Mortgage Renewal
Renewing your mortgage is an important moment in your financial journey, one that provides a valuable chance to review your current arrangement and think about options that may better reflect your present circumstances or even reduce your overall costs.
Failing to properly understand the renewal process could lead to accepting terms that aren't in your best interest. With that in mind, we’ve created this guide to help you navigate mortgage renewals and make an informed decision. We’ll cover:
What is a Mortgage Renewal?
When the term of your mortgage comes to an end, you’ll have to decide how to proceed. This point in the mortgage cycle is known as a mortgage renewal. It’s your opportunity to either stay with your existing lender under new terms or look at alternative offers from other lenders that might better suit your needs.
What is the Difference Between Mortgage Renewal and Remortgaging?
While mortgage renewal and remortgaging seem similar at first glance, they are quite different processes. A mortgage renewal takes place at the end of your current mortgage term and involves negotiating a new agreement with your existing lender. It’s a continuation of your mortgage, generally under updated terms and rates.
Remortgaging, by contrast, means switching your mortgage to a different lender, usually to take advantage of better interest rates, release equity, or change your mortgage type. Unlike renewals, remortgaging can be done at almost any time, not just when your term expires. In essence, you're replacing your existing mortgage with a brand new one, and using that to pay off the balance on your current deal.
Mortgage Renewals vs Remortgages: Pros and Cons
Interest rate
Both mortgage renewals and remortgaging afford the ability to secure more favourable terms, particularly when it comes to interest rates. However, the market could have shifted dramatically since you last arranged your mortgage.
If rates have risen, you might find yourself choosing the least costly option among a series of less-than-ideal deals. One key advantage of remortgaging is access to a broader range of products from various lenders, increasing your chances of finding a more competitive rate.
Flexibility
Renewing with your existing lender often comes with limited flexibility, and the conditions may restrict your ability to make changes down the line. For instance, you might face penalties for making overpayments or paying off your mortgage early.
Whereas, remortgaging opens up a wider range of products that could offer greater flexibility. If you’ve built up equity in your home, then this can provide useful funds for major expenses such as home improvements, debt consolidation, or other significant costs.
Eligibility
Renewing your mortgage is generally a straightforward process, as it involves continuing your existing arrangement with the same lender. In most cases, no new credit checks are required. Remortgaging, on the other hand, is treated as an entirely new mortgage application.
This means you’ll need to pass the lender’s full eligibility assessment, including income verification, affordability checks, and a credit check. If your financial circumstances have deteriorated since you first took out your mortgage, then you may struggle to qualify for better rates.
Additional fees
One of the pitfalls to be aware of when considering a remortgage is the early repayment charge (ERC). These fees are commonly applied if you end your mortgage deal before the agreed term finishes.
This is one of the main reasons many homeowners choose to wait until their current deal expires before switching lenders. In comparison, mortgage renewals don’t imply early repayment charges, as you're not exiting your agreement prematurely, you're simply moving on to a new deal with the same lender.
Convenience
When it comes to ease and simplicity, mortgage renewals tend to win hands down. Since you're staying with your current lender, the process is typically quick and hassle-free, often requiring minimal paperwork. Remortgaging is more thorough.
Because you’re applying for an entirely new mortgage with a different lender, you'll likely need to go through affordability checks, provide updated documentation, and possibly pay for a property valuation and legal fees. While the potential savings can be worthwhile, it does require more time and effort.
If you want to take a look at your credit score before you apply for a renewal or remortgage, you can use our free credit check tool (£14.99 per month after the free 30-day trial). Using it will help you to spot any mistakes or fraudulent activity on your profile, so you can easily handle such issues. The trial and subscription can be cancelled at any time.
Mortgage Renewal Timing
Keeping track of your mortgage throughout its term is crucial to having control over your finances, and that includes being well-prepared when renewal time approaches. Lenders usually send out a renewal offer a few months before your existing deal ends, giving you a window to explore your options.
This notice period is your opportunity to review your financial position, research the market, and decide whether a better deal is available, either through your current lender or by switching to a new one. Acting early gives you the time to negotiate, compare offers, and avoid being backed into a last-minute decision.
Leaving it too late might result in settling for a default rate or rushing into an unfavourable deal. With a bit of planning, you can enter the next phase of your mortgage with confidence and potentially save a substantial amount over the long term.
Speak to a Mortgage Broker
Choosing between renewing your mortgage and remortgaging can be complex, depending on a variety of factors. As such, it’s best to seek guidance from an experienced mortgage broker.
A broker can review your individual situation, clearly explain your options, and determine the most suitable path forward. They’ll also compare deals across a wide range of lenders, giving you access to competitive rates that may not be available directly. Beyond that, they can manage the paperwork, handle negotiations, and streamline the entire process from start to finish.
At The Mortgage Genie, our expert brokers are here to guide you every step of the way. Whether you're approaching the end of your mortgage term or considering a switch, we’ll help you understand the details and secure a deal that’s right for you.
If you’re interested, give us a call today at 01915809890. And why find out how much you could save on repayments right now by using our remortgage calculator?
The above blog has information contained within which was correct at the time of publication but is subject to change.
This information is a guide only and should not be relied on as a recommendation or advice that any particular mortgage is suitable for you. All mortgages are subject to the applicant(s) meeting the eligibility criteria of the specific lender. You should make an appointment to receive mortgage advice which will based on your needs and circumstances.