When to Remortgage

When is the Best Time to Remortgage?

1. Your current deal is about to end

One of the clearest signals that it’s time to think about remortgaging is when your current fixed-rate period or introductory variable deal is close to finishing. For reference, the most attractive mortgage offers only run for two to five years.

Once that period expires, your loan will roll onto the lender’s standard variable rate, which is noticeably higher than the competitive deals available elsewhere. So, to avoid drifting onto this pricier rate, it’s best to line up your next deal in advance.

If you plan to stay with your current lender via a product transfer, you can secure a new rate around three to four months before your existing term ends. If you’re looking to move to a different lender entirely, you’ll be able to secure a new offer as early as six months before your current deal finishes.

2. You won’t be charged

Despite the fact you’re free to remortgage at any point, a lot of mortgage products include an early repayment charge if you leave before the deal officially ends. If your mortgage has one of these penalties, then the most cost-effective option is to schedule your remortgage for the first working day after your current deal finishes. That way, you’d avoid triggering the charge altogether.

If your deal still has some time left and you’re considering remortgaging for another reason, check exactly what the penalty would be. Early repayment charges are generally calculated as a percentage of your outstanding balance, and they are surprisingly steep, i.e., up to 5%. Once you know the figure, you can factor it into the total cost of remortgaging and decide whether switching now still makes financial sense.

3. You can afford to

A lender must be confident that you can manage the repayments on a new deal, so they’ll take a close look at your income and outgoings. Specifically, they’ll start by adding up your basic salary along with any additional earnings, such as bonuses, commission, or other regular benefits.

After that, they’ll assess things like loan repayments, childcare or maintenance payments, household bills, food costs, and general spending. From this, they’ll calculate your disposable income to check that you could afford the mortgage, not only at today’s rates, but also if interest rates were to rise. If they’re not fully convinced, they will reduce the amount they’re willing to lend.

For anyone who’s self-employed, has an irregular income, or for whom it is tricky to prove long-term earnings (e.g. if you’ve been working on a short-term contract) then the process is more challenging. You’ll need to provide up to three years’ worth of accounts prepared by a chartered accountant, or a history of tax returns, to demonstrate stable earnings.

4. You’ve got a good credit score

On top of affordability, lenders similarly want reassurance that you manage your money responsibly, and one of the first places they’ll look is your credit report. This shows how reliably you’ve handled credit over the past six years, including your history with credit cards, loans, overdrafts, previous mortgages, and mobile contracts etc.

A solid track record of making payments on time strengthens your application and thereby increases your chances of securing a competitive rate. However, if your income has dropped since you first took out your mortgage, or you’ve experienced financial difficulties along the way, lenders will be more cautious. In some situations, you’ll struggle to qualify for a better deal and, in more serious cases, remortgaging won’t be possible at all.

5. You’ve built up a lot of equity

Your loan-to-value (LTV) ratio reflects how much of your home you still owe compared with how much of it you now own outright. This figure shifts quite a bit over time. If your property has gone up in value since you last arranged a mortgage, you’d fall into a lower LTV bracket.

Having more equity, and therefore a lower LTV, means you can get better interest rates when you remortgage, given that lenders consequently view you as a lower-risk borrower. You might even find yourself eligible for deals you couldn’t access previously, in some cases.

You can also choose to remortgage to release equity if you need funds for things such as home improvements or debt consolidation. Although, bear in mind that doing so means increasing the amount you owe, which raises your monthly payments and extends the total length of your borrowing.

6. You want more flexibility

If you’ve recently come into some extra money and are keen to clear your mortgage more quickly, your current deal may not give you the freedom you need. A lot of mortgages place limits on overpayments because lenders earn less interest when you pay the loan down early. If this applies, then switching to a product which has more room for overpayments will let you reduce your balance faster without facing penalties.

You could also want to explore other flexible features which your current mortgage doesn’t offer. For instance, options such as payment holidays or offsetting your savings against your mortgage interest allow for breathing space and likewise help you manage your finances in such a way as suits you best.

How to get ready to remortgage

In the run-up to a remortgage application, it’s important to keep your finances looking as steady as possible. As such, try to avoid taking out new credit, keep your spending consistent rather than erratic, and steer clear of using your overdraft if you can.

And, to help the process move quickly, gather the documents you’ll need beforehand:

• Three months of bank statements
• Three recent payslips
• Your latest P60
• Up to three years of accounts or tax returns if you’re self-employed
• ID
• Proof of address

If your application is declined, you shouldn’t immediately try again with another lender since multiple credit checks in a short space of time will damage your credit score, and so make approval even harder. Instead, take a moment to understand why you were refused, put any issues right, and then reapply when you’re in a stronger position.

Compare remortgage deals

When the right time to remortgage is really depends on your circumstances, so weighing up the full range of options is essential. Taking the time to compare what’s on offer, and seeking professional guidance if you’re unsure, guarantees you’ll make a confident decision.

Our online comparison tool makes it easy to compare remortgage deals from across the UK. Updated daily, it provides access to a broad selection of competitive rates so that you can spot the best offers available at any given time.

Once you’ve identified a deal which looks promising, our advisers are on hand to give tailored guidance. We’ll get to know your financial goals and current position so we can help you select a mortgage that genuinely fits your needs.

And, if anything feels unclear, simply reach out. We’re here to simplify the process, cut through the jargon, and support you in securing a remortgage which aligns with your future plans.