Remortgage
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Remortgage
Mateusz talks us through the remortgage process.
What is a remortgage and how does the process of remortgaging work in the UK?
A remortgage is when you apply for a new mortgage with a different lender, but stay in the same property.
How does the process of remortgaging work in the UK?
There are a few stages to focus on. First of all we would have to do some research. There are lots of deals on the market, so we have to shop around and find the right one for you. Then we consider the costs involved in remortgaging – those costs can vary.
We try to keep them down, but these might include things like booking or completion fees, and there might be conveyancing fees and a property valuation cost. You also might be liable for early repayment charges or exit fees, but we can usually avoid those.
The next step would be getting a Decision in Principle – also known as an Agreement in Principle. That basically gives you a good indication of how much you can borrow. We can then apply for the mortgage, which always involves a hard credit check. We would supply some supporting documents to the lender.
Remortgaging does involve some legal work, and lenders may appoint the solicitor, or you can choose your own. Then we move forward and head for completion, and make things nice and easy for the client.
How long does it take to remortgage? How often can someone remortgage a property?
It usually takes around four to eight weeks after applying. You could remortgage as often as you want to, but the question is how much would it cost?
Usually you would remortgage whenever it’s going to be cost effective. People tend to sign up for a deal lasting two or five years.
Can I switch lenders when remortgaging?
Absolutely – that’s pretty much the definition of a remortgage. If we switch lenders, that’s a remortgage. If we would just want to switch the product and stay with the same lender, that’s called a product transfer.
What are the main reasons why people choose to remortgage?
There are a few reasons – you’re coming to the end of your existing mortgage deal, you want a deal that better suits your needs, or you’re planning to borrow more against your property, for home improvements, for example.
Most of people consider remortgaging because they’re coming to an end of existing mortgage deal. It’s more cost effective to remortgage than do nothing.
What happens to my existing mortgage when I remortgage?
When you remortgage, the new lender transfers funds to your current one, and effectively pays off your mortgage.
What happens if I don’t remortgage after my deal expires?
If your current deal expires and you don’t sign a new one, you’d be transferred to what’s called the SVR – the standard variable rate. That’s usually much more expensive than other products, and it will effectively make your monthly payment higher.
What factors should I consider when deciding whether to remortgage?
First of all, you would have to check when your current deal ends and the costs of the remortgage. We would look at whether there is an Early Repayment Charge.
Also, it’s important to look at your plans – whether you’re going to stay in the property or maybe move sometime soon. Perhaps you plan to sell the property or rent it out. All of those factors might have a big impact on the remortgage and what product to go for.
Can people remortgage if they have bad credit?
Obviously bad credit does not help with remortgaging, but there are always options. First we have to check whether you will be eligible for a new mortgage and whether it’s worth switching. A bad credit score might mean you will have higher interest rates.
Can they remortgage to consolidate debts?
Remortgaging for debt consolidation is available, but I would advise exploring other options first. Consolidating your debts might mean you will pay more in the long run.
You’ll be adding more debt to your mortgage, and because a mortgage term is usually quite long, you could end up paying more at the end of the day.
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Will I have to pay any fees or penalties when remortgaging?
Booking fees or completion fees and early repayment charges might be applicable. We always try to find cost effective options and usually we can avoid the fees.
How much could someone potentially save by remortgaging?
It really depends on the circumstances, the size of your outstanding balance and the interest rates, but it’s very often thousands of pounds.
What documents would someone need to provide if they would like to remortgage as soon as possible?
Nothing unusual, really. You will need some bank statements, your ID and passport and some payslips. Having a copy of your credit record would also be very helpful.
Is a new valuation or survey needed when remortgaging?
Lenders need to undertake a house valuation for the mortgage to check the value of your house and that it’s good enough to be security for the mortgage.
This is also to check the Loan to Value. You might get a better deal if you have a lower Loan to Value. That valuation is usually undertaken by the lenders.
Is it harder to remortgage if someone is self-employed or a contractor?
I would say yes, if you’re newly self-employed. It can be more difficult if you’ve been working for yourself for less than a year.
You might not be able to remortgage with a new lender, but there are always some other options. You could possibly switch to another product with your current lender.
It’s the same with a contractor. It’s all doable.
What happens if my property value has decreased since I initially purchased it?
It can be more difficult if you want to remortgage and your property value has decreased. It may be hard to get a better deal on a fixed rate, for example.
But there are options. It might be worth paying for a valuation – especially if you’ve done some home improvements in the meantime. That might have increased the value of your property, which will help a lot.
Or, if you have any savings you could pay off some of your mortgage to improve the Loan to to Value ratio.
What are the advantages and disadvantages of fixed rate versus variable rate remortgages?
A fixed rate is a very popular product on the market. It’s not surprising, especially nowadays, because it avoids the risk that the mortgage payment will increase in the future. It essentially freezes the cost of your mortgage payment for a set amount of time.
So if we do a five year deal, you can be sure that for five years the monthly payment is always going to be the same, no matter what’s going on on the market.
With a variable rate, your payments might increase or decrease every time market interest rates change. The thing to remember is that with a fixed rate, you’re not going to benefit from interest rates going down – if they do – but it gives you great stability.
Can people remortgage if they’re nearing retirement age?
Absolutely. Some specialist lenders are happy to go beyond the age of 80 or 85 – and some don’t even have an upper limit.
You can remortgage in your 60s, 70s or even 80s, as long as you can show the lender that you will be able to afford the repayments throughout the term of the new deal. So even when you’re retired, it shouldn’t be a problem.
How can a broker help with a remortgage?
A mortgage broker can help navigate you through every stage of finding and applying for the mortgage. We can get the right deal based on your circumstances – we help assess your financial situation and identify suitable mortgages for your needs.
We can also help with protection products to cover your mortgage income. We offer a very comprehensive service and help you with all the aspects of remortgaging or buying your dream property.
You may have to pay an early repayment charge to your existing lender if you remortgage.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.