What is remortgaging and why should I consider it?

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Published on 14 September 2023

When it comes to managing your finances, your home can be your most valuable asset. It’s not just the place you and your family live, but it can also be a financial resource waiting to be used. One way to do that is through remortgaging. In this guide, we’ll explore what remortgaging is, why you should consider it, and how 177 Mortgages can help you make the most of this financial opportunity. We’ll provide you with all the information you need to make an informed decision.

Remortgaging is the process of replacing your existing mortgage on your home with a new one, either from your current lender or a different one. Essentially, it’s a way to restructure your home loan. There are several reasons why homeowners choose to remortgage. Remortgaging involves several steps, whether you choose to go direct to a lender or use a mortgage broker. You can read our step-by-step guide to remortgaging here, but in this blog, we look at the reason why you might consider remortgaging.

1. Remortgaging to Secure a Better Interest Rate

Interest rates fluctuate over time, and they play a significant role in how much you pay for your mortgage. If interest rates have dropped since you took out your initial mortgage, remortgaging can help you secure a lower rate, reducing your monthly payments and potentially saving you thousands of pounds over the life of your mortgage.

When your existing mortgage deal ends, most lenders will move your borrowing onto their Standard Variable Rate (SVR). With the recent increases in the Bank of England Base Rate, we have seen SVRs increase. The average SVR is now over 8% – this is the highest average rate for more than 15 years. So if your existing deal is coming to an end, moving to your lender’s SVR will see your monthly payments increase. Fixed Rates in today’s market are indeed higher than they were two, three or five years ago when you may have taken out the deal. But fixed rates are starting to fall again with the best two-year fixed today (at the time of writing!) standing at 5.75% whilst leading three-year deals are 5.54% and five-year deals are 5.19%. This is significantly lower than the market average SVR.

2. Remortgaging to Access Equity

Your home is likely to be your biggest financial asset. Over the years, as you make your monthly mortgage payments and potentially benefit from the increase in property values, you’re gradually building equity in your home. Equity builds in two ways. Firstly, as you make monthly mortgage payments, if you have a repayment mortgage, a portion of that payment goes toward reducing the outstanding balance. Over time, this steadily increases your equity in the property. Secondly, the property market is known for its cyclical nature, and, generally, properties tend to increase in value over time. This appreciation in property value can significantly boost your equity.

Equity represents the portion of your property’s value that you truly own, and it can become a valuable financial resource. Remortgaging allows you to access this equity, providing you with a lump sum of cash that can be used for various purposes.

Home Improvements.

One common use of released equity is to reinvest in your property. Perhaps you’ve been dreaming of a modern kitchen, a spacious loft conversion, or a garden makeover. By remortgaging, you can access a lump sum of cash that can turn those dreams into reality. Instead of waiting years to save up for these projects, you can enhance your living space now, potentially increasing both your property’s value and your quality of life.

Debt Consolidation.

If you have multiple outstanding debts, for example, personal loans, credit cards, store cards and car finance, high-interest rates and lots of monthly repayments can be a real financial burden. Remortgaging allows you to consolidate these debts into one manageable loan, with one monthly payment and potentially at a lower interest rate. This not only simplifies your financial commitments but can also reduce your overall interest expenses, helping you regain control of your finances. This option may mean that you are spreading your other debts over a longer period, but it can significantly reduce your monthly outgoing.

Other reasons.

There are many be other reasons that people may want to access the equity that is held in their homes. These include, but are certainly not limited to, essential financial commitments like covering education costs or medical expenses. Additionally, homeowners may be inclined to explore using their equity for compelling investment opportunities. Whatever your specific situation or the unique nature of your needs, 177 Mortgages can offer its expertise in identifying and delivering the most suitable solution tailored precisely to your circumstances.

It’s essential to approach releasing equity through remortgaging with a well-thought-out plan, considering your financial goals, risk tolerance, and long-term financial objectives. Accessing equity through remortgaging allows you to use the value locked within your property to enhance your lifestyle, reduce debt stress, invest in your future, or respond to unexpected financial needs. It’s a flexible and powerful financial tool that can unlock your home’s full potential and improve your overall financial well-being.

3. Changing Your Mortgage Terms: Tailoring Your Mortgage to Fit Life Changes

Life circumstances change, additions to the family, changes in your career, divorce or separation. What was once the perfect mortgage for you, may no longer align with your changing personal circumstances and financial goals. Your initial mortgage terms might not match your current situation. Remortgaging allows you to adjust the terms of your mortgage, whether it’s extending or shortening the repayment period, switching from a variable to a fixed-rate mortgage or moving from an interest-only to a repayment mortgage.

Extending or Shortening the Repayment Period.

In some situations, you might find that your current monthly mortgage payments are becoming a financial strain. Perhaps you’ve experienced a reduction in income or increased expenses. Remortgaging allows you to extend the repayment period – often called the term of the mortgage. This spreads the outstanding balance over a longer period. This can result in lower monthly payments, making your mortgage more manageable. You might be in a better financial position now, with increased income or improved financial stability. Shortening your mortgage term through remortgaging can help you pay off your home sooner. While this typically means higher monthly payments, it also means significant interest savings over the life of the mortgage.

Moving Between Mortgage Types.

There are a range of mortgage product types available on the market. Designed to meet different financial circumstances.

  • Variable to Fixed-Rate Mortgage. If you currently have a variable-rate mortgage and are concerned about further interest rate increases impacting your budget, remortgaging provides the opportunity to switch to a fixed-rate mortgage. A fixed-rate mortgage offers stability because your interest rate remains constant for a predetermined period usually 2,3, 5 or even 10 years. This can provide peace of mind in a rising interest rate environment.

  • Fixed to Variable-Rate Mortgage. On the other hand, if you currently have a fixed-rate mortgage and anticipate interest rates decreasing, moving to a variable-rate mortgage could result in lower monthly payments and interest costs. Variable-rate mortgages are often linked to a benchmark rate (usually the Bank of England Base Rate), and your interest rate can fluctuate with changes in that benchmark. They also provide more flexibility in making large overpayments, paying off your mortgage or selling your property. Doing these whilst on a fixed-rate mortgage often comes with financial penalties.

  • Offset Mortgages. With an offset mortgage, your savings and current account balances are offset against your mortgage balance. You only pay interest on the difference between the two, reducing the overall interest cost. So if you have a large savings balance but want to maintain access to this money you can minimise your interest expenses by utilising the savings balance.

  • Interest only and repayment. Some people may have chosen interest-only mortgages which require borrowers to pay only the interest on the debt each month. The initial amount borrowed remains unchanged. A separate investment plan is needed to repay the borrowing at the end of the term.  Repayment Mortgages are the more traditional mortgage, each monthly payment covers both the interest and a portion of the balance. By the end of the term, the entire loan is repaid. Moving temporarily to an interest-only mortgage may help short-term monthly affordability. Changing to a repayment mortgage will mean your investment plan could be used for other things when it matures.

Remortgaging to Access Better Terms and Rates.

If your credit score has improved since taking out your initial mortgage, you may now qualify for more favourable mortgage terms and lower interest rates. Remortgaging enables you to take advantage of your improved creditworthiness, potentially reducing your borrowing costs. Rates also reduce as your loan-to-value (LTV) reduces. The lower your LTV the less risk that the lender is taking and therefore they reward this with lower rates. Moving from one LTV band to another can give you access to better rates. The mortgage market is dynamic, with interest rates, fees, and incentives changing regularly. By remortgaging, you can take advantage of more competitive offers that weren’t available when you initially secured your mortgage.

It’s important to emphasize that remortgaging isn’t a one-size-fits-all solution. Your decision should align with your unique financial situation, objectives, and risk tolerance. Therefore, seeking guidance from a mortgage advisor at 177 Mortgages is crucial. They can help you assess whether changing your mortgage terms through remortgaging is the right step for you and ensure that any adjustments that you make align with your long-term financial goals.

The Benefits of Using 177 Mortgages to Remortgage

When it comes to remortgaging, working with a reputable and experienced mortgage broker like 177 Mortgages and 177 Protect can provide you with several benefits:

  1. Extensive Market Access: As a broker, 177 Mortgages and 177 Protect have access to the entire UK mortgage and protection market, including exclusive deals and niche lenders. This ensures that you have a wide range of options to choose from and increases your chances of finding the best deal for your needs.
  2. Expert Advice and Guidance: Our team of knowledgeable mortgage and protection advisers will assess your financial situation, understand your goals, and provide expert advice tailored to your circumstances. We have the expertise to navigate complex situations and find solutions for unique financial circumstances. And at the same time ensure that your financial security is also protected.
  3. Fee-Free Service: At 177 Mortgages and 177 Protect, we believe in providing excellent service without charging our clients any fees. Our fee-free approach ensures that you receive unbiased advice and support throughout the remortgaging process, without any additional financial burden.
  4. Efficient Application Process: We pride ourselves on delivering a fast and efficient recommendation and application process. Our team will handle all the paperwork, liaise with lenders on your behalf, and ensure a smooth and hassle-free experience.
  5. Unparalleled Customer Support: Our commitment to excellent service extends beyond the remortgaging process. We provide ongoing support and assistance, building a long-term relationship with our clients and ensuring their mortgage and protection needs are met throughout their homeownership journey.

In summary, remortgaging empowers you to make proactive adjustments to your mortgage terms, whether to improve affordability, enhance financial stability, or capitalize on changing market conditions. It’s a valuable financial tool that allows your mortgage to evolve with you, ensuring it remains a suitable fit for your life’s journey. Whether you choose to go directly to a lender or use a mortgage broker like 177 Mortgages, it’s essential to consider your individual circumstances and financial goals. Take the time to research the market, compare deals, and seek expert advice to ensure you find the right mortgage deal for your needs. With the right guidance and support, remortgaging can be a straightforward and rewarding process, helping you achieve your financial goals and secure your future. Get in touch if you would like to discuss your current mortgage and the possibility of remortgaging.

177 Mortgages and 177 Protect are open 7 days a week. We’re always happy to talk through your mortgage, specialist finance and protection needs in more detail. If you’d like to book an appointment or simply find out more information, please get in touch.

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