Remortgaging: When to Switch and How It Works

Why remortgage?

Remortgaging simply means switching your existing mortgage to a new deal, either with your current lender or a different one. Most people do it to save money, but there are several good reasons to consider it.

If you are on your lender's standard variable rate (SVR), you are almost certainly paying more than you need to. SVRs are typically 1% to 2% higher than the best fixed or tracker rates available. On a £150,000 mortgage, that difference could cost you well over £100 a month.

When to consider remortgaging

There are a few key situations where remortgaging is worth looking at:

• Your fixed rate is ending. Most fixed-rate deals last two, three, or five years. When they end, you roll onto the lender's SVR, which is almost always higher. Start looking at new deals three to six months before your current one expires.
• Your property has increased in value. If your home is worth more than when you bought it, your loan-to-value (LTV) ratio will have improved. A lower LTV means access to better interest rates. For example, dropping from 85% LTV to 75% LTV can make a meaningful difference to your monthly payment.
• You want to release equity. Remortgaging lets you borrow more against your home's value. People commonly use this for home improvements, paying off other debts, or helping family members with a deposit. Bear in mind that borrowing more increases your overall debt and your monthly payments.
• Better rates have become available. The mortgage market changes constantly. Even if your current deal is not ending soon, it can be worth checking whether the savings from switching outweigh any early repayment charges.

How the remortgage process works

The process is simpler than buying a new property, but it still involves several steps.

1. Review your current deal. Check when your current rate expires, what the SVR is, and whether there are any early repayment charges (ERCs). Your annual mortgage statement will have this information, or you can call your lender.
2. Get advice. An independent mortgage adviser can search across the market to find the best deal for your situation. They will look at your income, outgoings, remaining mortgage term, and what you want to achieve. CGR Financial is independent and FCA-regulated, with access to a wide range of products from across the market.
3. Apply for the new mortgage. Your adviser will handle the application. You will need to provide proof of income, bank statements, and details of your current mortgage.
4. Valuation. The new lender will arrange a valuation of your property. Many remortgage deals include a free valuation.
5. Legal work. A solicitor or conveyancer handles the legal transfer from one lender to another. Many remortgage deals include free legal work as well, which keeps costs down.
6. Completion. The new lender pays off your old mortgage and your new deal begins. The whole process typically takes four to eight weeks.

Costs to be aware of

Remortgaging is not always free. Here are the main costs you may encounter:

• Early repayment charges (ERCs). If you leave your current deal before it ends, you may have to pay a penalty, typically 1% to 5% of the outstanding balance. This is the biggest potential cost and can wipe out any savings from switching. Always check your ERC before committing.
• Arrangement fee. The new lender may charge a product or arrangement fee, typically £0 to £1,000+. Some deals let you add this to the mortgage balance, though you will then pay interest on it.
• Valuation fee. Typically £150 to £350, though many remortgage deals waive this.
• Legal fees. Typically £200 to £400, though again many deals include free legal work.

The key question is whether the savings from a better rate outweigh the costs of switching. A good adviser will run the numbers for you and give you a clear picture.

When it is NOT worth switching

Remortgaging is not always the right move. It may not be worth it if:

• Your early repayment charges are high and your current deal has a while to run.
• Your remaining mortgage balance is small (under £50,000, say), meaning the monthly savings are modest.
• Your circumstances have changed (lower income, credit issues) and you may not qualify for a better rate.
• You are planning to move soon. If you are selling within the next year or two, the costs and hassle of remortgaging may not be justified.

Even in these situations, it is worth getting advice. Sometimes the numbers work out differently than you expect.

Get in touch

If your fixed rate is coming to an end, or you are sitting on your lender's SVR and wondering whether you could do better, it is worth having a conversation. CGR Financial can review your current deal and search across the market for a better option. They are independent, FCA-regulated, and there is no obligation.

If you are thinking about remortgaging to fund home improvements before selling, our team can also advise on which improvements add the most value. Learn more about our financial services or get in touch.