Residential mortgages:
Your next mortgage deal
Choosing your next mortgage deal is an opportunity to review whether your borrowing still fits your circumstances. Your income, household spending, property value and future plans may all have changed since the mortgage was arranged.
You may want to keep everything broadly the same and secure a competitive rate. Alternatively, you might need to borrow more, reduce the balance, change the repayment term or prepare for a future move.
The main choice is usually between remortgaging to another lender and taking a new deal with your existing lender. The right approach depends on the overall cost, the options available and what you need the mortgage to do.
Remortgaging
Remortgaging means replacing your existing mortgage with a new mortgage from another lender, secured against the same property. The new mortgage repays the old one.
It can provide an opportunity to obtain a more suitable rate, change the structure of your borrowing or raise additional funds for an acceptable purpose.
Moving lenders normally involves a new application. The lender assesses your income, expenditure, credit history and property against its current requirements. A mortgage that was affordable when originally arranged does not automatically meet another lender’s criteria today.
Changes such as becoming self-employed, taking parental leave or approaching retirement may influence lender choice. They do not necessarily prevent a remortgage, but they make it important to understand your options before committing to a particular route.
The remortgage process
Your mortgage adviser will review your existing mortgage and circumstances, compare suitable options and recommend an approach.
The new lender then assesses the application and arranges a valuation. A solicitor or conveyancer handles the legal work, including repayment of the existing mortgage and registration of the new lender’s security.
Some mainstream lender deals include a standard valuation and basic legal work, while others offer cashback towards costs. Additional legal work may fall outside an included package, so the details should be checked.
If your situation is more complex and requires a more specialist lender like a building society, you may have to pay for a valuation and conveyancing.
Product transfers
A product transfer means choosing a new mortgage deal with your existing lender. You retain the mortgage with that lender but move onto a different interest-rate product.
For a straightforward switch without additional borrowing or other changes, many lenders do not require a fresh affordability assessment. There is also usually no conveyancing work or separate valuation fee, making the process simpler than moving lenders.
This can be particularly useful if your circumstances have changed and a new lender’s assessment would be more difficult. However, eligibility and procedures vary, and changes to the borrowing may require additional checks.
Comparing staying with moving
Your existing lender’s offer should be compared with suitable alternatives elsewhere. Staying may be competitive once fees and other costs are included, even where another lender advertises a lower rate.
Equally, convenience should not be the only consideration. Another lender may offer better overall value or features that fit your plans more closely.
A mortgage adviser can often arrange a product transfer as well as a remortgage, allowing both routes to be considered together.
When your current rate ends
The end of your fixed, discounted or introductory rate is different from the end of your mortgage term.
For example, a five-year fixed rate may finish while the mortgage still has twenty years left to run. The borrowing continues, but the interest rate changes unless a replacement deal is arranged.
If you take no action, the mortgage will normally move onto the follow-on rate specified in your offer, often the lender’s standard variable rate. This may increase your monthly payments.
Start reviewing early
Beginning a review around six months before your current deal ends gives you time to understand the options and prepare any necessary documents. The point at which you can reserve a new deal varies between lenders.
Arranging a replacement in advance does not necessarily mean starting it immediately. Completion or the product-switch date can often be timed around the end of the existing deal.
Check the precise date on which any early repayment charge ends. Moving too soon can create a cost that outweighs the benefit of the new rate.
What if rates change?
Depending on the lender and application stage, it may be possible to select a different product before the new deal starts. This is not always automatic, and deadlines, fees or revised checks may apply.
The aim is to secure a suitable option in good time while understanding what flexibility remains before it takes effect.
Adjusting your mortgage
A new deal is also an opportunity to consider whether the amount borrowed, repayment term and repayment method remain appropriate.
These changes are not necessarily included in a straightforward product transfer. Your lender may deal with them separately and require further assessment.
Changing the mortgage term
Shortening a repayment mortgage’s term generally increases the monthly payment but reduces the total interest paid, helping you become mortgage-free sooner.
Extending the term generally lowers the monthly payment but increases the overall interest cost if the mortgage runs for the longer period.
The decision should reflect both your current budget and your longer-term plans. Age limits, expected retirement and affordability can affect the term a lender will offer.
Reducing the balance
You may want to use savings, a bonus or an inheritance to repay part of the mortgage when your current deal ends.
A lower balance can reduce interest costs and may bring the mortgage into a lower loan-to-value band. For example, a £240,000 mortgage against a £400,000 property represents 60% LTV.
The lender’s accepted property value determines the calculation. Any lump-sum payment should also be timed with regard to overpayment allowances and early repayment charges, while leaving sufficient savings available for other needs.
Borrowing more
Additional borrowing may be available for purposes such as home improvements, subject to affordability, available equity and the lender’s rules.
This could involve a larger remortgage with a new lender or a further advance from your existing lender. A further advance may have a different rate and deal end date from the original borrowing.
The comparison should consider the cost of the whole arrangement. Replacing an existing competitive mortgage simply to obtain a relatively small additional amount may not offer the best overall outcome.
Changing the repayment method
You may wish to move from interest-only to repayment, or explore a combination of the two.
Interest-only borrowing requires an acceptable plan for repaying the capital and is subject to specific lender criteria. Lower monthly payments do not remove the obligation to repay the outstanding balance.
Any change should be considered alongside your income, assets and intended repayment strategy.
Comparing the full cost
The lowest advertised interest rate does not always produce the lowest overall cost.
A comparison should take account of:
Monthly payments and interest over the period being compared
Product, booking or arrangement fees
Valuation and legal costs
Any mortgage advice fee
Early repayment and exit charges
Cashback or included services
The balance remaining at the end of the comparison period
Fees added to the mortgage increase the borrowing and normally attract interest. A lower monthly payment achieved by extending the term should also be distinguished from a saving achieved through a better rate.
Choosing a deal around your plans
Your next mortgage should reflect what you expect to happen during the deal period.
Plans to move home, make substantial overpayments, change employment or receive a lump sum can all influence the choice. A longer fixed rate provides payment certainty for longer, while its early repayment charges may matter if you expect to make changes.
If your mortgage has several parts with different deal end dates, these should be reviewed together. Switching the whole mortgage at once could trigger charges on a part that is still within its existing deal.
Our role is to compare staying with your current lender against moving elsewhere, explain the costs and help shape the mortgage around your next stage of life.
It starts with a conversation.
Frequently asked questions.
Every client and every mortgage is different, but there are some questions we are asked regularly.
From affordability and deposits to complex income, expat mortgages and specialist property finance, our FAQs explain how different lenders may approach different circumstances.
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