What is a Remortgage?

A remortgage typically involves raising a mortgage on a property you already own. In this guide, we focus on what is commonly referred to as a "straightforward remortgage"—switching your mortgage to a better rate when your current fixed or tracker period ends.

When you take out a mortgage product, it usually comes with a fixed or tracker rate for a set period, such as two or five years. At the end of this term, your mortgage generally reverts to the lender’s Standard Variable Rate (SVR), which is often significantly higher. To avoid this, you have two main options: remortgaging or product switching.

Remortgaging vs. Product Switching

Both remortgaging and product switching aim to secure a better rate, but there are key differences between the two:

Remortgaging

• New Lender: This involves switching to a new lender. The process is streamlined and competitive, with many lenders offering free legal services and free valuations to minimise upfront costs.

• Income and Credit Assessment: A remortgage requires a full income and credit assessment. Changes in your income, credit score, or property value could affect your eligibility.

• Affordability Calculations: Some lenders offer more favourable affordability calculations, which can benefit those with a strong financial position.

• Flexibility: A remortgage allows adjustments to the loan, such as changing the term, repayment type, or borrowing additional funds through capital raising.

• Solicitors Required: Solicitors handle the transfer of the lender’s charge on the property title. Many lenders cover these costs as part of their product offerings.

Product Switching

• Same Lender: You stay with your current lender and switch to a new product they offer.

• No Income or Credit Assessment: Most lenders do not require a credit check or income verification if your payments are up to date.

• Quicker Process: Product switches are typically set up within a week and do not involve solicitors or legal paperwork.

• Limited Options: Product choices are restricted to your lender’s offerings, which may not include the most competitive rates.

• Indexed Valuations: Lenders use indexed valuations that may not account for home improvements increasing your property’s value.

• No Structural Changes: Term adjustments, repayment type changes, or capital raising are not generally allowed.

Can I Remortgage Before My Fixed or Tracker Rate Ends?

It is possible to remortgage during a fixed or tracker period. However, most products include an Early Repayment Charge (ERC) that applies until the rate period ends. This charge can be significant, but paying it might be worthwhile if interest rates drop significantly or your financial needs change. Speak with our specialists at Barrett Mortgages to assess whether the savings outweigh the ERC.

Why Start Remortgaging Early?

At Barrett Mortgages, we recommend exploring remortgage options around six months before the end of your current product term. Here’s why:

• Mortgage Offer Validity: Most offers remain valid for six months, allowing you to lock in a product and hedge against rate increases.

• Market Monitoring: If rates drop during this period, our team can help you secure a better rate.

• Streamlined Process: Starting early allows time to manage paperwork, valuations, and unforeseen issues, ensuring a smooth transition.

Tips to Save Money When Remortgaging

• Compare Loan-to-Value (LTV) Brackets: An increase in property value might lower your LTV bracket, unlocking better rates.

• Evaluate Fee Structures: Consider whether a lower rate with fees or a higher rate without fees suits your financial goals.

• Consider Future Flexibility: Select a product that aligns with your financial plans, such as a shorter fixed term if changes are expected.

• Review Additional Options: Remortgaging enables debt consolidation, funding home improvements, or adjusting repayment terms.

Key Considerations

• Indexed Valuations: Convenient for product switches but may not reflect home improvements, limiting borrowing power.

• Further Advances: If you wish to borrow more funds but remain with your lender, consider a further advance. This additional loan comes with separate terms and rates.

How We Help at Barrett Mortgages

At Barrett Mortgages, we work proactively to ensure you secure the most suitable product. By starting early, we provide:

• Proactive Monitoring: Lock in a product early and adjust if better rates emerge.

• Comprehensive Advice: Explore both remortgage and product switch options tailored to your goals.

• Smooth Processing: Handle all paperwork, legalities, and lender requirements on your behalf.

Final Thoughts

A standard remortgage can secure a better rate and save money. Starting early and exploring all options will help you make an informed decision. Contact the team at Barrett Mortgages today to discuss your remortgage options and let us guide you to the best solution for your needs.

Written by Darren Barrett, Company Director