Remortgage Guide: When to Switch and How to Save

Thinking about swapping your current mortgage for a better deal? You’re not alone. Homeowners across the UK are constantly checking rates to see if a remortgage could shave off a few hundred pounds a year. But the process isn’t just about lower interest – it’s about timing, costs, and the hidden traps that can turn a good idea into a costly mistake.

What Exactly Is a Remortgage?

A remortgage means you move your existing loan to a new mortgage product, either with the same lender or a different one. The goal is usually to get a lower rate, release equity, or change the term of the loan. Unlike a brand‑new mortgage, a remortgage keeps the same property as security, so the paperwork is a bit simpler, but you still need to go through credit checks and valuation.

When Does It Make Sense?

Look at three key signals: your current rate is higher than the market average, you have built up equity you want to tap, or your mortgage term is ending soon and you need a fresh deal. For example, if you locked in a 4.5% rate in 2017 and the average 2‑year fixed rate is now 2.8%, swapping could save you over £5,000 on a £200,000 loan.

Another common driver is releasing equity. Say your home is now worth £350,000 and you still owe £150,000. You could remortgage for £250,000, pull out £100,000 for home improvements or debt consolidation, and still enjoy a lower rate on the larger loan.

But don’t chase the lowest headline rate blindly. Adding fees, early‑repayment charges, and higher monthly payments can erase the benefit. Always run the numbers with a simple spreadsheet:

• New mortgage amount
• New interest rate
• Term length
• All fees (valuation, legal, arrangement)
• Potential early‑repayment charge on your existing deal

If the total cost over the next 2‑3 years is lower than staying put, you’ve got a win.

Real‑World Example

Meet Sarah, a first‑time buyer who remortgaged in early 2024. She had a 25‑year mortgage at 3.9% and a remaining balance of £180,000. After shopping around, she secured a 2‑year fixed at 2.3% with a £1,500 arrangement fee and a £500 valuation fee. The early‑repayment charge on her old deal was £2,000. Her monthly payment dropped from £950 to £860, saving £90 a month. Over the two‑year fixed period, that’s about £2,160 saved – more than enough to cover the £4,000 in fees and charges, leaving a net gain of roughly £1,000.

Risks You Can’t Ignore

Remortgaging isn’t risk‑free. The biggest danger is the early‑repayment charge (ERC) on your existing mortgage. Some lenders charge up to 5% of the outstanding balance if you exit early. That can wipe out any rate savings in the short term.

Another pitfall is extending your term to lower monthly payments. While it feels easier on cash flow, you’ll pay more interest overall. If you’re close to paying off your mortgage, adding five extra years could cost you thousands.

Finally, watch out for variable rates. A low starter rate can jump after a year, leaving you with a higher payment than you expected. Locking in a fixed rate for at least two years often offers a safer cushion.

Bottom‑Line Checklist

1. Check current market rates against your existing rate.
2. Calculate total fees, including ERC, arrangement, and legal costs.
3. Run a side‑by‑side comparison of monthly payments and total interest over the same period.
4. Decide whether you want to release equity or just lower your rate.
5. Speak to at least three lenders – online calculators can give you a quick snapshot, but a human adviser may spot hidden costs.

If the numbers add up, a remortgage can be a smart move that frees cash for other goals. If the costs outweigh the benefits, stay put and keep an eye on rates for the next review period.

Bottom line: treat a remortgage like any other financial decision – do the math, understand the fees, and only proceed when the savings are clear. That way you avoid nasty surprises and keep more money in your pocket.