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.
Remortgaging your property can help you in more ways than one. Through a remortgage you may be able to get a better deal to save yourself money; or you may be able to raise further cash for things like home improvements, or to also consolidate debt to reduce your monthly outgoings. Here we go through the process of remortgaging and all it entails so that you are as informed as possible.
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. When you remortgage with the help of Your Mortgage Experts, we will always check these details for you, and advice on the best available remortgage deals and the costs involved.
Could a Remortgage Help You Financially?
If you’re looking to either save some money each month, get rid of other more expensive debt, or fund a home renovation project, remortgaging may be the right option for you. Of course, it’s not the best solution for everyone and that’s why we explain when it can be useful, what the process entails, and any costs you might face.
Many homeowners have an idea of remortgaging but are unsure of the process or if it would be beneficial for their situation. In this guide, we go over what exactly remortgaging is and when you should and shouldn’t do it.
What Does Remortgage Mean?
Remortgaging occurs when you move your mortgage to a new lender while remaining in the same property. The most frequent time people remortgage is at the end of their current product deal. For example, if you are on a fixed rate deal that is due to expire, you may wish to remortgage to a new deal. If you do not remortgage, you product rate will move to the lender Standard Variable Rate (SVR) which is typically higher, and your monthly payments will therefore also increase.
Can I Remortgage With The Same Lender?
While it’s not likely that you would remortgage with the same lender, it is possible to switch to a new product with them. This is called a “product transfer.” If you’re interested in learning more about this process and how we can help, please call us at 0208 154 1111.
What Are the Reasons for Wanting to Remortgage Your Home?
With rates always changing, it’s become more common for borrowers to refinance their mortgages every few years. If you stay on your lender’s SVR (standard variable rate) after your initial product expires, you could miss out on potential benefits like lower monthly payments—which could be a significant amount of money in some cases, especially in the current environment where interest rates have significantly increase compared to just a few months ago in early 2022.
Below we are summarising some of the primary reasons people remortgage.
In order to save money
Remortgaging before your current mortgage deal expires can save you money. Your lender’s standard variable rate (SVR) is usually much higher than their introductory rates, so by changing lenders and taking out a new deal, you could end up paying less interest overall.
However, remortgaging to a new lender may not be your best option. You should consider contacting your current lender and they will help you to decide if it’s the right move for you. If you’re on a fixed or discounted rate, most lenders will write to you a few months before the end of the term asking you to contact them about options going forward. Many lenders will offer you, as an existing customer, a new rate deal; however, their deal on offer is not always the most competitive; therefore you may be better off shopping around with other lenders. This could help reduce your monthly expenses or allow you to pay off your mortgage more quickly.
If your lender’s offers don’t look good to you, it might be time to switch lender. But before you make a decision, talk to a mortgage broker. Your Mortgage Experts will help you compare deals and find the best one available to you.
To Consolidate Your Debts
If you’re looking to Consolidate Your Debts, remortgaging might be the right solution for you. By taking out a new mortgage with a new lender and using part of the equity in your home, you can get additional money to pay off other more expensive debts like car loans or credit card balances. All of your debt will end up under one roof – your larger mortgage.
Consider the implications carefully before you decide to consolidate your debts in this way. A new mortgage can help you keep track of what you owe and make timely payments, but it will take a longer period of time to pay off than credit cards or personal loans. Additionally, although mortgages come with lower interest rates, you may end up paying more interest overall because the mortgage has typically a very long term.
Nonetheless, sometimes debt consolidation could be the best option. It’s important to seek advice before you commit to consolidating your debt. You’ll need to make sure that you can keep up with the repayments; otherwise, you risk the repossession of your home.
So, with a remortgage for debt consolidation, the message is to think carefully before securing other debts against your home. And get sound advice from an experienced mortgage broker.
To Raise Money
If you make more money, or your property value has gone up, you could remortgage and get extra cash to help pay for things like home improvements, a wedding or university costs for your child. This may be a more cost effective option than taking out a loan. However, again please remember that securing additional debt on your home, means that you will pay interest for longer.
To Get Cash to Extend Your Home, rather than Moving
If you live in a property that can be extended, and you are looking for additional space, for example because you have a growing family and you need an extra bedroom in the loft, a remortgage can be a more convenient solution than selling your home and moving to another one. With the remortgage you may be able to raise the funds needed to extend the family home, and complete any home improvements projects.
When Is the Right Time for You to Remortgage?
You’re normally offered an introductory deal when you take out a new mortgage, which includes a reduced rate for a set period and freebies, like a free legal service or valuation. Introductory deals can differ in length, and once the deal expires, you’re generally moved onto the lender’s SVR (standard variable rate). The SVR is often much higher than their introductory rates.
Although you can begin organising your next mortgage up to 6 months before the end of your existing rate, It’s important to note that Mortgage offers usually take 2-4 weeks to process. Additionally, legal work often takes 2-3 weeks. However, The new mortgage offer is typically valid for up to 6 months. So if everything is completed and ready earlier than expected, you can have the solicitor wait until any early repayment charge period with your current lender has expired before continuing. Before your current mortgage deal expires, it is always best to explore other offers from different lenders. This way, you can be sure that you aren’t paying more than necessary – especially if the new deal isn’t ready to go yet and you are put onto your lender’s Standard Variable Rate instead.
How Long Will It Take to Remortgage My Home?
Compared to buying a new home, remortgaging is much quicker and more straightforward; in fact, it on average only takes 4-6 weeks. One of the reasons why is that when you remortgage, the deeds of the property are already registered under your name–thus saving you time from having to do paperwork.
How Does Remortgaging Work?
The process is simple:
1. You contact your current lender for a redemption statement, which details how much you owe on your mortgage and any fees associated with repaying it.
2. Your personal mortgage adviser will work to get you the best deal possible on your mortgage.
3. If you are content with continuing, your adviser will present your new lender with a Decision in Principle (DIP) that outlines your current situation.
4. If the DIP is approved, your mortgage specialist will go over the details with you and fill out the application for you, which they’ll then submit on your behalf. As for documentation, you’ll need to provide things like proof of address, bank statements, payslips, or tax calculations, passports. The documents required are different whether you are employed rather than self-employed.
5. If you’re getting a new lender, they’ll likely request a valuation report for your property. Your solicitor will also ask for title deeds along with any lease details and questions that need answering.
6. The completion date is the day that your solicitor clears the balance with your current lender. They do this by drawing money from your new lender. You get any money that’s left over after they pay off the balance.
How to Choose the Best Remortgage Deal for Your Home?
After you evaluate all the deals on the table, pick the mortgage that best benefits your individual circumstances. Lenders are hopeful that borrowers will choose them over their current lender, so they tend to offer more favourable terms like low-interest rates and freebies. But each person’s situation is different, so what might be perfect for one borrower might not work as well for another.
Don’t know what to expect with remortgage rates? Call Your Mortgage Experts today on 0208 154 1111, and we will be able to assess your circumstances and talk you through the available options.
The Property Value Will Impact the Deal Available to You
Mortgage product rates depend on the loan-to-value (LTV). The lower the LTV, the lower the product rate available to you, and vice versa.
In order to benefit from the lowest product rates available, you would need to have a low LTV. The LTV is the ratio between the outstanding mortgage balance and the value of your property.
So it is important to have an accurate idea of how much your property is worth.
It’s important to be honest with yourself, as your lender will do their own research, and they will typically instruct a professional valuation to confirm your estimate. This can take the form of either an online desktop valuation or an internal property inspection.
You can arrange your own valuation with an independent surveyor to find out the value of your property, but this can be expensive and the lender will still need to instruct their own valuation anyway. You’re better off talking to some local estate agents and using online property websites to come to a figure.
What Are the Costs of Remortgaging and The Associated Fee?
Out of all the associated costs that come with purchasing a new property, a remortgage is often more budget-friendly. Plus, many of the standard charges don’t apply to those who choose to remortgage their homes.
A remortgage can save you money in the following ways:
1. Legal fees – solicitors’ costs are generally lower for a remortgage than when initially buying the property, as the legal process is less complex. It is also common for mortgage lenders to pay for legal costs for you, by using their free legal service.
2. Stamp Duty Land Tax – since you only pay SDLT when first purchasing a property, you would not be liable for this again as you already own your home.
3. Homebuyer’s report or survey – this is typically not required when your remortgage, unless you have done material home improvements and you
wish to engage a third part professional to give you a professional valuation. Please remember that estate agents also typically offer free valuation services.
Remortgaging may come with the following fees:
● Early repayment charges – only if you remortgage before your deal is up, though there might be a “final administration fee” for closing the account
● Lender’s booking and arrangement fees – these depend on which product you choose
● Broker fees – brokers typically find better deals than homeowners can on their own, so it’s recommended that home owners use a mortgager broker
● Valuation fees – you may have to pay these, but often the lender will cover the cost.
● Legal fees – while a legal service is required, lenders usually offer a free standard remortgage legal service or provide cashback to offset such expenses
Ultimately, you want to remortgage when it’s most beneficial for you and will result in the most savings. However, before settling on anything, make sure to look into all of the fees you’ll have to pay- especially if there’s an early repayment charge on your current deal. The amount these could potentially reduce your savings could deter you from moving forward with remortgaging altogether. A mortgage broker will take into account all fees and costs for you, before recommending a new mortgage deal.
Check Your Credit Score and Review Any Steps to Improve It
Many lenders want to see that you’re capable of making your regular payments on time. And they look at your credit score, the higher the better. If your credit score is not god there could be a number of things that you can easily do to improve it. We list below the most common ones:
Get a credit card
At first glance, it may seem like getting a credit card would be counterproductive if you don’t have any credit cards. However, having and using a credit card responsibly can actually help improve your credit score by showing that you’re able to keep up with payments. It’s important to only charge items on your credit card that you already have the money for so that you don’t get into debt. Then, you put the money aside and pay off the credit card at the end of the month – hopefully in full to avoid interest charges. As long as you make your monthly payments on time, you’ll improve your credit score little by little. To make sure that you never miss a payment (and damage your credit score as a result), set up automatic payments for either full balance or minimum payment each month.
Reduce your spending on unnecessary items.
When mortgage lenders are determining whether you can make the repayments, they not only look at your ability to pay bills but also at your income and how much of it you spend. Therefore, consider all of your regular expenses–do you need that expensive take away meal every so often, or is that club membership really worth it? If an expense seems unimportant, get rid of it to make sure that you can evidence a higher level of disposable income left at the end of each month.
Register to vote
Registering to vote not only proves your identity to potential lenders but also improves your credit score. By linking up previous addresses with payment histories, credit search engines will have no trouble seeing that you’re a reliable candidate for a loan. That’s why it’s so important to make sure you’re registered to vote and that all of your electoral roll information is accurate before starting a mortgage application.
Meet monthly bills
Paying your mortgage on time each month, in addition to other bills and credit card payments, will show lenders that you’re able to manage your money. A good credit score means you’re more likely to be accepted by the lender with the best terms. Consistently meeting these repayments will help build up a strong credit history.
Can I Remortgage Early?
If you remortgage early on, and before the expiry of your current rate deal, most likely you will have to pay an Early Repayment Charge (ERC) to your current lender. An ERC is a fee, typically calculated as a percentage of the current outstanding mortgage balance and it could be quite costly.
Remortgaging can require you to consider quite a number of things, and weigh the pros and cons, the costs and the implications. At Your Mortgage Experts, we will walk you through the process and explain the available options. Our advisers are remortgage experts and they will be able to tell you everything that you need to know in order to make an informed decision about remortgaging your home. Please call us today on 0208 154 1111. Or get started Online.
Who Should Not Remortgage?
While remortgaging could help many people save, it’s not the best solution for everyone.
If any of the below examples fit you, give us a call. We’ll help you figure out what your options are. Below we list of scenarios when remortgaging may not be the most suitable option.
People Who Incur High Early Repayment Charges
If you are still on a fixed-rate or discount mortgage, and you have a number of years before the expiry of the product deal, you may find that early repayment charges can make remortgage too expensive.
People Who Need a Very Small Loan
If you’re looking to remortgage and your loan is under £25,000, know that many lenders don’t accept these applications. Additionally, fees could end up negating any potential savings from changing the product rate – in this case, it might be smarter to explore new deals with your existing lender.
People Who Recently Become Self-Employed
Lenders need to know that you will be able to repay your loan, so they ask for an estimate of your future income. If you have recently become self-employed but don’t yet have a long enough work history to show stability, it may be difficult to find a lender who is willing to work with you.
People with Payment History Issues or Bad Credit
If you’re having trouble keeping up with credit agreements, mainstream lenders may not approve you for a loan. In this case, it might be better to stay with your current lender and get a new product from them. We recommend talking to a broker so they can assess the chance of successfully remortgaging or transferring products. Bad Credit Mortgages are typically only available from Specialist Lenders, and Your Mortgage Experts can help you find the most suitable deals.
People Who Have an Interest-Only Mortgage with a High Loan to Value Ratio
If you currently have an interest-only mortgage with a high LTV, most lenders will likely decline your application. This is because there wouldn’t be enough equity in the property to downsize at the end. In this case, it might be best to stick with your current lender and take out a new deal with them instead. A mortgage adviser can tell you more about the likelihood of success for an application like this.
Finding the Right Remortgage Option For You
Your Mortgage Experts will help you understand which available product deals will best suit you.
To speak to one of our expert mortgage advisers, simply give us a call on 0208 154 1111 or Get Started Online. With experience arranging hundreds of remortgages, we’ll find the best option to suit your needs.
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.
