What is remortgaging?

Around one in three of all mortgages taken out in the UK is actually a remortgage, yet many people are confused about what this word actually means in practical terms.

Remortgaging is moving your current mortgage from one provider to another, but not moving house. If you're looking to switch to new mortgage deal or borrow more money with your existing mortgage lender, this isn't remortgaging.

If you already know what remortgaging is and want help on remortgaging your property, read our 'remortgaging your property' guide.

Reasons to remortgage

There are many reasons why you might choose to remortgage, including:

• Your existing mortgage deal is coming to an end. You may automatically be put on to your lender’s Standard Variable Rate (SVR) when your existing deal ends. Typically, SVR will be higher than your previous rate or other rates available on the market, particularly if the value of your property has risen considerably, meaning that you are now in a lower loan-to-value band, and are perhaps eligible for a more attractive rate.
• To find a better mortgage deal. This could be a lower mortgage rate meaning lower monthly payments or more flexible features, such as overpayments. Please check any early repayment charges (ERCs) if you're looking to leave your existing deal early.
• Extending the term of your mortgage or borrow more money but your existing lender is unable to help
• You want to release some equity in your property, maybe for extensive home improvements or to purchase a buy to let.

 

When remortgaging may not be worthwhile:

• Your Early Repayment Charge (ERC) to exit your existing mortgage deal is too high. TIP: Seek advice to help you work out the cost of ERC in relation to potential mortgage savings. Find out more about ERC on our mortgage glossary.
• Your outstanding mortgage balance is small. Given some of the fees involved, the smaller your mortgage debt the less sense switching deals is likely to make. Furthermore, many providers may not be prepared to offer smaller loans.
• Your home's value has dropped. If so, it's not likely to be easy or in your interest to remortgage, particularly if you're in negative equity (your mortgage debt exceeds the value of your property). 
• Remortgaging costs are high: If costs associated with remortgaging your home that you own outright, such as mortgage and legal fees and higher interest rates, are larger than other options such as a loan, it would not make long term financial sense. 

Whatever your reason, you should consider your options carefully, especially the impact of any fees, restrictions or charges that might occur because of the change. Speak to your existing lender first before remortgaging.

Early Repayment Charges when you remortgage

Not all ERCs are the same. For example, some are fixed throughout the duration of a deal whereas others exist on a diminishing scale, meaning it becomes cheaper to end the deal with every year of the mortgage. Furthermore, some lenders will calculate an ERC on the basis of the amount of the original loan while others will calculate it based on the outstanding amount.

Whether it makes sense to remortgage and pay an ERC will depend on your individual circumstances as well as the terms of your existing deal.

Remortgaging with The Cambridge

Talk to The Cambridge today. Whether you're already a member or you are wondering whether The Cambridge could provide you with a better deal on your existing mortgage, we can guide you through the remortgaging process so you can understand what it might mean for you.

Book an appointment to talk to one of our Mortgage Advisers or call us on 0345 601 3344 and we can arrange an appointment to help you understand the process and find a mortgage that best suits your needs. Find out more in our Guide to Remortgaging.

Mortgages are subject to underwriting and criteria. Minimum age 18, UK residents only.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE