Should You Get a Remortgage in 2024? [Detailed Guide]

Most homeowners have considered remortgaging but are unsure how the process goes. This guide addresses what remortgages are, how they work, and if it’s a good idea to remortgage your property. 

Remortgaging: Everything You Need to Know

You may not be getting the best deal on your mortgage, so you look into remortgage options, which can save you a lot of money if you play your cards right. So make sure you understand what a remortgage entails before applying for one. 

In most cases, applying for a remortgage is a straightforward process, mainly depending on your financial situation, which you need to assess first. Then, decide if a remortgage is the best course of action for you and your finances. 

What Is a Remortgage?

Remortgaging is the process of moving your current mortgage on your property from one lender to a new lender. Your new mortgage then replaces your old one. You can also choose another mortgage product from the same lender. Obtaining a remortgage doesn’t mean you need to move house. Instead, you’re simply using your existing property as collateral.

With a remortgage, you merely sign a new financial agreement to attain a better interest rate, reduce monthly payments, consolidate debt, or gain access to additional funds. 

Remortgage Fundamentals

The remortgage meaning is not in the context of a new loan. You still need to pay off the same loan, just under different conditions. You’re required to pay off your current mortgage with the money you borrow on your remortgage, using your home as security. Only then do you begin to make repayments under the new terms. 

Remortgages always require collateral as secured loans (read more about them here)—you cannot apply for a remortgage if you fail to provide a property as a form of security. But if you fulfil these conditions, you can continue with the process of applying for a remortgage.

How Does Remortgaging Work?

When considering a remortgage, you first need to consult a mortgage adviser. Lenders employ mortgage advisers who are qualified to assess the client’s financial situation and advise them on whether a remortgage is a good idea and the best deal for them. Then, when the adviser gives the green light, they can proceed with the application process. 

Keep in mind that the procedure is much less complex than the process of applying for a mortgage, but you still need to consider all the steps carefully. 

How Long Does a Remortgage Take?

The remortgage process takes between four and eight weeks to complete after you’ve submitted your application. The time needed to process the application varies from lender to lender and depends on the new mortgage deal you’ve chosen. 

If you want the process to go as speedily and smoothly as possible, make sure to include all the required documents (e.g., proof of earnings) along with the application. Then, you shouldn’t need to wait long before you hear from your mortgage adviser. 

How to Remortgage

The remortgage application process is conducted in several stages. So carefully scrutinize the following steps to ensure you’re not missing anything that could hinder the approval of your remortgage. 

#1: Consider All Costs

When seeking remortgages, ensure to borrow money at a better rate than what your previous mortgage offered. For example, the current rate on an average mortgage is 2.6% in the UK, but some lenders offer even lower rates. 

Besides low interest rates, you should be aware of all the fees and remortgaging costs, which include:

• Application Fee—the cost of setting up a remortgage
• Valuation Fee—confirmation of the property’s value
• Solicitor’s Fee—payment for the solicitor who manages the mortgage transfer
• Exit Fee—an exit fee or early repayment charge when transferring your mortgage

Once considering all the costs, you can decide if it’s worth paying the allotted amount of money for a remortgage. 

#2: Agreement in Principle 

How much in a remortgage can I get? An Agreement in Principle (AIP)—or Decision in Principle—gives you an idea of how much you can borrow prior to applying for a remortgage or before the lender conducts a full credit check. Most lenders allow you to fill out the AIP online. But be mindful that filling out this form is no guarantee that you’ll be approved for a remortgage. 

#3: The Application

Once you’ve filled out the AIP, you can proceed with the application process, which you can complete online, via phone, or in person. With the application, you’ll need to provide proof of identity (ID or passport), proof of earnings, and details of other financial commitments and your current mortgage. 

#4: The Legal Work

The question of ‘what does a remortgage mean’ further entails a solicitor or licensed conveyancer managing all the legal aspects of your application and transferring the mortgage funds on your behalf. Some lenders offer such services free of charge—all you need to do is read through the paperwork, sign it, and send it. 

#5: The Offer 

When you’ve completed all the steps and your application has been approved, the lender will send you an offer to review and accept. So what happens when you remortgage? If you decide to accept the offer, your old mortgage will be repaid, and you’ll need to begin making monthly payments toward your new mortgage. 

When to Get a Remortgage

While obtaining a remortgage may not always be a good idea, we’ve singled out the following situations when it is a good move. 

Current Rate Expiration

Most mortgage deals have a short lifespan of two to five years on a fixed rate, tracker, or discount mortgage. Once this period ends, if you don’t remortgage, you’ll need to pay the standard variable rate (SVR), which is likely to be higher than your current rate. So if you wish to obtain a cheap mortgage, start looking into remortgage offers three to six months before your current rate expires. 

A Better Rate

You can begin the remortgage process even before the initial deal expires if you think that you can get a better rate with another lender. Even though you may be required to pay an exit fee in such cases, it may be worth it if you save money in the long run. 

Property Value Increase

The value of real estate has gone up in recent years. Therefore, if the value of your home has increased, the loan-to-value might be lower, further enhancing your eligibility for lower rates. 

Overpayments

So when can I remortgage if I’m not permitted to overpay my mortgage? It’s possible to do so immediately. Many lenders, however, don’t allow overpayments on mortgages, but if you can pay more than the allotted payments, you should look into a remortgage. 

Change Mortgage Type

You may wish to switch from an interest-only mortgage to a repayment mortgage or obtain a flexible mortgage temporarily. In both cases, the lender should be happy to provide an alternative to your current mortgage. 

Borrow More

If you want to borrow more money, but your lender is unwilling to lend you more, the best remortgaging advice is to try your luck with another lender who might approve a remortgage. 

You may be offered a credit card when you wish to borrow more money. But be careful accepting this offer since credit card debt in the UK is rapidly increasing, and you may accumulate more debt than you can manage. 

Key Takeaways

When Not to Get a Remortgage

In some cases, it’s best to avoid getting a remortgage. If you recognise your financial situation in one of the scenarios listed below, you should stick with your current mortgage and make timely payments. 

Small Mortgage Debt

The best remortgage advice is not to remortgage when you only have a small amount of debt leftover, e.g., £50,000. You’re less likely to save money with a remortgage in such cases,  So it’s best to hold on to your original deal. 

Exit Fee Is Too Large

An exit fee or early repayment charge can be quite substantial with some lenders. If a remortgage comes with hefty fees, you may end up losing money when switching to another mortgage arrangement.

Home Value Reduction

It’s not a good idea to get a remortgage in the UK if your property value drops—your remortgage re-evaluation would then determine that you owe more than you borrowed. If this is the case—and you still decide to remortgage—you may need to make more substantial repayments, thereby increasing your amount of household debt. 

Little Equity

If your home equity is 10% or less, you may be unable to find a better rate for a remortgage or track down lenders willing to lend 90% of the property’s value. 

Great Current Rate

Once you’ve had remortgaging explained, you may realise that your mortgage rate is already in great shape. In this situation, it’s best to keep your original mortgage and only look into remortgages if the rates start rising or if your UK salary begins to plummet. 

Pros and Cons of a Remortgage

When you understand how remortgaging works in the UK, it becomes clear that a remortgage has good and bad sides, like all financial decisions. Consider some of the following main advantages and disadvantages of remortgages. 

Pros 

• Borrow at a lower interest rate: If you pay lower interest rates, you’ll be able to save more.
• Debt consolidation: You can consolidate all other debts and make only one monthly payment when you obtain a remortgage. 
• Receive additional cash: You can utilise your remaining home equity to get additional funds from lenders.
• Obtain a suitable financial product: Many contemplate when to remortgage. When your financial situation has changed, a remortgage allows you to choose a product more suitable to your situation.  

Cons 

• Overall cost increase: The longer you stretch your mortgage, the higher the costs. 
• Property repossession: Having your home repossessed is always a risk if you don’t make timely payments. 
• Long approval process: Remortgage approval can take up to two months—too long and complicated for some. 
• Various fees: When you remortgage, you’re required to pay multiple fees—some of which are not worth paying. 

Conclusion

When considering your financial situation, getting a remortgage might be the smartest move to make, saving you a lot of money. But before you take action, make sure you understand all the implications of a remortgage and if it’s the best choice for your circumstance.