When does remortgaging pay off?
Remortgaging can save thousands — or cost you, once fees and early repayment charges are counted. This guide shows how to compare deals properly, avoid the standard-variable-rate trap, and time your switch.
What remortgaging means
Remortgaging is switching your existing mortgage to a new deal — either with a new lender or, as a product transfer, a new rate with your current one. People do it to escape a rising standard variable rate, lock in certainty with a fix, release equity, or simply secure a cheaper rate. The decision comes down to one thing: does the saving outweigh the cost of switching?
The standard variable rate (SVR)
When a fixed or tracker deal ends, you roll onto the lender's SVR — almost always their most expensive rate, and one that can change at the lender's discretion. Drifting onto the SVR is the single most common way borrowers overpay, sometimes by hundreds a month. Set a reminder about six months before your deal ends and line up the next one.
Start early
Rate vs fees — compare total cost
A headline-low rate often comes with a large product fee (commonly £999–£1,499), while fee-free deals carry a slightly higher rate. The right choice depends on your balance: on a big loan a low rate with a fee usually wins; on a small loan the fee can outweigh the rate saving. Always compare the total cost over the deal period — payments plus fees — not the rate alone. Adding the fee to the loan spreads it but means paying interest on it for years.
Early repayment charges and switching costs
If you remortgage during a fixed period, you may pay an early repayment charge (often 1–5% of the balance) — frequently large enough to wipe out any saving, so most people switch when their deal ends. Other costs can include valuation and legal fees, though many remortgage deals include these free. The breakeven figure above shows how many months of saving it takes to recover the upfront cost.
Your LTV at remortgage
House-price growth and the capital you've repaid since you bought may have lowered your LTV into a cheaper band — meaning a better rate than your original deal even if market rates are similar. Always check your current LTV before assuming you can't improve on your rate.
Common mistakes
- Lapsing onto the SVR. The costliest mistake. Arrange the next deal before your current one ends.
- Judging by rate alone. A big fee can erase the saving on a smaller loan. Compare total cost over the deal.
- Remortgaging mid-fix. Early repayment charges often outweigh the saving — usually wait until the deal ends.
- Ignoring product transfers. Staying with your lender on a new rate can be quicker and fee-light; compare it with switching.