Securing a remortgage deal: A step-by-step guide

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Remortgaging is the process of switching your mortgage to a new deal. This can be with your existing lender or with another mortgage provider. It can be a good way to save money on your monthly mortgage payments, or to get a better interest rate.

According to a report in The Guardian, over 350,000 borrowers will come off a fixed rate mortgage from the end of June until the end of September 2023. There is also over 700,000 borrowers already on a variable rate mortgage, excluding those on base rate trackers.

There are many factors to consider when remortgaging, such as your current financial situation, your goals for the future, and the current mortgage market. It is important to review your current situation to decide if there have been any changes that could affect your mortgage. For example, you may have changed jobs or had a change in income. You may also have been considering improvements to your property and see this as an opportunity to increase your borrowing.

Key aspects to consider when remortgaging:

• Are you planning to sell or move during the fixed period of the mortgage?
• Are you planning to retire before your mortgage is due to be repaid?
• If you are on interest only, is your intended repayment vehicle on track?
• Is the property still being used for the purpose for which the mortgage was originally taken out?

If you are considering remortgaging, it is important to speak to a mortgage advisor to get independent advice. They will be able to help you understand your options and find the best deal for you.

Should you take a deal offered by your bank?

Currently, if you are on a mortgage deal, your bank will write to you 3-6 months in advance of the end-date of your product. They will invite you to view your options with them. The process usually doesn’t involve the need to talk to anyone and it can all be completed in a few clicks from your computer.

While this can be extremely convenient, it can come at considerable expense. Banks will often make it difficult to navigate through and compare the products available. There can also be products available to brokers which you are unable to view. This means that while you may be satisfied with the products offered, you are unaware of the missed savings.

The main limitation is that a bank will only show you their products, instead of products available across the entire market. This means that you may be able to get a better deal by shopping around.

If you would like to compare your options, Orton Financial can provide a free comparison between the options available with your current lender and options available in the market. If the most suitable option for your circumstances is to remain with your current lender, we can arrange this for you free of charge.

Learn more about our services by making an appointment.

Can I still take a new deal if my circumstances have changed?

Your ability to take a new mortgage deal if your circumstances have changed depends on a number of factors, including the following:

• Change in income: If your income or type of employment has changed, but you have still made your mortgage payments on time, you may still be able to take a new deal. However, the lender may not be able to accommodate any requests to increase your borrowing.
• Change in household: If the household has changed, for example, you now have a lodger, some lenders may not be willing to accept this. However, there are lenders that will accept lodgers and typically accept the income towards your affordability.
• Change in use: If your property was previously a residential home and the use has changed, you may need to switch to a different type of mortgage. For example, if you are now letting the property out, you will need to switch to a Buy to Let mortgage. If the property is used as a main or second home, with occasional short term letting then limited residential mortgage options are still available. Learn more about the options here.  

If you are unsure whether you will be able to take a new mortgage deal, it is important to speak to a mortgage advisor. They will be able to assess your individual circumstances and help you find the best deal for you.

Learn more about the Financial Conduct Authority’s mortgage affordability rules at FCA.org.

How to keep your monthly payments as low as possible

The average 2-year fixed rate mortgage has risen from 1.2% to just over 6% since September 2021. This means that for every £100,000 borrowed, the interest alone will rise by approximately £400 per month. For most, this increase could not come at a worse time, with energy and food costs at record levels in the UK.

There are a number of short-term measures available through the mortgage charter. These measures can help borrowers to keep their monthly payments as low as possible.

While the charter is voluntary there has been significant uptake in the market. The main commitments from lenders are:

• From 26th June, a borrower will not be forced to leave their home without their consent unless in exceptional circumstances, in less than a year from their first missed payment.[3]
• With effect from 10th July customers approaching the end of a fixed rate deal will have the chance to lock in a deal up to six months ahead. They will also be able to manage their new deal and request a better like for like deal with their lender right up until their new term starts, if one is available.[4]
• A new deal between lenders, the FCA and the government permitting customers who are up to date with their payments to:
  • Switch to interest-only payments for six months or
  • extend their mortgage term to reduce their monthly payments and give customers the option to revert to their original term within 6 months by contacting their lender

Learn more about the mortgage charter at gov.uk/mortgage-charter

If your bank is not signed up to the mortgage charter or you wanted to explore different options, there are a number of alternatives.

Repayment mortgages

Repayment mortgages can be arranged with certain high street lenders until a maximum age of 80. Repaying the mortgage over a longer period of time will increase the cost of the mortgage overall, as you will be paying more interest. However, it can help to reduce your monthly payments in the short term. Beyond this point there can be alternative options, such as retirement interest only or equity release. For more information on later life lending it is advisable to speak to a specialist, such as Legal and General.

Interest-only mortgages

The mortgage charter allows for a temporary switch to interest-only. Depending on your situation, you may be eligible for a standard interest-only loan. If you have over 50% equity in your property or earn in excess of £251,000, there may be options for your mortgage to be entirely interest only. For more information on interest only mortgages please see our guide.

Property revaluation

If you have completed significant improvements to your property, it may be worth more than the lender has on record. This is because most lenders will use the House Price Index, which tracks general property values. It does not capture if you have completed refurbishment work or extensions, which would add value. A new valuation may allow you to access lower loan-to-value products, saving money.

If you are considering any of these options, it is important to speak to a mortgage advisor. They will be able to assess your individual circumstances and help you find the best solution for you.

What costs can be expected in a remortgage?

The cost of a remortgage depends on the type of loan and your circumstances.

Remaining with your current lender

If you are remaining with your current lender, the only cost you will typically face is the product fee charged by the lender. For most loans, the lending option with a lower rate and a product fee is more cost-effective overall. With high street lenders, this is usually up to £999 and you are allowed to add this to your loan.

If you pick a product which is fee-free, you will usually incur no costs. However, this product may cost you more in the long term.

Refinancing to a new lender

If you are remortgaging to a new lender, most will provide a free valuation and a free legal service. If you require any additional legal work, such as changes to the title, removing a borrower, or independent legal advice, there will be some additional charges. However, for most people, the process is relatively light of fees.

The main cost to consider is any redemption costs from your existing bank. This can vary, with some charging no fee and some charging admin fees as high as £300 to release the deeds. It is important to consider all costs before deciding. Learn more about some of the fees you might expect though Uswitch.

How can Orton Financial help?

Orton Financial are able to consider all aspects of your remortgage and present to you a proposal that meets your objectives. We are able to discuss the pros and cons of different types of mortgages, something your bank is unable to help you with.

As a mortgage broker, we are not tied to any particular lender, which means we can compare the products available from different lenders and find the best deal for you. We can also help you with the entire remortgaging process, from start to finish.

For most clients, we can provide an accurate overview of the options available during our initial consultation. This means that for less time than it takes to have a cup of coffee, you will have a good overview of the options available.

Get in touch today to find out how we can help you save money on your mortgage.

Contact Orton Financial today or make an appointment

Important information

Your home may be repossessed if you do not keep up with repayments on your mortgage. If you extend your mortgage term or switch to interest only you will pay more interest over the lifetime of the mortgage. If you are struggling to keep up with your mortgage payments please see information available through Citizens Advice.