20 Reasons to remortgage (switch mortgage providers)

In this brief guide, we will discuss 20 main reasons to remortgage.

Switching mortgage providers could help you by cutting down on your mortgage interest, giving you a more flexible mortgage product or allowing you to buy a much bigger or smaller house.

20 reasons to remortgage (switch mortgage providers)

Below are 20 reasons to remortgage. If you find that you are in any of these positions then it may be a good time to switch mortgage providers.

A cheaper mortgage rate

To get a new introductory deal

To release equity

To buy more equity

To get a further advance

To downsize homes

To consolidate debts

To reduce your mortgage term

To increase your mortgage term

To pay off an interest-only mortgage

To pay off an equity release mortgage

To pay for home improvements

To go on a holiday

To raise investment funds

To invest in a buy to let

Property prices have risen

You want a more flexible mortgage

We will go into the reasons to remortgage in much more detail.

A cheaper mortgage rate

A cheaper mortgage is one of the main reasons people choose to remortgage. A cheaper mortgage rate can crop up at any time but if the benefits of switching to a cheaper mortgage rate outweigh the benefits of staying then you should remortgage.

You should consider the early repayment charge for your current mortgage, any mortgage fees for your new mortgage and the savings earned before you decide if to switch mortgage providers and switch to a new mortgage rate.

Switching your mortgage is a very good reason to remortgage.

To get a new introductory deal

The introductory deal in your mortgage will usually last for between 3 and 5 years. Once your introductory rate deal ends you will be moved on to the mortgage lenders standard variable rate mortgage which may have a much more expensive rate than the introductory rate which you previously had.

Switching mortgage providers and hopping from one mortgage introductory rate to another introductory rate is a good reason to remortgage as you ensure you always have a competitive mortgage rate for a fixed time.

If you are worried about interest rates going up then remortgaging to a new introductory deal which you can lock in for a few years may be a good idea.

To release equity

Another good reason to remortgage is the fact that you could release equity from the equity which you own in the property.

Releasing equity will allow you to use the cash released to do various things such as go on a holiday, invest in property or even gift a family member a mortgage deposit.

To release equity from your property you will usually need to have sufficient equity in your property.

That being said you could switch mortgage providers with as little as much as a 95% loan to value.

To buy more equity

Another reason to remortgage would be to buy additional equity in your property.

Most mortgage lenders will not let you overpay your mortgage by more than 10% without charging you an early repayment charge. This means that you may find it hard to buy more equity in your home even if you have access to the cash.

One way to get around this is to switch mortgage providers and out a further mortgage deposit down. By doing this you will buy more equity in the property and reduce the amount of mortgage debt you have. 

To get a further advance

One of the main reasons to remortgage is to get a further advance. When you get a further advance you are essentially borrowing more from your mortgage lender and increasing your mortgage debt.

You may want to get a further advance so you can invest in property, go on a holiday or use the funds for a home renovation project.

If your current mortgage lender doesn’t let you get a further advance then you can switch mortgage providers to a mortgage lender who will borrow you more.

To downsize homes

Another reason to remortgage would be to downsize your home. If you want a much smaller home you could simply remortgage to a smaller mortgage.

You should note that if you reduce your mortgage by 10% with the same mortgage lender then you may get charged a fee from your current mortgage lender so you may be better off switching mortgage providers rather than incurring this fee. 

To consolidate debts

Another reason you may want to remortgage is to consolidate your current debts such as your credit card debt, your personal loan debts etc under your mortgage.

You should be aware that when remortgaging debts with shorter terms to your mortgage you will essentially have to pay these debts for a much longer time and hence the interest charges on your short term debts will be much longer as you are repaying for them over a much longer mortgage term.

Not all mortgage lenders will allow you to remortgage for the purpose of debt consolidation and you may have to switch mortgage providers to a lender who will.

To reduce your mortgage term

Another reason to remortgage would be to reduce your mortgage term. You could remortgage your mortgage and ask the mortgage lender to reduce your mortgage term.

You should know that when you reduce your mortgage term your monthly mortgage repayments will likely increase.

A mortgage lender may want to ensure that you can afford these increased monthly mortgage repayments and hence it is not a guarantee that you will be able to get a remortgage when you look to reduce your mortgage term.

The good news is that there may be mortgage lenders out there who may be able to lend to you if you can prove to them that the increased mortgage repayments are affordable to you.

You can simply switch mortgage providers to one who will.

To increase your mortgage term

Another reason you may want to remortgage is to increase your mortgage term.  

You may want to increase your mortgage term as you want to reduce your monthly mortgage repayments.

The mortgage lender may want to ensure that you can continue to pay the mortgage over the increased mortgage term and they will carry out the mortgage affordability checks to ensure you can do this. 

The mortgage lender will also want to ensure that you will not be beyond their maximum mortgage age by the end of the mortgage term.

If you don’t meet the mortgage lenders eligibility criteria then the mortgage lender may refuse your request to remortgage to increase your mortgage term.

If this happens then you can simply switch mortgage providers to a lender who will let you increase your mortgage term.

To pay off an interest-only mortgage

Another reason to remortgage would be to pay off an interest-only mortgage.

A lot of mortgage lenders will accept remortgaging a property as a repayment vehicle for an interest-only mortgage.

By remortgaging the property with a new mortgage lender to a capital repayment mortgage you may be able to borrow the outstanding capital balance on the interest-only mortgage and use this new mortgage to pay off your existing interest-only mortgage.

You will, of course, need to prove to the new mortgage lender that you can afford to repay the mortgage amount you intend to borrow.

To pay off an equity release mortgage

Another reason you may want to remortgage is to use the mortgage funds to pay off an equity release product which you took on your home.

Equity release mortgage products are usually paid off when you die or move into a care home by the mortgage lender selling the property to regain the outstanding balance owed to them and paying off whatever is left to your estate.

You could instead choose to remortgage your property to a capital repayment mortgage with a new mortgage lender and use the funds to pay off your equity release mortgage.

You should be aware that if you repay your equity release mortgage early then you will have to deal with paying off any early repayment charges for your equity release mortgage.

To pay for home improvements

Another reason a lot of people remortgage is to gain extra funds which they can use for their home improvements.

By remortgaging, a homeowner could borrow extra funds from their mortgage lender(further advance) and use this to pay for any home improvements they may have.

You could also borrow by turning the existing equity you have in your home to debt.

There is no guarantee that the mortgage lender will agree to this or that this may be the best option for the homeowner and you may be better off getting a loan or switching mortgage providers to a different mortgage lender.

To go on a holiday

Another reason why a lot of people remortgage is to borrow extra funds to go on holiday. You could remortgage and borrow additional funds from your mortgage lender which you could use to go on a holiday by extracting the equity you have in your home and converting it into mortgage debt.

Not all mortgage lenders may agree to this and you may be better off borrowing from your credit card.

To raise investment funds

Another reason a lot of people remortgage is to convert existing equity they have in their homes to debt so they can use these funds to invest as their property is now rising as fast in price and they could utilise this equity elsewhere for much better returns.

You should be aware that when remortgaging the mortgage lender will still want to keep a suitable loan to value rate and hence you won’t be able to convert all the equity you have on the property to debt except the mortgage lender is happy with a 100% loan to value.

To invest in a buy to let

As mentioned above, a good reason to remortgage may be to use the funds to invest in things such as a buy to let property.

It is very common in the UK for people to remortgage as they need to invest in a suitable buy to let property.

Property prices have risen

A very good reason to remortgage is to extract equity from your home when house prices rise and essentially increase the value of equity you have in your home in comparison to the mortgage debt.

You may also want to remortgage when property prices have risen as your loan to value has now changed and you could potentially get a much better mortgage rate than you currently have.

You want a more flexible mortgage

Another reason you may want to remortgage may be to get a mortgage with better features. Example; a mortgage that lets you take mortgage payment holidays, a mortgage with an offset account or a mortgage which lets you overpay your mortgage.

FAQs: reasons to remortgage

Using a mortgage broker to remortgage

You may want to consider using an independent mortgage broker to get a mortgage.

Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases. This could be over 11,000 mortgage products. This may have some advantages than going directly to a mortgage lender.

A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you.

After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. 

This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your remortgage is indeed a possibility before you make a full mortgage application. 

Once you have found a home you want to buy or are satisfied with the mortgage offer for your remortgage then the mortgage broker will then look to get you a mortgage offer.

This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month if there are any limits such as early repayment fees, or annual overpayment limits.

If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer. Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it, they will oversee the sales agreement to ensure it is in your best interest and they will manage the transfer of mortgage funds.

In this brief guide, we discussed 15 main reasons to remortgage.

If you have any questions or comments please let us know.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.