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  • Writer's pictureRichard Jennings

Different Types of Remortgages

You might not realise that not all remortgages are created equal. There's actually a wide variety of types out there, each tailored to suit different financial situations and goals. From fixed-rate to variable-rate, interest-only to repayment, the options can seem overwhelming.


But don't worry - understanding these choices isn't as complex as it sounds. In fact, with a bit of guidance, you'll soon be able to navigate this landscape like a pro.


Stay tuned, because we're about to unpack these types one by one, demystifying the world of remortgages for you.

two symetrical hands over houses

 Fixed-rate vs. variable-rate remortgages


While considering remortgages, it's crucial to understand the difference between fixed-rate and variable-rate options, as your choice can significantly impact your financial future.


With a fixed-rate remortgage, you're locking in an interest rate for a set period, usually between 2 to 5 years, sometimes up to 10 years. Your monthly repayments stay the same, offering stability and making budgeting easier. However, if rates drop, you're stuck paying a higher rate until your fixed term ends.


On the other hand, variable-rate remortgages fluctuate with the market interest rate. You'll benefit when rates are low, but you're also exposed to the risk of increased payments when rates rise. There are two types: tracker, which follows the Bank of England base rate, and discount, which is a reduction on the lender's standard variable rate (SVR).


Interest-only vs. repayment remortgages


Just as choosing between fixed-rate and variable-rate remortgages can impact your financial situation, deciding between interest-only and repayment remortgages is equally important. You need to understand the differences to make an informed decision that best suits your needs.


Interest-only remortgages mean you're only required to pay the interest on your loan each month. The capital, or the amount borrowed, remains the same. This option can seem attractive due to its lower monthly payments. However, you'll need a solid plan to repay the capital amount at the end of the term.


On the other hand, repayment remortgages require you to pay both the interest and a portion of the capital each month. Though the monthly payments are higher, you're gradually reducing your debt. At the end of the term, you'll have repaid the entire loan.


Offset remortgages


Diving into the realm of offset remortgages, you'll find they offer a unique way to use your savings to reduce your mortgage payments. With an offset remortgage, your savings account and mortgage are combined. Instead of earning interest on your savings, you're reducing the interest you owe on your mortgage. Sounds interesting, right?


Let's break it down. Suppose you have a mortgage of £200,000 and savings of £20,000. Normally, you'd be charged interest on the full £200,000. But with an offset remortgage, you're only charged interest on £180,000 – that's your mortgage minus your savings.


This arrangement can significantly reduce your monthly mortgage payments. Alternatively, you can keep your payments the same and shorten the term of your mortgage, as you'll be paying more off your mortgage balance each month.


However, it's worth noting that the rates on offset remortgages can be a bit higher. So, it's essential to crunch the numbers and see if the benefits outweigh the costs for you.


Offset remortgages aren't for everyone, but if you've got a decent amount of savings, they're definitely worth considering.


Buy-to-let remortgages


Entering the world of buy-to-let remortgages, you'll discover a financial tool that could potentially boost your investment portfolio. This type of remortgage is specifically designed for property investors. It's essentially a way to refinance a rental property, often with the aim of releasing equity, securing a better interest rate, or changing the terms of your mortgage.


When you opt for a buy-to-let remortgage, you're betting on the property market. You're predicting that your rental income will cover your mortgage payments and leave a surplus. If you've made a sound investment and rental demand is high, you could be right.


Now, you might ask, 'What's the catch?' Well, buy-to-let remortgages come with risks. If rental demand drops, or if property values decline, you might find yourself in financial hot water. Plus, these remortgages often carry higher interest rates than standard residential ones.


But despite the risks, buy-to-let remortgages can be a savvy move. If you're an investor eyeing a potential property boom, or if you're a landlord looking to maximise your income, this could be the financial tool you need. It's all about balancing the risks and rewards.


Split or combination remortgages


On the other hand, you might find split or combination remortgages an intriguing option if you're looking for a flexible approach to your mortgage. This type allows you to split your mortgage into two distinct parts: one part on a fixed rate and the other on a variable rate.


By doing this, you're essentially hedging your bets. If interest rates go down, you'll benefit on the variable part of your mortgage. If they stay the same or increase, you're protected by the fixed rate portion.


There's also the benefit of flexibility. You can decide how much of your mortgage you want to be fixed and how much you want to be variable. If you're comfortable with a bit of risk, you might choose a larger variable portion. If you prefer stability, you might lean more towards the fixed segment.


However, combination remortgages aren't for everyone. They can be a bit more complicated than other types, and not all lenders offer them. You'll also need to keep a close eye on interest rates and be prepared to switch if necessary.


But if you're willing to put in the effort, they can offer a unique way to manage your mortgage.


Remortgage Frequently Asked Questions


What Are the Eligibility Criteria for Applying for a Remortgage?


To apply for a remortgage, you'd typically need a good credit score, steady income, and significant home equity. Lenders may also require proof of income and a low debt-to-income ratio. Rules vary by lender.


How Long Does the Remortgage Process Usually Take?


Typically, you're looking at around 4-8 weeks for the remortgage process. However, it can vary depending on your circumstances. It's important to have all your documentation ready to speed things up.


Can I Remortgage to Consolidate My Debts?


Yes, you can remortgage to consolidate your debts. It's a common practice that allows you to combine all your debts into one manageable monthly payment. However, it's crucial to consider all factors before proceeding.


What Are the Potential Costs or Fees Involved in Remortgaging?


You might face various costs when remortgaging, such as arrangement fees, valuation fees, legal costs, and possibly early repayment charges. It's crucial you're aware of these potential expenses before making any decisions.

Can I Remortgage if I Am Self-Employed or Have a Low Income?


Yes, you can remortgage if you're self-employed or have a low income. Lenders assess affordability based on your income and outgoings. However, you may need to provide more documentation to prove your income stability.




So, you've explored the world of remortgages. Whether it's fixed or variable, interest-only or repayment, offset, buy-to-let, or a combo, each has its own perks.


Remember, it's not just about finding a lower interest rate, it's about finding a deal that suits your needs. Don't rush into a decision. Take your time, explore your options and make a choice that'll benefit your financial future.


It's your move!

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