Securing a mortgage is a significant financial decision, often spanning many years. Even after spending considerable time securing a competitive deal, it’s possible that what once seemed ideal no longer meets your needs or provides the best value.
If your current mortgage isn’t offering you the advantages it once did, it could be time to explore remortgaging. By switching to a new mortgage deal, you could reduce your monthly payments, save a substantial amount of money, or gain greater financial flexibility. That said, it’s integral to fully understand the implications and benefits of remortgaging before moving forward.
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Over the course of your mortgage, you’ll reach points where it must be renewed. When that time comes, you’ll generally face two options: renewing with your current lender or remortgaging with a different one. This offers a chance to evaluate your financial situation and determine whether better deals are available elsewhere.
A lack of understanding around how renewals work can result in receiving terms which won’t serve you well. This guide is here to explain the distinction between renewing and remortgaging, so you can make an informed decision.
Why Renew Your Mortgage?
Mortgages aren’t meant to last unchanged for the full repayment period. When your existing deal ends, letting it roll over automatically can end up costing you more in the long run. Renewing your mortgage gives you the opportunity to negotiate a new deal with updated terms, securing a lower interest rate or more suitable repayment conditions.
Mortgage Renewal vs Remortgage
It’s easy to mix up mortgage renewals and remortgaging. After all, both imply switching from your current mortgage deal to a new one. However, the differences between them can affect your finances significantly.
Remortgaging:
- Can be done at any point, not just at the end of your term.
- Means switching to a new lender.
- Could mean extra costs, such as arrangement or legal fees.
Mortgage Renewal:
- Takes place at the end of your existing mortgage term.
- Involves staying with your current lender.
- Requires agreeing to new terms offered by the same provider.
What are the Benefits of Mortgage Renewals?
1. Securing a better interest rate
A key advantage of renewing your mortgage is the chance to access a more affordable interest rate. As rates shift, renewing when rates are lower can lead to substantial savings over the life of your mortgage, as opposed to going onto your lender’s standard rate.
2. More flexibility
Renewing your mortgage helps you realign your loan with your financial goals. You might decide to shorten your term to pay off your mortgage earlier, adjust your payment frequency, or switch to a different product that better reflects your present circumstances.
3. Payment stability
Renewing your mortgage lets you lock in consistent payment terms, giving you greater predictability in your monthly budgeting. By securing a fixed rate or adjusting your mortgage structure, you can avoid unexpected increases in repayments, giving you peace of mind.
Mortgage Renewals Compared to Remortgaging
Remortgaging
Pros:
- Access to more deals: By switching to a different lender, you can explore a wide range of mortgage products, often unlocking more competitive interest rates than your current provider offers.
- Greater financial flexibility: Remortgaging can allow you to release equity built up in your home, representing funds for major expenses like home improvements.
Cons:
- Full reapplication process: Because you’re applying for a brand-new mortgage, you’ll need to meet the lender’s eligibility criteria. If your financial situation has changed for the worse, this could result in less favourable terms.
- Early repayment charges: Exiting your existing mortgage before its official end date can trigger an early repayment charge (ERC), which will eat into any savings gained from a new deal.
Mortgage Renewal
Pros:
- Simpler process: Renewing involves staying with your current lender, making it a more straightforward option. In most cases, you won’t need to go through credit checks or affordability assessments.
- No early repayment fees: Since you’re not ending your mortgage early, just continuing it into a new term, you avoid any early repayment penalties.
Cons:
- Limited choice: Your existing lender may not have the most competitive deals available on the market, and you might find yourself choosing from a small set of options.
- Less flexibility: Renewal deals sometimes come with restrictions that could limit your ability to tailor your mortgage to specific circumstances.
Timing Your Mortgage Renewal
Staying on top of your mortgage throughout its term puts you in a strong position when the renewal date approaches. Rather than waiting until your current deal expires, it’s wise to start preparing well in advance.
Take the time to reassess your position, look at what’s available, and weigh up if it’s better to stay with your existing lender or switch to a new one. Starting early enables you to compare deals thoroughly, avoid rushed decisions, and ultimately secure more favourable terms.
Get Refinancing Advice
Deciding whether to renew your mortgage or go to a new lender through remortgaging isn’t always obvious. With so many options available, making the right choice demands careful consideration and a bit of expert support.
Our user-friendly tool allows you to compare remortgage deals from lenders across the UK, giving you access to real-time rates and competitive offers. Once you’ve identified a deal which fits your needs, our dedicated team is here to guide you through the next steps.
We’ll make it our priority to understand your individual circumstances, ensuring the solution you choose aligns with your long-term plans. If you’re either ready to take action, or just need some advice, don’t hesitate to get in touch. We’re here to make the process as smooth, clear, and stress-free as possible.