What Is Remortgaging?
Remortgaging is paying off your existing mortgage with a new one, typically from a different lender or on different terms. You stay in the same property; you're just switching the financing.
Why Remortgage?
1. Better interest rates (rates have fallen since you took out your mortgage)
2. Different product (fixed to variable, shorter term, etc.)
3. Debt consolidation (add other debts to the mortgage)
4. Equity release (borrow more against rising property value)
5. Coming to end of a fixed/discounted period (forced to act)
Frequency: Most people remortgage every 2–5 years when rates drop or their fixed period ends. It's a normal part of homeownership.
Remortgage Costs
Remortgaging isn't free. Budget for these costs:
| Cost | Typical Amount |
|---|---|
| Valuation Fee | £150–400 |
| Mortgage Arrangement/Completion Fee | £500–1,500 |
| Solicitor/Legal Fees | £200–600 |
| Early Repayment Charge (from old lender) | 1–5% of outstanding balance |
| TOTAL | £1,000–3,500+ |
Early Repayment Charges: If your current mortgage is in a fixed or discounted period with an early repayment charge (ERC), you'll pay 1–5% of what you owe to leave. This can exceed £10,000 on a large mortgage. Check your mortgage offer before remortgaging.
Tip: Remortgage costs are often added to your new loan balance (you don't pay them upfront). This spreads the cost over 25 years but increases total interest. Alternatively, pay upfront if you can afford it.
When to Remortgage: The Rate Decision
Remortgaging makes sense when savings exceed costs. Here's the math:
Example: Is It Worth Remortgaging?
Current mortgage: £200,000 at 6% (£1,199/month)
New rate available: 5.2% (£1,096/month)
Monthly savings: £103
Remortgage costs: £2,000
Break-even: 2,000 ÷ 103 = 19.4 months
If you'll stay for 2+ years, remortgaging makes financial sense.
Rule of Thumb: Remortgage if rate drop is 0.5%+ and you'll stay for 2+ years. If drop is only 0.25%, you likely won't save enough to justify costs.
Timing: When Your Fixed Period Ends
The most important remortgage timing is when your fixed or discounted period ends:
- 3 Months Before Expiry: Start shopping. Most lenders allow applications 3 months early. Compare rates and products while you can still lock in rates.
- Do NOT Wait Until Expiry: If you don't remortgage, you'll be moved onto your lender's Standard Variable Rate (SVR), which is typically 1–2% higher than fixed rates. This costs thousands per year.
- Rate Lock Period: Once you're offered a rate (usually within 6 months), it's typically locked for 121 days. Use this time to complete your remortgage.
Don't Miss the Window: If you forget to remortgage before your fixed period ends, you'll be on SVR at a punitive rate. You can still remortgage away from SVR, but you'll pay the expensive SVR for every day you're on it.
Portability: Taking Your Mortgage to a New Home
If you're moving home, "portability" means taking your existing mortgage to the new property without losing your rate.
How Portability Works
You're in a 5-year fixed at 4.5% (2 years remaining).
You sell your current home and buy a new one.
You request portability from your lender.
Your mortgage moves to the new property at the same 4.5% rate and same term (3 years remaining).
No new arrangement fee (usually).
Advantage: You keep your locked-in rate when rates have risen. Huge benefit if rates have jumped since you took out your mortgage. No new arrangement fees typically apply.
Limitations: Portability may require the new property's value to be similar to your current one. If you're buying a much more expensive property, you may need to increase the loan amount beyond the portable portion. The increase would be at current rates.
Moving Home: Portability vs. New Mortgage
When buying a new property, you have three options:
Option 1: Port Your Mortgage
Keep your existing mortgage at its current rate/terms. No arrangement fee. Simpler. Ideal if rates have risen and you want to lock in your old rate. Limited flexibility on property price (must be similar value or use new borrowing for the difference).
Option 2: Remortgage with New Lender
Pay off your old mortgage and take out a new one with a different lender. Full flexibility on property price and terms. You access market rates (possibly better if you've built equity or your circumstances improved). Costs: arrangement fee + valuation + legal fees.
Option 3: Remortgage with Current Lender
Stay with your current lender but on a new product (new fixed rate, different term). Simpler than switching to a new lender. You're already known to them; less scrutiny. May cost less in fees or waive some fees (loyalty incentive).
Decision Rule: If your old rate is significantly better than market, port. If rates have fallen or your circumstances improved, remortgage to a new lender for potential savings.
Remortgage Affordability Test
When remortgaging, lenders re-assess your affordability. This can be problematic if:
- Your income has fallen since you took out the original mortgage
- Your credit score has worsened
- You've taken on more debt (car loan, credit cards)
- You're older and closer to retirement (some lenders have age limits)
Risk: If your circumstances have deteriorated, a lender may refuse to remortgage you, even though you've been paying for years. This is rare but possible. Your current lender is most likely to accept you; new lenders are stricter.
Stay Proactive: Keep your credit score high, minimize new debt, and remortgage before your fixed period ends. Don't wait until the last moment when lenders might be less willing to take risks.
Debt Consolidation via Remortgage
Some people remortgage to consolidate debt (roll credit card or loan balances into the mortgage):
How It Works
You owe £200,000 mortgage + £15,000 credit card debt. You remortgage for £215,000, pay off the credit card, and roll it into a lower mortgage rate. Monthly payment might be similar or lower despite higher total borrowing.
Advantage: Consolidates debt into one payment; often lower interest rate than credit cards. Simplifies finances.
Risk: You've extended a short-term debt (credit card) into a 25-year commitment. If you only roll debt into the mortgage, you'll be paying far more interest over time. Use this strategically, not as a default fix.
Remortgage Checklist
- Know your fixed period end date; don't miss it
- Start remortgage shopping 3 months before expiry
- Check for early repayment charges on your current mortgage
- Calculate whether savings justify costs (break-even analysis)
- Compare rates and products across multiple lenders
- Get your affairs in order: clear new debt, improve credit score if needed
- If moving, decide: port or remortgage?
- Budget for remortgage costs (~£2,000–3,000)
- Lock in your rate within the allowed window (usually 6 months)