How to remortgage

How to remortgage? Follow our step-by-step guide for getting the best mortgage deal if you already have a mortgage

How to remortgage

How to remortgage? It's a question many home owners contemplate at some point. Just as you can change your energy supplier to save money on bills and swap your bank account provider to benefit from better interest rates, you could remortgage your home if it can provide clear financial benefits to you in both the short and the longer term. However, finding the best mortgage the second time around is not always necessarily easier. We guide you through the main steps of remortgaging, and weigh up the pros and cons of doing so. 

Need first-time advice? Follow our guide on how to take out a mortgage.

1. Check your credit score before remortgaging

Before you even begin comparing mortgage deals available, you should make efforts to improve or maintain your current financial situation and make sure your credit score is healthy. 

Ideally, you’ll need to start this up to a year before applying to remortgage. It’s best to minimise the amount of credit card applications you make, not miss any bill payments, take out fewer contracts, including for new phones or insurance policies, and never withdraw cash on a credit card. Also, make sure you’re on the electoral roll by registering to vote, as this will be included in your credit file, and ensure any accounts or contracts you hold are registered with the same details, including your address and occupation. Stay out of your overdraft and close any unused credit cards. 

2.  Work out your disposable income 

Lenders will want to make absolutely sure that you can afford to pay back the loan each month, so work out how much money you have left in your account after all your monthly repayments have gone out, including your mortgage. 

The larger the amount of disposable income left over at the end of each month, the more comfortable the lender will be with your loan application, as you’ll be seen as a reliable customer. 

3.  Factor the remortgage into your finances

Always work out how much a better deal could save you and work this out into monthly denominations so you can factor this into your monthly spending breakdown. 

Remember, some mortgage providers will charge you a fee to leave the policy early, so if this is the case, factor in this amount into your new monthly repayment plans and use this figure to work out if you can afford it. It could work out more expensive to leave your current deal when the fees are included, so work this out before moving to a new provider. 

4. Know how much you owe your current mortgage lender 

Before you start looking elsewhere, take a good look through your current deal, including how much you pay monthly, whether your rate is fixed or variable, if you’re on a promotional period, how long you have left on the mortgage and if there are any penalties for leaving early. Once you’re fully prepared with the details of how much you’ve paid and how much you still owe, you’ll be able to accurately compare other deals available. 

5. Use online price comparison tools

To get an idea of what’s available in the current market and which deals best suit your circumstances, start your search on comparison websites, or use a free calculator. This will help you assess the mortgages available to you, make direct comparisons and compile an initial list of deals to look into more closely. 

6.  Remortgage with your current lender

Don’t just rely on comparison websites or other providers to offer a better rate. Make sure you ask your current provider if they can put you on a better plan to reduce your monthly payments in return for being a loyal customer. Remember that mortgage providers make money from you, so they’ll be keen to keep your custom, so don’t change provider until you’ve exhausted the possibilities with your existing one too. 

7. Remortgage with your bank

If your current lender can’t better your existing deal or offer more money to finance a home redesign, ask your bank account provider (if different) if they can provide you with a new mortgage. Again, as an existing customer, you may be able to negotiate a favourable deal and they’ll be keen to sell you another of their services. 

8. How much equity do you have?

If you’ve been paying a mortgage on your property for years and your home has increased in value, chances are you’ll have built up equity. To get the best deals for remortgaging, you’ll ideally need 20 to 40 per cent equity in your property, while the very cheapest deals with have a loan-to-value of 60 per cent, according to Moneysavingexpert.com. 

9. What is the best type of mortgage?

There are different mortgage types available and it’s crucial to go for the one that will best suit your financial circumstances. A fixed mortgage will have rates that won’t fluctuate in line with changing interest rate, so the rate will remain at the level it was when you signed up for the loan, meaning you can better plan your finances each month as the repayment amount won’t change (but remember to check if the rate is fixed for a promotional period only). 

A variable mortgage will fluctuate in line with changing interest rates, so your payments will go up and down. A variable rate mortgage will typically start at a lower rate than a fixed rate mortgage, but bear in mind that this could change depending on the financial climate. Speak to a qualified broker for more information and to discuss which type will be suit you. 

10. Use a whole market mortgage broker

While comparison websites are a good resource for seeing what’s available, a qualified mortgage broker will have invaluable knowledge of the industry and will know where to look for the best deals to suit your unique circumstances. Visit online mortgage broker Habito to get the best advice about remortgaging. They’ll be able to help you seek out the best deals, answer any queries you have and use their inside knowledge to negotiate the best deal based on your financial history and current status. 

Mortgage jargon explained

Fixed rate – A mortgage that has a fixed rate has an interest rate that is set when the loan is first taken out, so will not change.

Variable rate – In contrast to a fixed rate mortgage, a variable rate may go up and down.

Loan-to-value (LTV) – A term used by lenders, the LTV expresses the ratio of a loan against the value of the asset, listed as a percentage. It is the ratio between your property’s value and the mortgage required.

Equity – the value of ownership built up in a home in line with the current market value minus the remaining mortgage repayments. This is built up as a mortgage is repaid and the property’s value increases.

Standard Variable Rate (SVR) – The rate you’ll most likely be put on after finishing an introductory fixed or variable deal.

Did you know?

If you’ve already extended and added value to your home, find out if you qualify for a lower LTV band and can reduce your monthly mortgage repayments.

Comparing mortgages

We've teamed up with online mortgage advisor Habito. Use this form below to get an idea of what you can borrow, then speak to an advisor for unbiased advice about taking out a mortgage, help seeking out the best deals, and answers to queries you may have. They can use their insider knowledge to negotiate the best deal based on your financial history and current status, too.