who have had their life changed by removing the weight of debt.

Debt is the biggest cause of sleep deprivation, and one of the biggest sources of money worries. That contributes massively to stress in the body and mind. So I want you to listen to that episode to find out more about consolidating your debts.

But yes, you absolutely can remortgage to consolidate credit cards, personal loans or any other debt you’re carrying, as long as a few things are taken into account, such as affordability and the amount of equity in your property.

Can I remortgage if I have bad credit?

You can remortgage if you have bad credit. Perhaps you’re with a high street lender at the moment and your credit was nice and clean a few years ago, but something has happened since then and your credit is not so clean anymore. You will probably end up paying a higher interest rate.

We may have to go to the specialist market to find you a lender who is happy with what’s showing on your credit file. It really depends on how bad it is. What some people think is bad is actually not bad at all from a mortgage lender’s point of view. It’s all about what that actually looks like and the whole overall picture.

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Will I have to pay any fees or penalties when remortgaging?

If you’re on a fixed rate deal, you will have an early repayment charge from your current lender until the day the fixed rate expires. It’s really important not to remortgage before that date to avoid that charge.

Your advisor should be taking care to make sure that doesn’t happen. Make sure you’re looking into it six months before that date. Then you’re prepared, you can get the best deal on the market and make it a very smooth transition.

Often there’s going to be an arrangement fee from the new mortgage lender if you are switching, but even with a product transfer there’s sometimes an arrangement fee. It can be added to the loan, as it’s often in the region of £1,000, or you can pay it up front if you don’t want to pay interest on that.

As I said earlier, there is a solicitor involved and the lender will potentially value your property. Those fees are mostly covered by the lender, so you’ll have free valuation and free legal fees. It’s unusual to have to pay for those on a remortgage

How much could I potentially save by remortgaging?

If you’re on the standard variable rate, you could save so much money each month, instantly, with a remortgage. If you’re currently on a lower interest rate than the market is currently offering, I’m sorry to say you’re probably not going to save from remortgaging, but you will still save compared with the standard variable rate.

It’s really about looking at the alternatives. If you don’t remortgage, the lender will put you on the variable rate. So many people are on that variable rate right now and I just want to go into their houses and sort this out for them. I can save you money overnight, and remortgaging is honestly not as bad as people think.

What documentation will I need to provide when remortgaging?

You’re going to need to prove your affordability, so we’ll need proof of income – with payslips or tax returns if you’re self-employed.

We often ask for bank statements to accompany that, as part of our role is to look at spending patterns to make sure your monthly budget is affordable to you, now and in the future. We also correspond your payslips to your bank statements.

You’ll be asked for proof of ID and address, if it’s a brand new lender or a brand new advisor,
to confirm you are who you say you are. We do a fact-find to make sure we’ve got all your details. That might include a credit score, details of your current lender, any expenses we need to know about and your utility bills.

I’ll be honest – some people are surprised at how many questions we ask, but it’s all for good reason. It gives us an overall picture of your spending and your financial position, so we can give you the best possible advice.

Often we give people really good news – they download everything to us and we show them how much disposable income they have each month after everything. They are often quite surprised. We can also suggest good financial habits that could take them to the next level of money management.

Will I need a new valuation or survey when remortgaging?

Most of the time, yes, but with tech being really advanced, lenders often now use what’s called an AVM – an automatic valuation. It’s done from intelligent systems that pull together comparable house prices in that area.

They assume no alterations have been made to the property and give you quite a realistic valuation figure. If that happens and everyone’s happy with that figure, they don’t do a full valuation. Lenders have to pay for the valuation, so it saves them money.

However, if you’re like me, and between remortgages you do things to your home that add to the value, that AVM may not be reflective of the real value of the property. Maybe you’ve added another bedroom or a garden room or you’ve renovated.

In that case, you can insist that the lender actually sends someone to your property. It’s really important to be aware of that, because it can make a huge difference to your rate options if there’s more equity in the property.

The negative side is if they believe your property is worth less, they might put you on a higher rate because of the Loan to Value shift. So it’s really important that the valuation reflects what you believe your property is worth.

Is it harder to remortgage if I’m self-employed or a contractor?

Yes and we’ve got lovely episodes to deep dive into if you are in one of those categories, so I encourage you to scroll back a bit and find those.

It’s not harder. It’s just perhaps a bit different in how we look at your affordability and the paperwork you need. It depends how organised you are on the paperwork front, but also how well your business has done over the last two years – although some lenders will just look at the last year. It’s not harder, it’s just different, is my honest answer.

What happens if my property value has decreased since I initially obtained my mortgage?

It’s really hard for people to accept when that happens. Thankfully, in general, house prices have increased in the UK, so it’s not a common thing. But if your property value has decreased, the simple truth is it will affect your Loan to Value.

Loan to Value is the difference between the value of your property – the decreased value – and your mortgage amount. If you divide your mortgage amount by the value of the property and multiply by 100, that’s going to give you a percentage figure: that’s the Loan to Value.

If we say you’re on a 90% Loan to Value product, we mean there’s 10% equity in your property right now. If the property value goes down, that percentage will go down too, because there’s less money in your property than we thought. It just means you’re going to have different rate options, potentially. It depends how much we’re talking about and the difference it makes to that percentage.

If it hits another 5% bracket, so for example, if it hits 85% or 90%, it will change your rate. If it goes to 87% or 88%, it’s not really going to change. Rates typically change every 5% until you reach a 60% Loan to Value. They typically stay the same beyond that.

What are the advantages and disadvantages of fixed rate versus variable rate remortgages?

The main advantage of a fixed rate is that it’s predictable and stable. You know what you’re paying. If rates shoot up, you are protected for that period of time.

The disadvantage of a fixed rate is less flexibility. If you want to move or remortgage again, you’re going to pay an early repayment charge. And of course, interest rates can go up and they can go down. You might be kicking yourself if you’ve got yourself a fixed rate and then interest rates shoot down and you’re paying more than the market rate.

You know I don’t like the standard variable rate – I’ve made it very obvious. But other variable rates like tracker rates or discounted rates are more flexible, so you can move without paying an early repayment charge. If you’re moving house in the next few years, you won’t need to worry about having to wait till the fixed rate ends – or indeed taking that particular mortgage with you.

When Bank of England rates come down, variable rates go down as well. But the disadvantage is that they can go up as well. That’s the price for that flexibility – it’s less predictable and gives you slightly less stability overall.

It’s all about your personal situation. If you’re looking to move, it is best to go for a variable product because you can potentially save tens of thousands of pounds potentially in early repayment penalties. It really does depend on your situation and your attitude to risk. Some people will have sleepless nights if they don’t know what’s going to happen.

Can I remortgage if I’m nearing retirement age?

Yes. We did a mortgage the other day for a 49-year-old with a 40-year mortgage term.

Obviously he’s going to be retiring within that time. But this particular lender’s criteria means as long as he’s working for over half of the mortgage term, they will include his working income right now without delving too much into what happens when he retires.

So you absolutely can get a remortgage if you’re nearing retirement age. There are more options out there than you think. There’s a big market for this type of borrower now, so I would definitely encourage you to get advice.

Some people have still got quite chunky mortgages and are approaching retirement. If you can’t get a mortgage, there are equity release or retirement interest only mortgages as well. They’re not our first option, but if your priority is to stay in your property, those are options outside of the remortgage market.

What else do we need to know about remortgages?

Hopefully, this just gives people the nudge to get their mortgage looked at. If you don’t know when your rate expires, find out. That’s a nice piece of homework for you.

If you’ve listened through to the end of this episode, you’re obviously interested. Put a reminder in six months before your rate is due to end and you will really benefit from having a conversation with a broker then.

If you’re on the standard variable rate, you know what to do. Get yourself off it. There’s no reason to be paying that much, so pick up the phone.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.

YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.