A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. You may have to pay an early repayment charge to your existing lender when you remortgage.
Remortgaging is an exciting opportunity to get a fresher mortgage deal on your home from a lender who can potentially offer you more favorable terms. It’s the ideal way to start anew with better rates and conditions that suit your financial needs, however, it requires having an existing mortgage in place already. Generally speaking, most people remortgage at the end of their current term but if circumstances change or you discover attractive offers before then don’t hesitate to consider them sooner rather than later.
Please remember that a mortgage is a loan secured against your home. Your home may be repossessed if you do not maintain repayments on your mortgage or any other load secured against it. You may have to pay an early repayment charge to your existing lender when you remortgage.
What to do on getting remortgaging
Remortgaging is a breeze compared to the process of acquiring your first mortgage! Before you switch lenders, investigate what deals are currently offered by your current one – this type of transaction where you stick with the same lender is known as product transfer. With just a bit less time and effort than it took before, remortgaging could be easier than ever expected.
If you’re thinking of remortgaging, there are a few steps to consider.
- First and foremost, do your due diligence by researching potential deals to ensure that remortgaging is the right move for you.
- Additionally, budgeting plays an essential role in this process – figure out what (and how much) you can reasonably afford each month based on your current income and expenses.
- Finally, find a deal that fits all three criteria: You + Your Budget + Your Needs; it may be wise to seek independent financial advice if needed when making such an important decision!
- Before you decide to remortgage, make sure that the timing is right for you. If there are still payments left on your current mortgage deal, be aware of any potential early repayment fees before switching.
- Plot out when the best time would be for your new mortgage deal to start so it matches up with when your old one ends.
When ready, submit an application form and let the lender verify all information provided; soon after they will tell you if they can provide you with what exactly what it is that you are searching for.
Do I need remortgage?
Exploring the option of remortgaging can offer various advantages, and there are several compelling reasons to consider this financial move:
Current Deal Expiry
As many mortgages have a limited duration, typically two to five years, the conclusion of your existing deal might lead to a transition to the lender’s higher standard variable rate (SVR). To avoid being tied to a less favourable rate, it’s advisable to start exploring remortgage options three to six months before your current deal ends.
Seeking a Better Rate
Despite potential early repayment charges (ERC) tied to existing deals, pursuing a better interest rate can result in substantial savings, especially for those with significant mortgage debt. Utilize tools like our Compare two mortgages calculator to assess the impact of a more favourable rate on your finances.
Property Value Increase
If your property’s value has experienced a significant rise since your initial mortgage, you may now fall into a lower loan-to-value band, making you eligible for lower interest rates. Evaluating the potential benefits against associated costs is essential in this scenario.
Concerns About Rising Interest Rates
Apprehensions regarding future interest rate increases can prompt individuals to explore remortgaging options. However, it’s crucial to differentiate between potential changes in the Bank of England base rate, which may directly impact mortgage payments, and rate adjustments for new customers.
Desire to Overpay
Increased income or unexpected funds may lead to a desire to make higher mortgage payments. If your current deal limits overpayments, remortgaging provides an opportunity to reduce the loan size and potentially secure a more favourable rate. Be mindful of any early repayment charges or exit fees associated with this decision.
Switching Mortgage Type
Individuals may opt to switch from interest-only to a repayment mortgage, which might not necessitate remortgaging but can be facilitated by your current lender. The flexibility to modify loan structures can be useful, especially for those with specific financial goals.
Borrowing Additional Funds
Seeking additional funds, whether for home improvements or debt consolidation, is a common reason for remortgaging. Exploring new lenders can offer better terms and rates, but it’s essential to factor in all associated fees and evaluate the overall cost-effectiveness.
When considering remortgaging, transparency with your lender about the purpose of borrowing additional funds is crucial. Providing evidence, such as quotes for home improvements or proof of debt repayment, may be required, particularly for larger borrowing amounts.
The Advantages and Disadvantages of Remortgaging
Examining the merits and drawbacks of remortgaging unveils a range of considerations.
A. The Advantages of Remortgaging
Cost Savings
Transition to a more cost-effective mortgage deal, steering clear of high default rates imposed by your current lender.
Equity Release
Expand your mortgage to release built-up equity in your home, providing additional financial flexibility.
Tailored Financial Solutions
Opt for a mortgage deal that aligns with your current financial requirements, ensuring a personalized approach.
Term Adjustment
Adjust the duration of your mortgage term, either extending or shortening it based on your evolving circumstances.
Debt Consolidation
Consolidate higher-interest debts, such as credit card balances, into your mortgage, streamlining monthly repayments. This is feasible when the Loan-to-Value (LTV) on your property decreases, leveraging increased equity as a negotiating tool.
B. The Disadvantages of Remortgaging
Potential Fees
Shifting to a new mortgage deal for savings may incur fees, including early-repayment charges (up to 5%) from your previous lender if you exit before the deal concludes, along with administration fees from the new lender. These charges could offset the benefits of securing a more affordable rate.
Risk of Repossession
Utilizing your property as collateral for additional debt poses a risk of repossession if mortgage repayments are not maintained.
Extended Interest Payments
Consolidating short-term debts onto your mortgage and stretching them over a more extended term may result in paying significantly more interest over time.
Time Commitment
The remortgaging process can span weeks or months, contingent on various factors. Commitment to completing the process is crucial due to the time involved.
Step-by-step process for remortgaging
Navigating the remortgaging process may seem overwhelming initially, but rest assured, it follows a structured series of steps, often facilitated by a knowledgeable broker. Here’s an overview of the typical progression for most properties:
Step 1: Obtain the Closing Balance from the Current Lender
Request a closing balance from your current mortgage provider to determine the minimum borrowing amount required from a new lender.
Step 2: Consult a Mortgage Broker or Adviser
Engage with a mortgage broker to explore a broader range of rates beyond the high street, ensuring that your remortgage plans align with your unique situation.
Step 3: Evaluate All Costs
Collaborate with your broker to comprehensively assess costs, including early repayment charges, brokerage fees, valuation costs, and more.
Step 4: Secure an Agreement in Principle
Obtain an agreement in principle, outlining a mortgage offer, though not yet finalized pending a complete credit check. If satisfactory, proceed to formalize the agreement.
Step 5: Initiate a New Mortgage Application
Begin the application process for your chosen mortgage deal, providing details of your finances, such as household outgoings and salaries.
Step 6: Undergo a Credit Check
Undergo a hard credit check by the lender, necessitating caution in acquiring new debt or making significant purchases during this period.
Step 7: Property Valuation
A property valuation takes place, either remotely or through an on-site assessment of the property’s exterior.
Step 8: Receive Mortgage Offer Letter
The new lender issues a mortgage offer letter, valid for three to six months. It’s essential to double-check the dates for accuracy.
Step 9: Thoroughly Review the Offer
Take the time to assess the final offer carefully, ensuring it aligns with your ability to meet monthly repayments, considering any changes in circumstances during the application process.
Step 10: Solicitor or Conveyancer Management
Engage a solicitor to oversee the transfer, utilizing the new mortgage to settle the old one and updating details with the Land Registry. This step ensures a smooth transition in the remortgaging process.
Is a solicitor needed to remortgage?
When it comes to remortgaging, you’ll need the aid of a solicitor or conveyancer. This should be less pricey than when initially obtaining your mortgage – and don’t forget to check if the lender offers to foot the bill for these fees. Your chosen representative may have various identity checks and property searches carried out on your behalf; they will also collect funds from your new loan provider and pay off any existing lenders too.
When can I remortgage?
If you possess a fixed-term mortgage, it is imperative to go over your terms and conditions prior to searching for another deal. Several lenders may charge an early repayment fee if you switch before the conclusion of your contract. An added advantage that most mortgage offers carry with them is they are valid up to six months after being issued. This thus allows you the opportunity to secure a new deal so as soon as your existing one expires, meaning that in many cases there will be no extra cost incurred from an early payment penalty.
Does it take long to remortgage?
The remortgaging process usually requires approximately six to eight weeks for completion, affording enough time for your conveyancer to undertake searches and handle the legal documentation.
How much does it cost to remortgage?
While not every cost may apply to your situation, it’s essential to be aware of the potential fees. Here’s an overview of the associated costs:
Early Repayment Charge
Incurred if you exit your current mortgage deal before its scheduled end.
Deeds Release Fee
This fee, often termed an ‘admin fee,’ is applicable when settling any outstanding mortgage.
Arrangement (Product) Fee
Charged by the new lender for setting up your remortgage deal.
Exit Fee
A charge from your existing lender when concluding your current mortgage agreement.
Valuation Fee
The cost associated with assessing the value of your property.
Booking Fee
A fee to secure a particular mortgage deal, commonly paid upfront.
New Mortgage Payments
The ongoing monthly payments on your new mortgage.
Conveyancing Fee/Legal Fee (Solicitor Fee)
Fees for legal services to handle the transfer of the mortgage, including paperwork and property registration.
Broker Fee
If you engage a mortgage broker, they may charge a fee for their services.
Get support from the expert.
Whether you are thinking about getting your first mortgage, and need help and guidance on what to do, or whether you look to secure your next mortgage deal or review what may be done about the increased mortgager monthly payment, it is generally a good idea to talk to an experienced mortgage broker.
Your Mortgage Experts have the knowledge and experience to help and guide you, and advice on the most suitable available options.
Call us today on 02081541111 or drop us an email to hello@yourmortgageexperts.co.uk
Your Mortgage Experts, London, W9 2HQ
Luca Bertolino
Mortgage ExpertYour Mortgage Experts is led by Luca Bertolino with 20 years experience in financial services and in the property market. Through Luca’s wealth of knowledge and expertise, Your Mortgage Experts have become a trusted adviser that clients have come to rely upon for all their mortgage and protection needs.
