8 remortgages myths dispelled

We reveal the facts behind some of the most common myths surrounding remortgaging.

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Are you sitting on your mortgage lender’s standard variable rate because you think you might not be able to remortgage, or that it’ll be too much hassle?

If so, you’re far from alone. There are all sorts of reasons why people don’t remortgage, with some people worried that others may think they’ve done it because they’re short of cash.

Our research found that nearly 15% of people said they’d be somewhat embarrassed to admit they’d remortgaged, even though moving to a cheaper deal could potentially cut hundreds, if not thousands, of pounds off their annual mortgage costs.

Here, we dispel some of the myths that might be putting you off remortgaging.

1.       You can only remortgage once your current deal has finished

You can usually apply for a new mortgage deal from three to six months in advance, so you don’t have to wait for your current mortgage to end to get the ball rolling.

Planning your remortgage before your existing deal ends means that you can arrange it so that you move straight onto your new deal without going onto your lender’s standard variable rate.

In certain situations, you may want to remortgage mid-way through your deal. Although many mortgages have early repayment charges if you get out of your deal early, not all do, and some decrease the further into the mortgage term you are.

If you are on a particularly high interest rate, you may find it works out more cost-effective to remortgage to a lower rate and pay the early repayment charge – but do work out the calculations carefully first and be sure it’s the cheaper option.

2.       You’d only remortgage if you needed money

Nearly one in four people (23.5%) said they thought remortgaging was only for people who needed extra cash, according to our research.

But you don’t have to borrow any extra money when you remortgage – in fact, people often do it because they’ve found a cheaper mortgage rate and can save money on their monthly repayments.

3.       You can’t remortgage if you have a bad credit rating

Having a poor credit rating doesn’t necessarily mean you won’t be able to remortgage, but you’re unlikely to have access to the very best mortgage deals.

When you compare remortgage deals with MoneySuperMarket you’ll be asked six short questions so that we can show you the most relevant deals based on your loan-to-value, including those from your current lender.

But you’ll also have the option of answering a further set of questions that will allow us to remove those mortgages you won’t be eligible for from your results – so you can have a better idea of the deals you can apply for.

This doesn’t mean you will definitely be accepted for those mortgages, but it does mean you are eligible to apply for them. The lender or mortgage broker can then advise you on your full mortgage eligibility.

4.       You legally have to remortgage every year

There are no laws that say when you have to remortgage. In fact, you don’t have to remortgage at all if you don’t want to, but you could be missing out on some potentially big savings if you don’t remortgage when your deal ends.

5.       You should always remortgage to the lowest rate you can find

When choosing a remortgage deal, it’s important to look at the overall cost rather than focusing on the headline interest rate alone. That means you need to factor in any arrangement or booking fees, which can sometimes add significantly to costs.

You’ll often find that the lowest mortgage rates have the highest fees.

As a general rule, the bigger your mortgage is, the less of an impact arrangement fees are likely to have overall. If you’ve only got a small mortgage, however, a large arrangement fee can make a bigger difference to the total cost.

6.       You can only remortgage with the same lender

You can apply for a mortgage with any lender, so you should always compare mortgage deals from a wide range of providers before deciding which one to go for.

It’s still a good idea to find out what your existing lender can offer you though.

7.       You need to own a large amount of equity in your home to remortgage

Several lenders will allow you to remortgage if you own as little as 10% equity in your home, so it’s always worth checking to see which remortgage deals you’re eligible for.

The more equity you do own, however, the wider the range of deals you’ll have to choose from, and at better rates than if you only own a small proportion of your property.

8.       You’ll have to pay steep legal fees when you remortgage

There are plenty of remortgage deals available where the lender you’re moving to will cover legal fees, so don’t assume you’ll have to fork out hundreds of pounds for a solicitor.

Some lenders also cover valuation costs, which means that your only cost to remortgage may be a mortgage arrangement fee, if there is one. So it’s always worth comparing options carefully.

Find out more about remortgaging in our Q&A.

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