5 things to check when remortgaging


5 things to check when remortgaging

Remortgaging your home could save you thousands of pounds or, if you wish to raise some cash, could give you the money you need to do the home improvement project you’ve been dreaming about. However, it’s not always the best option – that’s why it pays to do your research. 

Searching for a good remortgage deal on your own isn’t easy and can be extremely time consuming. It can also be hard to digest and compare what’s available.  That’s why many people take advantage of the services of a mortgage broker like Ocean Mortgages, which can search its panel of lenders to help find a good deal that suits your circumstances. It also means you don’t have the stress of searching the whole market yourself. 

If you’re thinking of remortgaging, take a look at our list of five things to check: 

      1. Fixed or variable, tracker or discount?

There are so many different types of mortgages available, and you need to find the right one for you. You might choose to stick with the same sort of mortgage you currently have or maybe another type would suit you better. 

Fixed Rate

With this type of mortgage you are guaranteed to pay exactly the same amount every month for the duration of your 2, 3 or 5-year fixed mortgage term. After this period your rate usually changes to the lender’s Standard Variable Rate. 

+  You will know exactly how much your mortgage payments will be each month

+  Your payments will never change during the fixed term, even if interest rates go up 

-  Fixed rates can be higher than other alternatives

-  If interest rates fall, you won’t feel the benefit as your payments are fixed

If you decide to change your mortgage deal during your fix, you might be faced with additional costs like an early repayment charge

Variable Rate

As the name suggests, choose this type of mortgage and your monthly payments will vary. There are a number of options available: 


Tracker rate mortgages usually track the Bank of England base rate. This means that when interest rates go up by 1% your mortgage payments should go up by 1%, but if interest rates fall by 1% then your mortgage payments should likewise fall by 1%. 

+  Only economic change (the Bank of England base rate) will alter what your payments are. Generally, your lender can’t suddenly change your payment amounts for no reason 

-  No one knows for sure what will happen to the Bank of England base rate in years to come but it is most likely to go up and not down. If interest goes up your payments could too. Could you still afford your mortgage repayments if this happens? 

-  Not all lenders offer this type of mortgage, so finding one may be difficult 

Standard Variable Rate (SVR) 

These also follow the Bank of England base rate but unlike trackers they don’t follow it religiously. You can’t normally choose to go on to this rate as it’s usually the rate that lenders put you on when your fixed or tracker deals end. The interest rates vary from 2 to 5 percentage points above the base interest rate and lenders can move them up even when the interest rate hasn’t changed. 

+  When interest rates drop your payments normally drop too (but not in every case, and not always at the same rate)

+  You aren’t normally penalised for early repayment

-  The lenders have the power to increase your payments whenever they choose 

Discount Rate

With these deals you will get a discount off a Standard Variable Rate for a period of time – typically 2 to 3 years, but sometimes more or less.

+  Usually cheaper than other types of mortgages

+  When interest rates drop your payments normally drop too (but not in every case, and not always at the same rate)

-  Your lender might raise their Standard Variable Rate so you could end up paying more than you expected

      2. LTV – do you qualify? 

LTV stands for the loan-to-value ratio (LTV). It relates to the size of your outstanding mortgage compared to the value of your home. Your LTV may have dropped to a lower interest rate band from when you first took out your mortgage if you have been paying a little off and/or if your home’s value has gone up.

The lower your LTV band the more likely you may be to get a better remortgage deal. To improve your chances of dropping a band, you could borrow less by using some of your savings or get an estimate that shows your property’s value has grown. Please note that lenders will get an independent valuation done, so don’t overestimate how much your home is worth.

      3.  Fees 

It is very important that when considering which mortgage deal is right for you, you pay special attention to the fees. Some arrangement fees can be over £2,000 and some lenders charge percentage fees. You may have to pay an early repayment charge for ending your current mortgage and there are also valuation fees to consider. Add all these up and check that you will still be saving money by remortgaging, even with all of these costs accounted for. 

Keep in mind that some lenders offer a remortgage service that includes a free basic legal and valuation service, which is something to think about when considering all the options available.

      4. How long is the term?

When remortgaging, you could extend your mortgage term, reduce it or keep the term as it is presently. The longer the term the lower your monthly payments will be but because it will take longer to pay it back you will pay more interest.

If you can afford to pay more, you could shorten your term or choose to overpay. Overpaying gives you more flexibility so if something comes up you don’t have to find the extra cash you might need with a shorter term. Check first whether your lender will charge you for making overpayments.

      5. Equity release option

If you have been wanting to add an extension or convert your garage for a while, now might be a good opportunity to get the finance you need. You may be able to increase your mortgage and get extra money from your new lender so that you can afford your renovations. Please note fees may be applicable and your repayments could increase by increasing your mortgage, so be sure that you can manage them. Remember, if you don’t keep up with your mortgage repayments your home could be at risk of repossession.

There’s plenty to consider when you’re thinking of remortgaging, but we hope this guide has made things a little clearer.