Remortgages

What is a Remortgage?

When you remortgage your property, you are switching one mortgage deal for  another.

Your remortgage might be a new deal with your existing lender, or you might decide to move to a new mortgage with an entirely different lender.

There are lots of reasons why you might decide to remortgage. You may, for example, have found a cheaper deal which can help you reduce your monthly outgoings, or want to increase the amount you’re borrowing, perhaps to fund home improvements.

In this guide, we will explain how the remortgage process works, when you should remortgage and when you should not and how much you could save by remortgaging.

How Much You can borrow

A quick check to find out what size mortgage you can get on your income.

How does a Remortgage work?

Remortgaging is the process by which you take out a new mortgage deal that replaces your current one.

The first thing you need to do if you are looking to remortgage is to check that there aren’t any early repayment charges (ERCs) for leaving your existing deal. If there are, then you may be better off waiting until it finishes.

If there aren’t any Early Repayment Charges on your current mortgage deal, you will then need to think about what type of mortgage you want, for example a fixed or tracker deal (more about these later). Expert advice  on mortgages will help you to make up your mind about the right remortgage deal for your individual circumstances.

Once you’ve chosen a remortgage deal, you can then submit your application to your new lender. You will need to provide them with evidence of your income and outgoings, as well as details of your current mortgage.

The lender will carry out a credit check and arrange for your property to be valued. You’ll need a solicitor who will handle all the legal paperwork and sort out the transfer of funds in order to complete the remortgage.

Why Should You Remortgage?

The main reason for remortgaging is to make sure that you are always on the most competitive deal possible so that you don’t pay more than you need to for a mortgage. 

After all, your mortgage payment is likely to be your biggest monthly outgoing, so it makes sense to keep costs at a minimum.

Remortgaging can often save you hundreds (if not thousands) of pounds a year, especially if you are moving from your lender’s standard variable rate (SVR) to a fixed rate deal. The SVR is the rate you typically move onto once your current deal finishes and is usually much more expensive than remortgage rates.

Other reasons to remortgage include helping to pay off your mortgage earlier, or to raise capital to invest in  more properties and increasing your property portfolio.

When Should you Remortgage?

The best time to begin looking for a good deal on your remortgage is roughly 3 to 4 months before your current mortgage deal is due to expire, in the case of fixed interest mortgage rates. This will ensure that you do not end up paying the higher Standard Variable Rate monthly payments. If you are already on a Standard Varable Rate mortgage rate, you can switch to a new remortgage deal at any time.

When Should you NOT Remortgage?

If you are already on a low interest rate deal and there isn’t anything better in the market, then the best course of action would be to stay on your existing deal until something better comes along. However, please remember that you may not be able to access the best deals in the market, but we can help you find a better range of deals across the whole of market, completely free of charge.

Another reason not to remortgage is if your existing Mortgage deal has an Early Repayment Charge/Exit Fee on it. In such cases, it is best to wait until your deal is about to run out, so that you are not out of pocket by paying this fee.

When might remortgaging not be a good idea?

Remortgaging isn’t always a good idea, so if you’re not sure  you can contact us for a free consultation and discuss whether remortgaging is the right option for you. 

Some of the reasons it might not be advisable to remortgage include:

You’ve only got a couple of years to go before your mortgage is paid off

If you are approaching the end of your mortgage term, you will need to weigh up whether the costs of remortgaging might outweigh its benefits. That is because the smaller your mortgage is, the bigger the impact of any arrangement fees, so you will need to carefully consider whether it is worth it.

Your credit score isn’t up to scratch

If you have missed debt repayments in the past, this will have had an impact on your credit score, which lenders look at when they determine whether to offer you a mortgage or not. This means any mortgage application you make may be refused. However, it’s still worth checking as your existing lender may offer you a better deal than the one you are currently on.

You’ll pay high early repayment charges

Before remortgaging, check to see whether you’ll have to pay any early repayment charges when you leave your existing mortgage. If these are high, this could wipe out the benefit of switching to a deal with a lower rate.

Your property’s value has fallen

If your property is now worth less than you paid for it, then you may find that you don’t have enough equity in your home to be able to remortgage. If this is the case, you may have to sit tight and wait for prices to go up again before you can remortgage. It’s worth speaking to your existing lender though, as they might still be able to offer you a new deal.

How much could you save by switching to a better deal?

The amount you can save by remortgaging will depend on the size of your mortgage, your mortgage term, and how much lower your new rate is compared to your old one.

You will save more money if you are  moving from your lender’s standard variable rate (SVR) to a new deal and could potentially save hundreds or even thousands of pounds of year.

For example, saving 2% on a £150,000, 25 year repayment mortgage would cut the monthly payments by about £160 a month, or nearly £2,000 over a year. That could be the down payment on a car!

 

What happens when you remortgage?

There are several steps in the remortgage process.

Once you have found a remortgage deal you want to move to, you’ll need to complete the remortgage application forms and supply any additional information that the lender asks for. This will include things such as payslips and bank statements showing your outgoings.

If your new lender doesn’t provide a legal service, you must also appoint a solicitor who will deal with the basic legal work of transferring your mortgage across.

Your property will need to be valued by a surveyor. This is usually arranged by your new lender and paid for by you.

On completion day, your new lender will release funds to pay off your mortgage and you will be moved across to your new remortgage deal.

 

What are Fixed and Tracker Mortgages?

These 2 terms describe the type of interest rate you choose for your mortgage. Most mortgages are either Fixed or Tracker. A Fixed Rate is when the interest rate is ‘frozen’ for a certain period of time, usually 2 or 5 years, where it will remain the same, even if the interest rates rise. 

Tracker mortgages have the Bank of England’s Rate added on top of the lender’s set interest rate.