Remortgaging
Remortgaging has become increasingly popular. It’s a great way to use a new mortgage with better terms to pay off an existing mortgage. It can also be used to swiftly raise capital to use for a variety of outcomes.
Remortgaging allows you to review your borrowing requirements and put yourself in a better financial position.
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You might want to remortgage for a number of reasons. You may want to consolidate short-term debts, reduce the size of future mortgage repayments, or make home improvements.
Whatever you’re trying to achieve, as specialist advisors we’ll be able to find you the right deal.
What is remortgaging?
Remortgaging involves finding and taking out a new mortgage on your home or property. It can improve your financial situation as you may be able to find a more favourable product with lower costs. Remortgaging can also allow you to release equity that has built up in your property.
Keep in mind that if you want to leave a current mortgage product early, you may be subject to an Early Repayment Charge (ERC). If you want to get started on your remortgage journey, reach out today.
More on Remortgaging
Remortgaging for something specific? Have a look at our services.
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If you’re looking into a mortgage, our various calculators will help guide you to see what you could be entitled to borrow and what might suit your needs best.
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What are the benefits of remortgaging?
When can I remortgage?
Technically, you should be able to remortgage at any time. However, look out for factors that might make doing so a potentially unwise decision.
One factor will be Early Repayment Charges (ERCs). Especially during the last few years, many lenders have specified a tie-in period of perhaps 2, 3 or 5 years.
This usually coincides with their introductory offer on the deal, or even longer in some rare cases. During this time they may impose a charge in the event of early repayment, to make up for the loss of interest earnings.
Often calculated according to a percentage of the mortgage balance, ERCs can add up to thousands of pounds, so you’ll need to make sure that every financial decision you make produces a result in your favour. Ensure the costs of remortgaging outweigh the savings from a deal with a different lender. If they don’t, you may need to reconsider your options.
In purely practical terms, the best time to remortgage is when the introductory term ends. At this point, most deals will revert to the lender’s Standard Variable Rate (STR). This rate is quite often significantly higher than the rate you’d enjoyed up to that point.
Should I Remortgage?
Looking at a new mortgage to replace your current arrangement is much like considering your first mortgage. You must consider a range of factors that will vary according to your circumstances. Whether remortgaging is best for you will depend on how they all stack up.
Firstly, how much do you want to borrow? If you’re simply replacing one mortgage with another, this will be the balance outstanding on your current mortgage. However, many property owners use remortgaging to borrow more, especially if the value of the property has increased. This allows them to raise money for things like home improvements or a major purchase like a car.
Next, what will be the term of the new mortgage? Will it last up to the same point as your current mortgage, or will you look for a shorter or longer period? What will be the term of the product, or introductory period?
Deals are usually set for 2, 3 or 5 years, or occasionally 10 years for longer-term plans. You’ll also need to consider the product type, i.e. fixed rate, tracker rate or a discount deal.
When looking at a remortgage product, most people focus on the interest rate. While this is important, you do need to consider other peripheral factors.
For instance, will the new mortgage carry high arrangement fees, or will you have to pay a large ERC on your current mortgage? Will the new mortgage require a repayment fee if you want to switch again? Will you have flexibility to make overpayments or early part-repayments without a penalty?
If you want to discuss if remortgaging is the right choice for you, get in touch!
How do I remortgage?
The remortgaging process is in many ways very similar to obtaining a standard mortgage, but in a few regards it’s a little simpler.
Your property will need to be valued and you’ll need a solicitor to handle the transfer of deeds, as well as ensure all contracts are as they should be. However, it’s now quite common for the lender to offer these as part of their overall service in a ‘fee-free’ deal.
Your application will be submitted to the lender as usual. Following this they’ll make their own assessments as to the affordability of the loan. Lenders will look at your creditworthiness, taking reference from one or more of the main credit agencies.
Once your application is approved and you receive an offer, your existing mortgage will be paid off by the lender and your new mortgage will start. The whole process of remortgaging varies from lender to lender and doesn’t take a set amount of time. Like any loan, it’s subject to any complications. To give you an estimation, the majority of remortgage deals we help with take between 4 to 8 weeks to complete.
What are the costs of remortgaging?
The costs in some cases can be quite minimal, as this is a competitive market with a range of lenders. You’ll find that many products come with a range of offers, such as free valuations and a free legal package. However, not all products come with added bonuses.
Some lenders require you to cover these costs, perhaps in exchange for a better interest rate. In the long term, if you can afford the upfront charges, this might work out better for you.
You may need to pay mortgage arrangement fees and broker’s fees on top of this and ERCs might apply. Finally, lenders can charge an admin fee for closing your current mortgage account.
When looking at remortgage deals, it’s important to consider fee-free mortgage products.
With these deals, you won’t have to pay any arrangement, valuation, or legal fees. You may also find that some products offer a small amount of cash back to cover any admin charges.
However, it’s worth remembering that a fee-free package might not always be the best product for you in the long term.
You can spend a lot of time researching mortgage rates online, but still never find the best deal for your circumstances. This is because there are many specialist mortgage lenders who don’t advertise online or appear on the high street. They offer competitive rates, but only accept applications through established brokers like us.
These brokers can offer exclusive and cheaper rates, especially for those with bad credit. If you want to explore your options and potentially access the best remortgage deals, reach out today.
A fixed rate remortgage deal is when the interest rate stays the same for the duration of your deal. They can be very effective for individuals in certain cases. If you’re unsure about the type of deal you want, consulting a broker can be beneficial.
They’ll look at every aspect of your situation and provide you with an unbiased recommendation. It might be that you’d be better with a shorter-term 2 or 3-year fixed-rate deal, or it might be advisable that you need a longer term fixed-rate plan lasting 5 years or more.
A tracker rate remortgage is where the interest rate you pay typically falls in line with the Bank of England base rate.
As before, the options available to you will depend on your circumstances. Typically, the best tracker rates are offered by specialist lenders who will only work through trusted brokers.
What is a product transfer?
A product transfer is the process whereby your mortgage remains with your current lender, but the result is a change in your interest rate. This usually happens when you’re nearing the end or at the end of the deal period.
Instead of remortgaging with another lender, it can be advantageous to stay with your current provider. The main benefit is that if you’re simply switching product and not borrowing additional funds, the lender won’t need to make affordability checks, nor carry out any additional underwriting.
However, staying with your current provider isn’t always the best choice. If you’re unsure what to do, you can reach out today. We’ll pair you with one of our expert remortgage advisors, who can suggest the best options.
Frequently asked questions
A common query we get is whether a borrower can get a remortgage of up to 95% of the value of their property. Typically, most lenders will be willing to lend up to 90%, although you’ll find some who only allow 85%, while others go up to 95%. It all depends on your circumstances and the lender.
Lenders will always apply their own criteria when it comes to how much they’re willing to lend. They will check the loan’s affordability in comparison to your income, assessing your financial commitments.
For example, if the loan contains capital-raising to consolidate debts, it may affect the Loan to Value they offer. If your property is a Buy to Let, different limits will apply.
It can be difficult, but it’s possible to get a bad credit remortgage.
Your options will be limited and you may have to incur slightly higher rates. However, as a specialist remortgage broker we have helped many people do so.
A solicitor or conveyancer is required when remortgaging. However, there’s much less legal work required when remortgaging, as the majority would have been done when the property was originally purchased.
Any lender will have to ensure the legalities are in line before offering you a product.
Phil Scott
Director
About the author
Phil has worked in the financial services industry since 1992, having started with a large insurance company. He went self employed in 1996 as an Independent Financial Adviser before setting up his first company, Needham Market Home Financial in 1999.
After four years, he decided to concentrate solely on mortgages and related insurances, and The Mortgage Centres was born. Since then, Phil has been influential in the opening of several new offices as the business continues to grow.
Qualifications
Financial Planning Certificate: 1, 2 & 3 | Year Attained: 1992
Certificate in Mortgage Advice and Practice (CEMAP) | Year Attained: 2001
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