Choosing when to remortgage can be a tough decision – should you remortgage before your original deal is due to expire, or wait until the last minute?
We run through your best options in our guide.
When should I consider remortgaging?
You can remortgage for many different reasons, but most of the time, it is to move to a new deal when your current one is due to expire.
How far ahead can I start a remortgage?
Most mortgage offers are now valid for up to 6 months, which means that if your current mortgage deal is due to end in the next 6 months, you should be looking to start the process now.
Getting your new mortgage ready usually takes much less than 6 months, but getting the application started early means there is plenty of time, should there be any delays in the process, to ensure your new deal is ready to start as soon as your existing one ends.
This way, you avoid paying the higher standard variable rate that will follow on from your current rate.
It also means you can secure a rate now for your new mortgage deal, which is useful if interest rates are rising.
Should I remortgage before the end of a fixed term?
If you currently have a fixed rate mortgage, there will usually be early repayment charges if you move your mortgage before the end of the fixed rate.
These can be quite a large amount, as much as 5% of the mortgage balance outstanding in some cases. This means that in the vast majority of cases, it is not advisable to complete a remortgage before your current fixed rate expires.
As with all things, there are exceptions to this, but these are rare and you should always speak to your mortgage advisor about this before you do it.
As the remortgage process can take a little while, we would advise you start the process around 6 months before the end of your current fixed rate, with a view to only complete the new mortgage after your existing deal ends.
How does remortgaging work?
Remortgaging is simply taking out a new mortgage to replace an existing one.
This normally involves moving the mortgage to a new lender, who will offer you a better deal than your existing lender.
The application process is similar to taking out a mortgage to purchase a new property in that the lender will require all your information and will underwrite the application to ensure you meet their affordability checks and lending criteria.
There will need to be a new valuation done for your property, although many lenders are now able to do these electronically, without the need for a valuer to visit the property. There will also be some legal work that needs to be done by a solicitor.
This is usually much less than for a property purchase and in most cases, the cost of this will be covered by the new lender either by instructing their own solicitor to deal with it, or offering a cashback amount to cover the cost of the legal work.
Remortgaging also allows you to review the loan amount and repayment term of your mortgage. You may wish to borrow extra money, for home improvements or to consolidate other debts for example, or even pay a lump sum off your mortgage.
You can also review the repayment term of your mortgage at this time, either reducing it if you can afford to or extending it if necessary and within the lenders criteria.
The important thing with a remortgage is that you speak to your mortgage advisor and conduct a full review of your circumstances, as these may well have changed since you originally took out your mortgage.
Your advisor then can then show you the best way forward and ensure you are in the best position possible with the new mortgage.
Why do lenders withdraw mortgage deals?
Mortgage lenders are constantly reviewing the deals they have on offer and will change these on a regular basis for a variety of reasons.
They will often have what is known as a “tranche of funds” available for a particular deal. This is basically a pot of money they have made available for that particular deal and when that has all been used up, they will review their deals.
They will also change the rates on offer depending on the economic circumstances and the cost to them of raising the money for the mortgage.
Lenders will also monitor the number of applications they are receiving and how this impacts the service standards they can offer. If they are the cheapest on the market, they will receive more applications and may get to the point where they can’t process the applications fast enough. When this happens, they will withdraw their deals and replace them with ones that don’t come to the top of the “best buy tables” to stem the flow of applications they receive.
Conversely, if they feel they need to receive more applications, they will withdraw their current deals and launch new ones at a cheaper rate.
It is important to remember that when you submit a mortgage application, you “book” a deal at that point. This means that you secure the rate selected on the application, so even if the lender subsequently increases their rate, you still have the original one secured.
When is the best time to remortgage your home?
There are many different reasons why you may look to remortgage, which can have an effect on when you should start the process
Remortgaging if your current deal is ending
When your existing mortgage deal is due to expire, it is important to start the remortgage process in plenty of time to ensure that the new mortgage is ready to start as soon as your existing one ends.
We recommend that you start looking at your remortgage around 6 months before the end date of your existing deal. It typically takes around 3 months to get a remortgage from application to completion stage, but starting earlier makes sure that, should there be any unforeseen delays, your new mortgage is ready in plenty of time.
Remortgaging to borrow money
If you are looking to remortgage to raise funds, then it very much depends on why and how much you are looking to raise.
Normally, you would wait until your current mortgage deal ends, but it can sometimes be better to remortgage straight away, paying any early repayment charges, to save money in the long run.
This very much depends on the individual circumstances of the application and you should always discuss this with your mortgage advisor.
Remortgaging during rising interest rates
This, again, is down to individual circumstances, but it is often a bad idea to remortgage early during a period of rising interest rates.
This is because, as well as having to pay the early repayment charges, you may well be forfeiting a period at a lower rate on your existing mortgage, to move to a higher rate that is available now. The thought behind this is to secure the new rate now, despite the cost of doing so, so that you do not have to pay an even higher rate in the future, when you would normally look to remortgage.
This can be a very dangerous tactic, as there are no guarantees of where rates will be in the future and you may well end up paying the early repayment charges and a higher rate now, only to find that if you had waited, the rates at that point are not any higher.
If you are considering this, it is very important to discuss this with your mortgage advisor to look at all the figures in detail.
Remortgaging with built up equity
If your property has increased in value since you bought it, you may find that the increase in equity has resulted in your mortgage loan to value decreasing to a level at which you could potentially get a better mortgage deal.
If this is the case, it is worth remembering that you will have early repayment charges to pay by moving your mortgage early and these need to be factored into the calculations to see if it is worth doing now, or waiting until your current deal expires.
Your mortgage advisor can do these calculations for you, although we do find that it often the case that it works out more expensive to change mortgages early for this reason.
How long should I remortgage for?
As with all these things, this depends on your personal circumstances and there is not a right or wrong answer to this question.
It is vital that you speak to your mortgage advisor about this to ensure that your deal fits your circumstances both now and in the future.
Is it worth remortgaging every 2 years?
Having a mortgage deal that lasts 2 years can provide quite a bit of flexibility. As the early repayment charges on a mortgage typically last the same length of time as the initial deal (e.g. fixed rate), taking a 2 year deal will allow you to review your situation again in 2 years.
This can be useful if you feel that you may wish to move house in the near future, or change your mortgage, by paying some capital off, borrowing extra or changing the repayment term.
The downside of a 2 year deal is that you will have to accept whatever mortgage deals are around at that time and you may end up with a higher rate at that point, although of course rates could also decrease during that time.
Should I get a five-year fixed rate mortgage?
Taking a 5 year fixed rate mortgage will provide additional stability over a 2 year fixed rate, in that you will know what your payments will be, no matter what happens, for 5 years.
This can be useful if you prefer the stability of this and have no plans to change your mortgage during that 5 years, such as moving house, raising funds or paying off lump sums.
The downside to a 5 year fixed rate mortgage is that you will have early repayment charges for the full 5 years, effectively tying you into that deal for that time.
This reduces flexibility should you need to change anything and you will not be able to benefit from reduced rates, should the market change that way.
How to get the best remortgage deals
Speaking to a Go2 mortgage advisor will ensure that you are in the best position to get the most appropriate mortgage deal for you.
Everybody is different and what is the best deal for one person will probably not be the best for someone else. Our team are experts in the remortgage process and will guide and advise you on the best deal for you.