How does remortgaging work? A step-by-step guide

A remortgage is when a homeowner replaces their current mortgage with a new one on the same property, without moving home. The new loan pays off the old one, usually with a different lender. People remortgage to get a new rate when a deal ends, to borrow more, to change the term or to change the type of mortgage.

Staying with the same lender on a new deal is called a product transfer, and it is often grouped with remortgaging. A remortgage to a new lender involves a full application, a valuation and legal work, while a product transfer usually does not.

The most common reason is that a fixed or tracker deal is ending. When it ends, the mortgage usually moves onto the lender's standard variable rate, which is often higher than its new deals. Remortgaging before that happens keeps the payment on a chosen rate and avoids paying the variable rate for longer than needed.

Other reasons include releasing equity for home improvements or other plans, consolidating debts, changing from interest-only to repayment, changing the term, adding or removing a borrower after a relationship change, or moving to a lender whose terms suit a change in circumstances.

Most lenders let borrowers secure a new deal several months before the current one ends, so many people start looking around four to six months ahead. That gives time for the application, valuation and legal work, and the new deal can start the day after the old one finishes, with no early repayment charge.

Remortgaging during a fixed period usually brings an early repayment charge, set out in the current mortgage offer. Checking the end date and the charge before starting shows whether switching now or waiting is likely to cost less.

The process has a few clear stages. First, check the current balance, end date and any early repayment charge. Next, compare deals, directly or through a broker, and get an agreement in principle. Then make a full application with documents, after which the new lender values the property and issues a mortgage offer if it approves.

Once the offer is issued, a solicitor or conveyancer, often provided free by the lender, handles the legal work. They check the title, arrange to pay off the old mortgage and register the new lender's charge. On completion day, the new lender sends the funds, the old mortgage is repaid and the new monthly payments begin.

Throughout the process, the current mortgage stays in place, so payments continue as normal until completion. If the offer comes before the old deal ends, completion is usually timed for the end date.

A new lender assesses a remortgage much like a purchase. It checks income and regular outgoings, credit history, the property value and the loan-to-value, and it tests whether the payments would still be affordable if rates rose. Payslips, bank statements and, for the self-employed, accounts or tax calculations are the usual documents.

The valuation sets the loan-to-value, which affects the rates on offer. If the property has risen in value or the balance has fallen, the loan-to-value may have dropped into a lower band. How lenders price those bands is explained on the remortgage rates page.

A straightforward remortgage usually takes a few weeks from application to completion, though it can take longer if the valuation, the legal work or the documents raise questions. A product transfer with the same lender is often much quicker, because there is usually no valuation or legal work, and the switch can be arranged online.

Starting early, having documents ready and replying quickly to the lender and solicitor keep delays down. Some lenders offer a remortgage service that uses an automated valuation, which can also speed things up.

A remortgage can bring an arrangement fee, a valuation fee and legal fees, though many remortgage deals include free valuation and legal work. Any early repayment charge on the current deal and an exit fee from the current lender also count. The saving from a lower rate needs to outweigh these costs over the new deal period.

Comparing the total cost over the deal period, including fees, against the cost of staying on the current lender's standard variable rate or taking a product transfer, shows whether it is worth it. Each charge is explained in the guide to remortgage costs and fees.