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.
What is Remortgaging?
When you remortgage, you’re simply replacing your current mortgage deal with a new one. The process of securing a first mortgage and remortgage is similar in that you’ll need to follow certain protocols and consider all your options carefully. However, this doesn’t necessarily mean that you have to change lenders – although if it makes financial sense to do so, then it’s definitely worth considering another option.
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. Think carefully before securing other debts against your home. And it is always a good idea to speak with an experienced mortgage broker who can talk you through the process and understand the options and what they mean for you
The Process of Remortgaging
Understanding the intricacies of remortgaging is crucial for making informed decisions. Here’s a systematic guide to help you navigate the process with precision:
1. Analyse Yourself
After checking the term of your current mortgage and the rate you’re on, it’s time to begin gathering all of your documentation.
2. Compare Prices
Use free mortgage calculators online to compare deals and find the one with the lowest total cost. The amount you pay will differ based on which type of mortgage you choose (fixed-rate, tracker, or discounted), so be sure to take that into account. Also, keep in mind that changes in interest rates or fees for services like legal work can’t be predicted by a calculator,
so factor those potential extra costs into your budget as well.
3. Compare & Cost
Firstly, calculate the costs of your current mortgage and compare options. It’s also vital to think about future changes in interest rates as well as any extra fees. For example, breaking your contract often comes with high penalties. Make sure you’re confident that you can cover all monthly payments before moving ahead.
4. Find a Lender
To get the most accurate and up-to-date information about remortgage products and rates, speak to a lender or mortgage broker.
5. Attorney Services
If the lender doesn’t provide a legal team, appoint one yourself, as you will need assistance to iron out and finalize the deal.
6. Wait
Although remortgage is usually quicker than buying a house and applying for a mortgage, it can still take 4-8 weeks. So don’t wait around—get organized! If you’re switching lenders, the process may even take longer.
7. Close the Deal
Upon completion of the refinance, your previous mortgage will be paid off, and you’ll start fresh with new terms.
8. Update Your Bank
Don’t forget to talk to your bank and set up or cancel any payments as necessary.
9. Gather the Documentation
Store all relevant documentation in a safe place once you have received it. This should include both your new mortgage and your old one, just to be on the safe side.
The Duration of Remortgaging
Generally, the remortgaging timeline spans from 4 to 8 weeks post-application. The specific timeframe is contingent upon individual circumstances and the unique requirements of your remortgage.
Efficiency in processing can be enhanced by ensuring the timely submission of clear, accurate, and pertinent documents. For instance, providing promptly requested documentation, including proof of earnings, plays a pivotal role in expediting the overall remortgage procedure.
The Consideration Before Remortgaging
Contemplating remortgaging involves a meticulous evaluation of various factors to ensure a well-informed decision. Here’s a comprehensive checklist of considerations before proceeding with a remortgage:
1. Assess Your Circumstances
Gauge your financial stability and anticipate potential changes. Consider factors such as affordability in the face of higher monthly repayments, the impact of potential interest rate hikes, and how changes in employment status or family plans may affect your financial situation. Use a calculator to determine both current and future affordability.
2. Scrutinize Financial Benefits
Thoroughly compare your existing mortgage terms with alternative offers. Beyond the initial rate, calculate the total interest payable over the entire term. Factor in additional costs associated with remortgaging, including early redemption charges, exit fees if your current mortgage term hasn’t concluded, mortgage application fees, legal and valuation expenses, and potential mortgage broker fees. A comprehensive assessment ensures a clear understanding of the overall financial implications.
3. Evaluate Your Credit Score
Lenders rely on your credit score to assess lending eligibility. Obtain insight into your creditworthiness by checking your free Experian Credit Score. Address any issues affecting your credit rating before initiating the remortgage application, utilizing available steps to improve your credit profile.
4. Minimize Other Credit Applications
Recognize the impact of credit applications on your credit report. Each credit application triggers a hard search, potentially raising concerns among lenders if too many occur in a short period. To present a favourable image, refrain from applying for additional credit in the months leading up to your remortgage application.
This comprehensive pre-remortgage checklist ensures a strategic and informed approach, safeguarding your financial interests throughout the process.
The Advantages of Remortgaging
Exploring the advantages of remortgaging your home opens up a range of possibilities aimed at enhancing your financial flexibility and optimising your mortgage structure. Here are key benefits to consider:
1. Securing a More Favourable Mortgage Rate
Remortgaging offers an opportunity to secure a better rate for various reasons. As initial low fixed or discounted variable rates expire, lenders often transition homeowners to a standard variable rate, resulting in higher monthly payments.
Proactively remortgaging before this shift can mitigate increased costs. Additionally, if your home’s value has risen, leading to a more favourable loan-to-value ratio, you may qualify for lower mortgage rates. Opting for the stability of a fixed rate is also advisable, especially when anticipating potential increases in variable or tracker rates.
2. Tailoring Monthly Repayments to Financial Changes
Remortgaging becomes a strategic tool to adjust monthly repayment amounts in alignment with changes in your financial circumstances. For instance, a salary increase due to a job promotion might prompt the desire for a new mortgage with larger monthly payments over a shorter term, accelerating the mortgage payoff.
Conversely, if income decreases or living expenses rise, exploring remortgage options with smaller payments over an extended term can provide financial relief.
3. Unlocking Funds for Home Enhancements
If your property holds equity, where its value surpasses the outstanding mortgage amount, remortgage allows you to access additional funds. This surplus cash can be utilized for significant endeavours such as home improvements, funding your children’s education, or covering wedding expenses.
However, it’s essential to weigh your options carefully, considering alternatives like home improvement loans or 0% purchase credit cards to ensure the most suitable financial approach for your specific needs.
Hopefully, we’ve answered the common question about ‘how does remortgage work’? But if you’re still unsure or would like to speak with one of our friendly advisors for some free and impartial advice, don’t hesitate to get in touch. Or visit our website for more details.
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.
