Remortgaging explained

Remortgaging means moving your home loan from one mortgage to another: either a new deal with the lender you already have, or a new mortgage with a different lender secured on the same property. The Bank of England defines it as what happens "when existing borrowers redeem their current mortgage in favour of a new one secured on the same property, but with a different mortgage lender"¹. In everyday use the word covers both that move and the simpler switch to a new deal with your existing lender.

People remortgage for a mixture of reasons. StepChange lists the common ones: a mortgage deal or term is ending, you want a better deal, interest rates are changing, you need to pay for an expense, or you need to remortgage as part of an IVA or bankruptcy². The most common trigger is a fixed or discounted rate coming to an end, because at that point the loan moves onto the lender's standard variable rate unless you arrange something else.

The scale of this market is large. UK Finance reported that in the second quarter of 2024 more than one in twenty people remortgaging took out loans with terms of 36 to 40 years, a sign that longer terms are spreading beyond first-time buyers into remortgaging too³. Remortgaging is a routine financial event, not a rescue measure, and most homeowners with a mortgage will do it several times over the life of the loan.

What remortgaging is and why people do it

A remortgage replaces your existing home loan with a new one. The HomeOwners Alliance describes it as "switching from one mortgage to another", either with your current lender or with a different one⁹. Your home stays exactly where it is and you stay exactly where you are: only the loan changes.

The reasons people do it fall into a few broad groups. The first is price. Most mortgage deals last two or five years, and when they end the balance moves onto the lender's standard variable rate, which is usually more expensive than the deals offered to new borrowers. Remortgaging at that point replaces the variable rate with a new fixed rate or tracker rate.

The second is borrowing. Remortgaging can release a lump sum from the value of your home or reduce your monthly payment, as StepChange explains¹⁰. Someone who has owned a home for years and paid down the loan may be able to borrow more against it, whether for home improvements or to consolidate debts. The third is circumstance: a change of circumstances such as a separation, a new job or a change of income often prompts a review of the mortgage, and some people in an IVA or bankruptcy are required to remortgage as part of the arrangement².

The fourth reason is simply that the market has moved. When interest rates are changing, a deal taken two years ago may look very different from what is available now, and Which? notes that people who took out a 90% mortgage two years ago will now own more of the property and may be able to remortgage at 85% loan to value⁴. That single change of band can open up a wider and cheaper set of deals.

Staying with your lender or moving: product transfer or full remortgage

There are two routes to a new deal, and they differ in cost, paperwork and checks.

A product transfer means taking a new deal with the lender you already have. Your balance, term and security arrangement stay the same; only the rate and deal change. There is normally no valuation, no legal work and often no full credit check, which makes it quick and cheap. The trade-off is that you can only choose from that lender's own deals.

A remortgage to a new lender means redeeming your existing mortgage and taking out a new one, secured on the same property, with a different lender¹. The new lender assesses you as a fresh applicant: your credit file, the value of your house and how much you want to borrow¹⁰. Legal work is needed to remove the old lender's charge and register the new one, and a valuation of the property is usually required.

Which route suits you depends on what you want out of the switch. If your priority is simply to avoid the standard variable rate with minimum fuss, a product transfer does that. If you want to borrow more, change the term, move to a different type of mortgage, or the whole market offers better deals than your lender does, a full remortgage is the route that makes those possible. The comparison page on remortgage or product transfer sets the two side by side, and product transfers explains the stay-put route in detail.

One thing a remortgage does not do is move the house. If you are moving home, that is a different transaction, and you may be able to take your mortgage with you by porting a mortgage when you move home. Which? notes that porting is not guaranteed: if your circumstances have changed, you might not qualify for the ported deal⁵.

When to remortgage: up to six months before your deal ends

The timing rule is that a new deal can be arranged well in advance. Which? reports that you can usually secure a new mortgage six months before the end of your current one⁴. The Mortgage Charter, which most major lenders have signed, allows borrowers to lock into a deal up to six months before an existing fixed rate changes⁸.

Starting early does two things. First, it removes the risk of a gap between your deal ending and the new mortgage starting, during which you would pay the standard variable rate. Second, it gives you room to fix problems: a valuation that comes in lower than expected, a credit file error, or a lender that is slow with paperwork. The narrow guide on how far ahead you can lock in a new rate covers the mechanics of booking a rate in advance.

The other timing question is what happens if you do nothing. Your loan does not disappear or get called in: it simply continues on your lender's standard variable rate, usually at a higher monthly cost. There is no deadline you miss and no penalty you incur, only the ongoing difference between the variable rate and the deals you could have had. The page on what to do when your fixed rate ends walks through that decision point.

Remortgage costs: early repayment charges and other fees

The cost that catches people out is the early repayment charge. If you remortgage before your current deal ends, there is often an early redemption fee¹⁰. These fees can add up to tens of thousands of pounds on large loans, as Which? warns in its guide to porting⁵. The typical range across the market is 1% to 5% of the amount being repaid, though the exact figure and how it is calculated are set by your own mortgage offer.

The Financial Ombudsman has dealt with cases where this went wrong. In one case study, a borrower's plan took no account of a £1,500 early repayment charge that the lender had not made clear¹². The lesson is to read your mortgage offer before applying anywhere: the charge, the deal end date and any overpayment allowance are all in it. The dedicated guide to early repayment charges explains how they are worked out and when they do not apply.

Beyond the charge for leaving early, a remortgage to a new lender can involve:

• Valuation fee: many lenders offer a free basic valuation as part of a remortgage package, but not all do.
• Legal fees: the redemption of the old mortgage and registration of the new one require a solicitor or licensed conveyancer. Free standard remortgage legal work is commonly bundled with remortgage deals.
• Product or arrangement fees: some deals carry an upfront fee, which may be added to the loan.
• Broker fees: if you use a broker, some charge a fee and some are paid commission by the lender.

A product transfer avoids most of these: there is usually no valuation, no legal work and no product fee, which is why it is the cheaper route when the numbers are close. Mortgage fees and charges sets out the full list of costs you may meet, and the ESIS illustration page explains the document that must show the total cost of any deal you are offered.

Loan to value: why the equity in your home sets your options

The single biggest factor in what a remortgage can achieve is your loan to value, or LTV. The HomeOwners Alliance defines it as "the size of your mortgage in relation to the value of the property you're buying or remortgaging"⁶. Its mirror image is equity: "the difference between the mortgage owed on your home and the value of your property"¹³. The amount of equity you have is based on how much your home is worth and how much you owe on your mortgage¹⁴.

Which? gives a worked example. Someone who owes £180,000 on a property worth £300,000 is at a loan to value of 60%¹⁵. If they remortgage for £200,000 instead, releasing £20,000, the loan to value rises to 66%¹⁵. The more equity you have, the lower the LTV, and the wider the choice of deals at the sharpest bands.

LTV bands matter because lenders price by band. Crossing from one band to the next, say from 85% to 75%, can change the deals available to you. Equity grows in two ways: as you pay off the loan, and if your property rises in value. Which? notes that someone who took out a 90% mortgage two years ago may now be able to remortgage at 85% loan to value⁴.

The reverse also happens. Which? warns that taking out a 95% mortgage can make it difficult to remortgage to a better rate when the deal ends, because it can take a while to build up enough equity, and there is a risk of negative equity if the value of your home falls¹⁶. The full guide to loan to value explains the bands, and making overpayments covers one way to push your LTV down deliberately.

Shared equity schemes add a layer. If you bought with a Help to Buy equity loan, the amount you repay is based on the current market value of the home at the time you choose to repay, and the percentage you want to repay¹⁷. Part repayments change how the interest on the equity loan is worked out: it is recalculated using the percentage of equity loan left to repay and the original market value of the home¹⁸. In Wales, the equity mortgage repayment is likewise linked to the value of your home at the point of repayment, not the amount originally borrowed¹⁹, and the repayment sum rises if the market value rises and falls if it falls²⁰. Remortgaging with one of these loans in place has its own rules, covered in remortgaging and repaying a Help to Buy equity loan.

Borrowing more when you remortgage

Remortgaging can improve your situation in two ways, as StepChange puts it: release equity, taking a lump sum from the value of your home, or reduce your monthly mortgage payment¹⁰. Borrowing more is one of the most common reasons for a remortgage, whether for home improvements, a one-off expense or to clear other debts.

A lender assessing an application to borrow more looks at several things: your credit file, the value of your house, and how much you want to borrow¹⁰. You can remortgage even if you have debt; what matters most is how well you are keeping up with payments to those debts¹⁰. If you are in arrears with your mortgage or any other debts, your credit rating will be affected and it is unlikely you will get a good mortgage offer¹⁰.

Borrowing more against your home carries specific risks that unsecured borrowing does not. StepChange lists them: longer repayment terms, securing the mortgage against your home, and more interest to repay in total²¹. Stretching a £10,000 debt over a 20-year mortgage term converts a short-term problem into a long-term cost, and the debt is now secured on your home, so missed payments can ultimately put the home at risk. Refinancing debt can have less impact on your credit rating than some other approaches, because there is not an ongoing record of making reduced payments, but you do risk paying back more in the long run²².

There are alternatives to borrowing more on the mortgage. A further advance from your existing lender, a second charge mortgage, or an unsecured loan each work differently and carry different risks. The comparison of a second charge mortgage or remortgage sets out when each tends to be used. Free debt advice, from StepChange or National Debt Helpline, can help weigh whether consolidating debts into a mortgage is the right move at all²⁵.

How to remortgage, step by step

1. Check your current deal. Find the end date, the rate you will move to afterwards, and any early repayment charge in your mortgage offer. Your annual mortgage statement shows the balance and rate.
2. Work out your loan to value. Estimate your home's value and compare it with what you owe⁶. This tells you which deals you are likely to qualify for.
3. Decide whether to stay or move. Compare your lender's product transfer deals with the wider market, weighing fees and the legal and valuation work a new lender requires⁹.
4. Get a decision in principle. A lender or broker gives an indication of what you could borrow. The page on the mortgage in principle explains what it involves and what it does not commit you to.
5. Apply. The lender assesses your credit file, income and the property. Avoid multiple hard credit checks by not scattering applications, as Which? warns they can negatively impact your credit score⁴.
6. Valuation and legal work. The lender arranges a valuation; a solicitor handles the redemption and registration.
7. Receive the offer and complete. Once the offer is accepted, the new mortgage pays off the old one on the agreed date, timed for the day your old deal ends.

Whether to use a broker or go direct is a genuine choice: mortgage advice: brokers, advisers and applying direct explains what each offers, and broker-only mortgage lenders covers lenders you cannot approach yourself.

Special schemes have extra steps. If you bought through Scotland's Open Market Shared Equity scheme and want to remortgage, you have to contact the registered social landlord or local council who handled the sale²⁶. If you have a guarantor mortgage, the aim is usually to remortgage as soon as you have built up enough equity to a deal that does not require a guarantor²⁷.

Credit checks, valuations and solicitors

A new lender runs a credit check as part of assessing your application. One check is normal. The danger is several: Which? advises making sure you do not end up with multiple hard credit checks, as this could negatively impact your credit score⁴. A bad credit rating makes it more expensive and harder to borrow money, and can also affect your ability to rent a home, get a mobile phone contract or anything else that requires a credit check, as the Bank of England explains²⁸. If arrears or past problems are on your file, getting a mortgage with bad credit and specialist mortgage lenders explain the options that remain.

The valuation a lender arranges is not a survey of the home's condition. It exists to confirm the property is worth enough to secure the loan. The Financial Ombudsman notes that a basic mortgage valuation should still be carried out by a qualified surveyor accredited by the Royal Institution of Chartered Surveyors (RICS)²⁹. If the valuation comes in lower than expected, the loan to value rises and the deal may change; how to challenge a mortgage down valuation covers that situation, and mortgage valuations and surveys explains the difference between a valuation, a homebuyer's report and a full survey.

Legal work is needed because the new lender must take security over the property. In a let-to-buy arrangement, where you remortgage one home and buy another, some lenders require the same solicitor for both transactions, though not all do³⁰. If things go wrong later, the Ombudsman can look at complaints about valuations²⁹, and complaining to the Financial Ombudsman about your mortgage explains the process.

When remortgaging may not work for you

Remortgaging is not always available, and sometimes it is available but unwise.

Negative equity. If your home is worth less than what you owe, you are in negative equity³¹. In that position a new lender would be unlikely to approve a new deal, as your property would not be sufficient security⁷. Being in negative equity can make it extremely difficult to remortgage or move home in the future¹⁵. Your lender may allow you to repay the shortfall over time using a payment plan⁷, and a very small number of specialist lenders offer negative equity mortgages that enable you to transfer the negative equity to a new property⁷. Selling in negative equity needs your lender's permission, whichever nation you are in: Citizens Advice makes this clear for England³², Independent Age for homeowners generally³³, Advice NI for Northern Ireland³⁴ and Housing Rights for Northern Ireland's own guidance³⁵. Handing back the keys does not end the debt: you may still owe money³⁶. Note also that you cannot get a debt relief order if you are a homeowner, even if the property is in negative equity³⁷.

Arrears and credit problems. If you are in arrears with your mortgage or other debts, a good mortgage offer is unlikely¹⁰. Mortgage arrears put a mark on your credit record and may prevent you buying a house in the future⁷. Free help exists: mortgage arrears: what to do if you cannot pay explains the steps, and charities including StepChange, Shelter, National Debt Helpline and Citizens Advice advise without charge.

Early repayment charges that outweigh the gain. If the charge for leaving your deal early exceeds what the new deal saves, remortgaging early costs money overall. The £1,500 charge in the Ombudsman's case study is a small example of how these figures work in practice¹².

Scheme restrictions. Under Help to Buy Wales, the new first charge lender must confirm it will not allow additional borrowing without the scheme's prior consent²⁰, which limits borrowing more at remortgage. In Scotland, the Mortgage to Shared Equity scheme cannot help if your home is in negative equity, though the Mortgage to Rent scheme can still consider you, and you can apply to it even if you are in negative equity³⁸.

Where the debt has grown beyond the mortgage. If a home is repossessed and sold for less than the mortgage, the shortfall debt can follow you. Repossession affects your credit rating, making it harder to get another mortgage, with a larger deposit and higher interest rate likely³⁹. Business Debtline explains that mortgage interest debt can be extinguished if no court claim is started and no payment or written acknowledgement is made during the last five years³⁶. Borrowing again after a repossession covers the route back.

Support that remortgaging can cut off. If you receive help with housing costs, you cannot get help with the part of the mortgage used for other purposes, such as debt consolidation by remortgaging²³, and the same rule applies for people over 60²⁴. Increasing the mortgage to clear unsecured debts can therefore reduce the help available with the mortgage itself.

For borrowers who are struggling, the Mortgage Charter provides breathing space: lenders that have signed it do not force anyone to leave their home within 12 months of a first missed mortgage payment unless the borrower agrees⁸, and it allows a switch to interest-only repayments for six months without affecting the borrower's credit score⁴⁰. Scope sets out these options for disabled people and households with long-term conditions⁴⁰. Free, independent help is available from MoneyHelper, StepChange, National Debt Helpline, Shelter and Citizens Advice.