How to remortgage in the UK: a step by step guide

Before your current mortgage deal runs out, it’s a good idea to arrange a remortgage and avoid being switched onto your lender’s standard variable rate (SVR), which is likely to be more expensive.

Here’s the remortgaging process explained, whether you’re looking to switch your mortgage lender or find a new deal with your current one.

What is remortgaging?

Remortgaging is the process of switching your existing mortgage to a new deal, either with your current lender or a different one.

This is typically done when your current fixed-rate or introductory deal comes to an end, at which point you would otherwise move onto your lender's standard variable rate (SVR), which is often higher.

People also remortgage to release equity from their home, reduce their monthly payments, or take advantage of more competitive rates elsewhere.

Why do people remortgage?

Although a full mortgage term is usually around 20 to 25 years, a typical mortgage deal will last between two and five years, although some lenders offer 10-year deals.

You may, therefore, have several different mortgage deals over the lifespan of your mortgage.

When your mortgage deal ends, the interest rate will change to the lender’s standard variable rate (SVR).

This will usually be higher than your previous rate, and even if it isn’t, it may rise unpredictably.

Here are some reasons why you might want to remortgage:

• Your current deal is about to expire, which would push you onto the lender’s SVR.

• Your circumstances have improved, so you might get a better deal.

• Your home's value has risen significantly, so you could get a more competitive deal.

• You want to switch to a different kind of mortgage, such as a fixed, capped or tracker.

• You need a more flexible mortgage, such as one that allows you to miss payments or make excess payments, which is useful if your income fluctuates.

• You want to borrow money against your property.

How much does it cost to remortgage?

When combining valuation fees, legal fees and exit fees the average remortgage cost in the UK is typically between £300 and £1,500, excluding ERCs.

The full potential cost of remortgaging will depend on many factors, including the terms of your current mortgage and the deal offered by your lender.

Similar to taking out a mortgage for the first time, you will find some mortgage deals have hefty arrangement fees attached, while others may have fewer upfront costs.

A major charge to watch out for is the early repayment fee (also known as a redemption penalty) on your current mortgage.

This is not the same as an exit fee, which is usually small and may be up to 5% of the mortgage value. A large redemption penalty may make the process too costly or not worthwhile.

This is why, whenever you take out a mortgage, you should always think ahead to your next one. It is best to find a mortgage broker who will study the terms of any mortgage deal you’re offered.

Remember, a redemption penalty may apply beyond the terms of your mortgage deal.

For instance, a mortgage might have a two-year fixed rate deal, but charge a penalty if you leave before three years are up.

Such arrangements are easy to miss and can force you to spend one or more years on your lender’s SVR, which may be very costly.

If you are buying your next home and want to avoid early repayment fees, you may have the option of porting your current mortgage.

Is remortgaging right for me?

Even if your deal is about to expire, there may still be good reasons to stick with your current mortgage.

For example:

• Your outstanding loan is small (e.g. £50,000 or less): The switching fees may cancel out any potential savings.

• Your current mortgage has a large redemption penalty: A large early repayment fee may make it cheaper to keep your current mortgage. However, your current lender may let to change to another of its own deals at a reduced charge.

• You have a high loan-to-value ratio: If your equity is low (for example, if you have a 90% mortgage), you’ll struggle to get a better deal elsewhere.

• Your circumstances have deteriorated: Were you offered your current mortgage based on you (and/or your partner) having a higher or more reliable income than you have now? If so, you might not get a better offer, although it’s still worth trying.

• You can borrow money more cheaply elsewhere: Although it’s possible to borrow money against your property, it’s rarely the best solution. You'll likely be charged more interest even if it's at a lower rate as it's over a longer term compared to a higher rate over a short amount of time. 

If you think any of these issues may apply to you, talk them over with a mortgage broker.

Step-by-step guide to the remortgage process

1. Your current lender writes to you

If you’re on an introductory deal such as a two or five-year fixed rate, your lender will contact you well in advance of the expiry date, so you’ll know when you’re due to revert to the SVR.

Assuming the SVR is higher than your current rate of interest (which tends to be the case, though exceptions do occur), this is the time to investigate whether you can save money by remortgaging.

Alternatively, you can find out when you’ll revert to your SVR on your latest mortgage statement. You can sometimes arrange your remortgage up to six months before your current deal runs out.

2. Ask your lender for a closing balance

Your lender will provide you with a redemption statement on request.

This tells you the amount needed to pay off the remaining mortgage loan (including fees). This is the amount you’d need to borrow if you choose to remortgage.

Again, make sure you have this information in good time.

3. Find a mortgage broker

The easiest way to be sure of the best deal when you remortgage is to go through a mortgage broker.

An independent mortgage adviser or broker can search the whole of the market to find the best deal for your circumstances and usually has access to deals not available on the open market.

Read about mortgage broker fees.

4. Decide which type of mortgage you want

First, decide whether to go for a repayment or interest-only mortgage.

Interest-only mortgages have lower monthly repayments, but you’ll need a way of repaying the loan at the end of the mortgage term.

You’ll also need to consider whether you want a fixed or a variable rate mortgage and whether you want a shorter two-year deal or a longer one, lasting five years or longer.

There’s a lot to think about, but once again, a mortgage broker can help with the decision and help you find the right remortgage deal. 

Read more about the different types of mortgages.

5. Instruct a solicitor (if moving to a new lender)

If you’re changing lenders, you’ll need to appoint a solicitor or conveyancer.

They will sort out any paperwork needed in the process e.g. drawing up and signing the mortgage deed and transferring the title of the property.

6. Eligibility and affordability checks – get your documents ready

Having documents ready in advance will help speed up the remortgage process.

The broker or bank will want to see some or all of the following:

• Three months’ bank statements, payslips or both (if self-employed, your last three years’ accounts)

• Utility bills

• Credit card statements

• Address details (for the last three years)

• ID such as a driving license or passport

• Records of regular outgoings, such as subscriptions

• Proof of any bonuses or commission

• Your P60.

Learn more: what to do if you can't remortage due to affordability

7. Lender issues a mortgage in principle

Once they are happy with your documents, the mortgage provider will give you a mortgage in principle (MIP), a written indication of how much they might be prepared to lend.

This isn’t a mortgage offer, and it’s not binding, but it’s a useful indicator of what you may be able to borrow.

Also, if you’re remortgaging to buy a new home, estate agents take these seriously. A MIP lasts between 60 and 90 days, depending on the lender.

8. Valuation

The lender will arrange a valuation, which the customer generally pays for, although sometimes it is included free of charge.

This simply confirms the house is worth the amount you’re asking to borrow.

It does not replace a survey to check the building’s condition, and in fact, is sometimes done online.

9. Mortgage application time

If you already have a MIP and are applying for your mortgage with the same lender, you’ve done part of the legwork already.

If you haven’t, the mortgage broker or lender will ask you about your job and the industry you work in, your income, spending, credit history, deposit size and any other financial commitments.

The more evidence you can provide of regular repayments, the more likely you are to have your application approved.

10. Receive mortgage offer

If the lender approves your mortgage application, they will send you and your solicitor a mortgage offer letter.

The offer usually lasts six months and outlines the amount you can borrow based on the credit checks, income verification and property valuation, together with any conditions.

Check the offer thoroughly to ensure the details are correct. Let the lender know if anything is wrong or if your circumstances have changed in the meantime.

11. Solicitor draws down mortgage funds and pays off old mortgage

When you are ready to go ahead, your solicitor requests the money from the new lender and uses it to pay off your old mortgage.

12. New mortgage registered at the Land Registry

Your solicitor registers the mortgage holder’s details with the Land Registry. If applicable, the title deeds are transferred to the new lender.

To find out more, read the Unbiased guide to remortgaging and our article on how long it takes to remortgage.

Get expert remortgaging advice

It can take time to find the right remortgaging deal for you and your family but, remember, you don’t have to do it alone.

Unbiased can quickly match you with a qualified mortgage broker who can help you find the right mortgage based on your unique circumstances.