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Top 5 reasons to remortgage

Here, we are looking at the TOP 5 reasons you might choose to remortgage your home

A photo of Dom Limberg, the author

By Dom Limberg

Published on: 12 May 2023

4 min read

Top 5 reasons to remortgage

You are likely to change your mortgage at least a couple of times during your lifetime. Remortgaging can be useful in several different situations. You can release equity, consolidate debts, or save money by switching to a better rate.

What is remortgaging?

When we talk about remortgaging, we are referring to the process of changing your mortgage to a new deal. This can be a product transfer (switching to a new mortgage with the same lender). You could also choose to switch your mortgage to a new lender.

When you choose a mortgage, you don’t have to be locked in for life. A remortgage can allow you to switch to a deal that is better suited to you or access money you have tied up in your property (equity).

You should double check whether there are early repayment charges tied into your mortgage. If so, you may have to pay out a percentage of your remaining mortgage balance before you are able to switch to a new deal.

More on this topic:

Debt consolidation remortgage

Did you know you can use your mortgage to consolidate your debts? Remortgaging can help you get the money needed to repay debts such as:

  • Credit card debt
  • Finance agreement arrears
  • Unsecured debt (loans)
  • Secured loans
  • And more..

People can fall into debt for many reasons, especially with the UK in a cost of living crisis. Prices are consistently increasing, meaning many people may now be struggling to afford essential bills and turning to loans and credit cards to get by.

Remortgage to release equity

Equity release is another popular reason to remortgage. If you have repaid a significant amount of your mortgage, you will have built equity (the value of your home you own outright).

You can remortgage to release some of this equity if you need (or want) to access some of this cash. Remember, in doing this you will essentially be agreeing to a new mortgage with higher repayments in many cases.

Be certain you are happy to do this and comfortable with paying more each month before making any decisions. It is also possible to fall into negative equity if house prices drop, meaning your property is less than your mortgage amount.

Remortgage to fund renovations

Many homeowners want to make improvements to their home from time to time, but often don’t have the funds available for bigger renovations. This makes remortgaging to fund home improvements a popular option in the UK.

Remortgaging allows you to access additional funds tied up in your property to help fund projects such as a property extension, conservatory, loft conversions and more.

There are a few things to think about before deciding to remortgage for home improvements:

  • Is it possible to borrow more on your existing mortgage?
  • Have you built enough equity in your property to fund all the works that need doing?
  • Will the renovations to your property add value?
  • Would it be easier to move home to a new property that already has the features you want?

The mortgage market changes all the time, with new rates becoming available frequently. You may find there is a rate available to you now, that wasn’t when you first took out a mortgage. This could be by transferring to a new deal with your current lender or changing to a new lender.

Sticking with your current lender can be simpler, but it’s not always your best option. Your current lender may not have the lowest rates available on the market. Remember though, there will be other things to think about when considering taking a remortgage deal with a new lender. This includes arrangements such as property surveys and needing a solicitor to modify legal documents.

Switching to a new lower mortgage rate could lead to significant savings on your monthly mortgage repayments.

Change your mortgage term

Your circumstances can change over time, and you might now want to change your mortgage term.

Reasons not to remortgage

Though remortgaging can be a good idea and a helpful option in many cases, there are few things you should consider first:

  • Think carefully about the type of mortgage you want e.g. variable rate vs fixed rate, to avoid needing to remortgage again in the near future
  • If your credit score is worse now than when you got your original mortgage, you may not be eligible for the interest rates you want
  • If your mortgage has early repayment charges attached, you will need to pay these fees when remortgaging (usually a percentage of your remaining mortgage balance)
  • Your lender could also have exit fees for their mortgages which you would have to pay if switching to a new lender
  • If your income is now lower, this can affect your affordability when applying for a remortgage and can make it harder to get a decent rate
  • You will need to budget for other fees including valuation fees, broker fees (if applicable) administration fees and more

It is just as important to know when not to remortgage or at least when it may be better to wait or think about other options. We always recommend speaking to a qualified mortgage broker before making any big changes to your mortgage.

Resources

Financial Conduct Authority – Mortgage lending statistics – December 2022

Statista – Mortgages in the the United Kingdom (UK)

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