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Remortgaging and remortgages

When you remortgage you still choose the rate you’ll pay, repayment method and type of product from any lender in the market. However, contrary to what many believe, you don’t have to change lenders. Your aim is to find a deal that improves on your existing mortgage.

Reasons for remortgaging vary. The main ones are to:

REMORTGAGE COSTS AND PENALTIES

The lender will not rely on your original survey when assessing the remortgage value of your house, so there will be a charge – as there would be for a normal mortgage. There will also be legal costs and possibly administration fees – although these aren’t likely to be as high as with a totally new mortgage.
 
Many lenders offer re-mortgage packages that refund these costs on the completion of the deal,
providing you use their recommended surveyors and solicitors. However, you may face substantial costs if there are early repayment charges (ERCs) associated with your existing mortgage. If you are within an introductory offer period with a fixed, discounted or capped rate of interest, you will incur a penalty, which will usually be a set proportion of the loan. Some loans also have an overhang period after the introductory time – this could cost thousands.

However, it’s always worth weighing up the savings you can make with a remortgage against the
costs and penalties. It may be worth paying these for the benefit of the new loan, particularly if the
redemption fee is small.

TIMING

Although the process of remortgaging is similar to getting a normal mortgage, it’s faster as you’re not buying a home. Depending on the lender, it should take around six weeks. If you need to remortgage fast, some lenders offer fast-track services that can complete in as little as a week but this does depend on your individual circumstances.

It’s also important to consider when you want to complete the deal. If you are remortgaging from a
lender that charges interest to the end of the month, you should remortgage on the first of the month so the old and new mortgages don’t overlap.

WHICH MORTGAGE?

Choosing a product when remortgaging is just as important as the first time around. You need to consider your financial requirements and your circumstances. The product you choose will depend on factors such as the size of your outstanding loan, attitude to risk, income and what you think will happen to interest rates.
 
A remortgage is the same as any other mortgage – except you’re not buying a house

Need to know

The process should take about six weeks

Source: Mortgage Advisor & Home Buyer magazine