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When should I Remortgage?

Remortgaging unfairly gets a lot of bad press but should be treated the same as switching credit cards. Read on to find out why getting a remortgage could be an attractive proposition for you! 

Contrary to popular belief, remortgaging can be a very clever and simple move to help you save money. You may even wish to use the remortgage to reduce or increase your mortgage term or reduce or increase the amount borrowed. Read on to find out more on why people decide to remortgage and whether it could be the right option for you!

What is a remortgage?

A remortgage is basically where you get a new mortgage deal on a property that you already own. This will then replace your existing mortgage deal and can save you thousands of pounds per year.

Why do people tend to remortgage?

The list of reasons why someone may want to remortgage can be long and varied. Ultimately, the main reason that you’ll be looking to remortgage will be to move to a better mortgage deal than the one that you are currently on. This may take the form of either a lower rate of interest or a repayment system, which may better suit your current finances.

In the days of yesteryear, when you took out a mortgage it would mean that you would have to stick with it for the entirety of your mortgage term. Luckily for you, things have changed. Now you can switch your mortgage deal to either a new one offered by your current lender or by a different lender altogether. Another great thing about remortgaging is that if you have enough equity in your home then you can remortgage for more and take out some of the equity in your property for cash.

When should I remortgage?

As we’ve said one reason that you may want to remortgage could be to move to a better rate. Even if you make a move to a deal which offers an interest rate that is 0.5% less then this could save you thousands of pounds across your mortgage term.

Another reason you might want to remortgage is if your current deal is about to end. At the end of a deal you will usually revert the the lenders "standard variable rate" which will likely be 2% or more above the best deals available. On an average sized mortgage this means you'd be paying approximately £4500 per year in additional interest charges.

Reaching the end of your current deal gives you the opportunity to search for a new deal to suit your present & future needs, which may be very different to what they were when you took out your last mortgage. In times of economic termoil or when you need to take control of your outgoings you may opt for a fixed rate mortgage offer, whereas when times are more bouyant & interest rates are dropping you may opt for a tracker mortgage linked to the Bank of England base rate. 

Should you think about remortgaging if you want to overpay on your mortgage?

Overpaying on a mortgage can seem a great option if you have had a pay rise or you have received a sum of money from your inheritance. So why should you overpay? Remember that ultimately you’re going to be paying interest every time you make a monthly repayment on your mortgage. So, if you opt to overpay on your mortgage you are reducing the amount you owe so are also reducing the amount due in interest charges. Don't forget, paying just £1000 off your mortgage may only give you a small monthly interest saving but, that saving is there each & every month for the entirity of the outstanding term of your mortgage.

Be warned though, many lenders have a limit to the overpayments you are able to make, often 10% of the outstanding balance per year so, check first before making any form of overpayment.

Should you remortgage to borrow more money? 

If you feel like your current lender is offering you less than what you need, then remortgaging can be an easy way to remedy this. If this is the case, then the lender you are looking to remortgage with is going to ask you why you need the extra money. Make sure you have a good answer for this. Lenders are far more unlikely to accept your remortgage application if you are doing this for business purposes in contrast with you needing to remortgage to pay off any outstanding debts or for home improvements. 

Who should I remortgage with?

When you’re looking for a new mortgage we can’t stress enough that you should do your research before you commit to any new deal. This is because choosing to remortgage with your current lender or another one entirely brings different pros and cons. Existing customers may not want to remain with the same lender if there’s a better deal out.

The reasons for this are simple. If you decide to go with a new lender then you’ll be opening yourself up to a whole market’s worth of deals. However, the main problem with doing this is that you’ll have to potentially pay a additional fees to change mortgage lenders. This may nullify the savings you’d make by switching as opposed to taking a new deal with your current lender. While some lenders are aware of this and will offer to pay some of your fees before you accept their deal, make sure that they will do this. It can be a huge decision making factor.

Alternatively, if you chose to stay with your current lender then you may not have to pay the same amount in fees but you will be limiting your options. So, we recommend that you do your homework and think carefully.

If you’ve got any more questions about whether to remortgage then check out some of the other articles on our site.

 

We have loads of articles on everything mortgage-related. From first-time buyers guides, credit score information, guides on finding mortgage calculators, remortgage advice, interest base rates to the likes of home insurance and life insurance too! See all of our Articles, here.

Looking to remortgage? Start your application today! Visit our Remortgage page to see what Mortgages Online could do for you. We’ll provide you with remortgage rates tailored to you, so you can find the deal that is ideal for your own situation.

‘Do I need a credit card to use MO?’ Not at all. All of our services are free! Use Mortgages Online to see what mortgage and remortgage deals we have for you.

PaulFlavin

Paul Flavin

Paul Flavin is the Managing Director of Mortgages Online and has been working in the mortgage industry for over 20 years. Running a successful independent mortgage broker since 2010, Paul oversees Mortgages Online and creates articles regularly – drawing on his years of mortgage experience.

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