What are Mortgage Renewals?

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 ends 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 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 due to how, when rates shift, renewing when they’re lower leads 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, for instance, you could 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’ll 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, unlocking more competitive interest rates than your current provider offers,
• Greater financial flexibility: Remortgaging allows 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 triggers 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 won’t have the most competitive deals available on the market, and you’ll 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.

Could I be Declined for a Mortgage Renewal?

Despite the majority borrowers being able to renew their mortgage, there are situations where a renewal won’t be approved, such as if you:

Have credit problems

If your credit profile has worsened since you originally took out your mortgage, your lender will reassess whether you still meet their criteria, and serious or recent credit issues will affect your chances of securing a new deal. Though, not every credit issue leads to a refusal, and if your current lender declines the renewal, there’s still specialist lenders who will be willing to offer a remortgage.

Are nearing retirement age

Some lenders place limits on the age a borrower can be at the end of a mortgage term, so if renewing your mortgage would extend the loan beyond their retirement-age threshold, they’ll be hesitant to approve the application because lenders need reassurance that repayments will remain affordable once your income changes in retirement.

Have less affordability

If your financial situation has changed and your income is lower than when you first arranged the mortgage, you could struggle to meet your lender’s affordability checks. In these circumstances, it’s worth exploring lenders who offer more flexible income assessments or who’ll take additional sources of income into account when calculating borrowing limits.

Recently became self-employed

Switching from employed work to self-employment makes mortgage approval more complex in that lenders want applicants to provide two to three years of accounts before they will consider a new mortgage deal. So, if you became self-employed after taking out your original mortgage, this will make renewal more difficult.

What Happens if I’m Declined for a Renewal?

If your current lender decides not to offer you a new mortgage deal, your loan will move onto their standard variable rate (SVR) once your existing deal ends, with this rate being higher than those during fixed or introductory periods, further meaning your monthly repayments will increase.

However, being declined for a renewal does not mean you are out of options through how it’ll still be possible to speak with your existing lender and review their decision, particularly if there have been changes to your circumstances or additional information that support your application.

Timing Your Mortgage Renewal

Staying on top of your mortgage throughout its term puts you in a strong position when the renewal date approaches, so rather than waiting until your current deal expires, you should 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.

Tips to Prepare Before Renewing Your Mortgage

It’s important to review your options carefully rather than simply accepting the first offer from your lender, therefore taking some time to prepare helps you land a deal that better suits your circumstances.

• Many borrowers renew without fully knowing the interest rate, fees, and features attached to their existing product, and looking closely at what you currently have helps you judge whether a renewal offer is actually competitive.
• Lenders provide a default renewal option for convenience, but this isn’t always the most suitable or cost-effective choice, and so accepting it without exploring alternatives means missing out on a better deal elsewhere.
• There are several types of mortgage products available, including fixed-rate, tracker, and variable-rate mortgages, and each option works differently to suit different financial situations. There’s also certain features (such as overpayment allowances or offset accounts) which could benefit you.
• It’ll still be possible to discuss your renewal terms with your lender. Mortgage providers want to retain existing customers, so they’ll be willing to improve their offer if you raise the possibility of switching to another lender.
• To complete the renewal process, your lender will ask for updated financial information, commonly including recent payslips, bank statements, and proof of income. If you are self-employed, you’ll also need to provide several years of tax returns or accounts.

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.