Being experienced remortgaging brokers, our team of advisors know that remortgaging can provide homeowners with valuable opportunities to save money, consolidate debt, and release equity from their property. By switching mortgage deals, whether with the same lender or a new one, you can ensure you’re getting the most favourable rate for your unique situation.
So, what is remortgage? In this guide, we’ll dive into what remortgaging entails, how it works, and the important factors you should consider before embarking on this process.
Key Steps and Insights: How Does Remortgaging Work?
In simple terms, remortgaging involves replacing your existing mortgage with a new one that offers better conditions, lower interest rates, or improved terms. As a homeowner, you have the option to switch deals either with your current lender or by moving to a new one. By remortgaging, you can potentially save money, access the equity in your home, or adjust your mortgage to better suit your financial needs. The process usually requires a property valuation, credit checks, and some paperwork, but the potential benefits can make it a smart financial decision for many homeowners.
Maximise savings by switching mortgage deal
Remortgaging can significantly benefit homeowners by allowing them to pay off their existing mortgage and replace it with a new one that offers better terms, lower interest rates, or more advantageous conditions. By choosing a superior deal compared to your current mortgage, you could save thousands of pounds over the course of your mortgage term, making the most of your hard-earned money.
Reasons to Consider Remortgaging Your Property
Why remortgage? There are several reasons to consider remortgaging:
- Save money: If interest rates have dropped or your credit score has improved, you may qualify for a better mortgage deal with lower monthly payments.
- Release equity: If your home has increased in value, you may want to release some of the equity to fund home improvements, consolidate debt, or invest in other projects.
- Change mortgage type: You might want to switch from an interest-only mortgage to a repayment mortgage or vice versa, depending on your financial goals.
- Gain more flexibility: Some mortgages offer flexible features, such as overpayment or payment holidays, which might better suit your needs.
The Remortgage Timeline: How Long Does It Take to Remortgage?
Knowing when to remortgage is vital when making the best financial decisions for your situation. The remortgage process typically takes 4-8 weeks, depending on your circumstances and the lender’s requirements. It can be quicker if you’re remortgaging with your existing lender, but switching to a new lender may take longer due to additional checks and valuations.
Can you remortgage early?
You can remortgage early, but you may face early repayment charges if you’re still within a fixed-rate term or have other penalties specified in your mortgage agreement. Weigh the potential savings against these fees to determine if remortgaging early is the right choice for you.
When shouldn’t you remortgage?
Remortgaging may not be right for you in the following situations:
- If you have a small mortgage balance and the potential savings are minimal
- If you’re currently in a fixed-rate term with high early repayment charges
- If your credit rating has worsened since your last mortgage application
- If your property value has decreased significantly
- If you’re in negative equity, where the outstanding mortgage balance is more than the property’s value
How to find remortgage deals
To find the best remortgage deals, you can:
- Use comparison websites to view various interest rates and deals
- Approach your current lender to see if they can offer you a better deal
- Contact a mortgage broker who can search the market and recommend suitable deals based on your circumstances
What remortgage costs are there?
There are various costs associated with remortgaging, including:
Valuation fees: Lenders may charge a fee for valuing your property as part of the remortgage process.
- Legal fees: You may need to pay for a solicitor or conveyancer to handle the legal aspects of the remortgage.
- Mortgage arrangement fees: Some lenders charge a fee for setting up your new mortgage.
- Early repayment charges: If you’re leaving your current mortgage deal early, you may face early repayment fees.
- Exit fees: Your existing lender may charge a fee for closing your current mortgage.
Are there Fees for Remortgaging?
There are several fees associated with remortgaging, such as valuation fees, legal fees, mortgage arrangement fees, early repayment charges, exit fees, and booking fees. It’s essential to factor these fees into your calculations when determining if remortgaging will save you money in the long run.
Mortgage Arrangement Fee
A mortgage arrangement fee is a charge imposed by the lender for setting up your new mortgage. These fees can vary widely and may be a flat fee or a percentage of your loan amount. When comparing mortgage rates, consider the impact of the arrangement fee on the overall cost of your mortgage.
Early Repayment Charge
An early repayment fee is a charge imposed by your current lender if you decide to pay off your mortgage before the end of the agreed term, particularly during a fixed-rate period. These fees can be substantial and should be weighed against the potential savings from remortgaging before making a decision.
An exit fee, also known as a mortgage account fee or deeds release fee, is charged by your current lender for closing your mortgage account. Exit fees can vary between lenders and should be factored into the overall cost of remortgaging.
Can I Remortgage with the same Lender?
Yes, you can remortgage with your existing lender. Remortgaging with the same lender is called a product transfer and may be quicker and easier than switching to a new lender. However, it’s still essential to compare deals to ensure you’re getting the best rate.
Why it pays to switch from your existing lender and when it doesn’t
Switching mortgages can save you money in the long run if you can secure a lower interest rate or better terms. However, there are times when remortgaging may not be the best option:
- If your mortgage balance is small, the potential savings may not be significant enough to justify the costs of remortgaging.
- If you’re in the middle of a fixed-rate term, you may face early repayment charges for leaving your current deal.
- If your property value has decreased or your financial situation has worsened, you may not qualify for a better mortgage deal.
Your lender’s valuation
During the remortgage process, your new lender will conduct a valuation of your property to determine its current market value. This valuation will influence the mortgage deals available to you and may impact your LTV ratio.
Related reading: Do I need a Remortgage Valuation on my house?
Is it worth paying exit or early repayment fees to switch lenders?
In some cases, it may be worth paying exit or early repayment fees to switch lenders if the potential savings from a better mortgage deal outweigh the fees. Calculate the potential savings and weigh them against the cost of the fees to determine if it’s a financially sound decision.
Remortgaging for more flexibility
Some homeowners choose to remortgage for increased flexibility in their mortgage terms. This can include options like overpayment facilities, payment holidays, or the ability to offset savings against the mortgage balance. When comparing interest rates and deals, consider the flexible features that might suit your financial situation and goals.
Are any lenders offering incentives to bring the cost of switching down?
Some lenders may offer incentives to attract borrowers, such as cashback offers, free valuations, or reduced arrangement fees. These incentives can help offset the costs of remortgaging, but it’s essential to compare the overall mortgage deal, including rates and other fees, to ensure it’s the best option for you.
Reducing your loan-to-value to get a better rate
If your property value has increased or you’ve paid off a significant portion of your mortgage, your loan-to-value (LTV) ratio may have decreased. A lower LTV usually means better mortgage rates, as lenders consider you a lower risk. When remortgaging, aim for an LTV of 60% or lower to secure the best deals.
Remortgaging to consolidate debt
If you have high-interest debts, such as credit cards or personal loans, remortgaging can help you consolidate them into your mortgage. This can potentially lower your overall monthly repayments and reduce the amount of interest you pay. However, be cautious when extending the repayment term of your debts, as this could increase the total amount you repay in the long run.
Remortgaging to raise funds
If you’re needing extra funds for home renovations, a second property purchase or any other purpose, remortgaging could be an opportune solution. By unlocking the equity from your current residence, you can get a lump sum of money added to your mortgage balance. Just bear in mind that increasing what is owed on the mortgage may result in larger payments and an extended loan term—so it’s critical to thoroughly evaluate how this will affect your financial circumstances before proceeding. To ensure that you are receiving the most advantageous deal possible according to your needs, always compare fixed rates and fees too!
Preparing for a Successful Remortgage Application
Before embarking on the remortgage process, it’s essential to evaluate various factors that can influence your chances of securing a better mortgage deal. To increase your chances of success in the remortgage application process, be sure to evaluate your credit score ahead of time and address any changes that could impact it. It is also important to acknowledge alterations in employment status as well. The suggestions provided below will provide helpful guidance for anyone starting their remortgage journey and wanting to ensure their application is successful.
Is your credit score in good shape?
Boosting your credit score can help you get more advantageous mortgages. Before remortgaging, make sure to double-check that there are no blemishes on your credit report. To amplify your chances even further, pay down any debt and ensure all of the payments for any existing credits accounts are done in a timely manner.
Has your credit rating fallen since you applied for your mortgage?
When your credit score dips in comparison to when you initially applied for a mortgage, it can be difficult to secure more advantageous financing. To increase the chances of success, prioritize developing an elevated credit rating by making all payments on time, decreasing debt and correcting any inaccuracies listed on your report before refiling for remortgaging.
Has your employment status changed?
If your employment status has changed since your last mortgage application, it can impact your ability to remortgage. Lenders may be more cautious if you’ve become self-employed or have had a significant change in income. Ensure you have up-to-date financial information and proof of income to support your remortgage application.
Leveraging a Mortgage Broker to Find the Best Mortgage Deals
It’s vital to explore the market thoroughly for the most competitive mortgage interest rates before deciding to remortgage.
You can do this by:
- using comparison websites,
- reaching out to lenders directly,
- or partnering with a mortgage broker.
A mortgage broker can be particularly beneficial in this process, as they have access to a wide range of mortgage products and can tailor their search to your specific needs and financial situation. With their expertise and connections, they can save you time and effort by finding suitable deals that align with your goals. When comparing mortgage options, it’s important to evaluate similar products and take into account the overall cost, which includes rates, fees, and any flexible features that may be relevant to your circumstances. By leveraging the services of a mortgage broker, you can maximise your chances of securing the best possible new mortgage deal for your remortgage journey.
Fix in a rate with an Agreement in Principle
An Agreement in Principle (AIP) gives you a rough idea of how much a lender might be willing to lend you. It’s not an official mortgage offer, but it’s a great way to see what deals are out there and get the ball rolling on the remortgage process. Locking in a rate with an AIP can help you feel more confident knowing you’ve got a mortgage offer lined up in principle, making it easier to plan your budget.
Fee-Free Remortgage Support from YesCanDo Money
Remortgaging can be a wise financial decision for homeowners aiming to save money, release equity, or obtain more flexibility in their mortgage terms. It’s crucial to carefully evaluate the costs involved, such as fees and charges, and compare mortgage deals to ensure the best choice for your financial situation. Understanding the remortgaging process and actively seeking the most suitable new deal can potentially save you thousands of pounds throughout your mortgage term. However, it’s important to examine your personal circumstances, including your credit score, property value, and employment status before moving forward with a remortgage.
For a stress-free and successful remortgage journey, reach out to YesCanDo Money for their complimentary advice and aid. Their competent mortgage brokers will provide you with the support you need on your way through remortgaging so that you make well-informed decisions. With YesCanDo Money as your partner, rest assured that you are making the most of this chance to take advantage of secure long-term financial goals.
What is remortgage and how does it work?
Remortgaging is the process of replacing your current mortgage with a new one, either with your existing lender or by moving to a different lender. It usually involves a property valuation, credit checks, and completing the necessary paperwork. Homeowners often remortgage to secure a better interest rate, more favourable terms, or to access the equity in their property. The primary goal of remortgaging is to reduce your outgoings or adjust your mortgage to suit your changing financial needs or circumstances.
What is the purpose of remortgaging?
The purpose of remortgaging varies depending on the homeowner's financial situation and goals. Some common reasons include saving money by switching to a lower interest rate, consolidating debts, releasing equity from the property for home improvements or other investments, changing the mortgage type (e.g., from interest-only to repayment), or gaining more flexibility in mortgage terms (e.g., overpayment options or payment holidays).
Is remortgaging a good idea?
Remortgaging can be a good idea for homeowners looking to save money, access the equity in their property, or better align their mortgage with their financial goals. However, it's essential to consider factors such as early redemption charges, fees associated with the remortgaging process, and whether the potential savings outweigh the costs. It's crucial to evaluate your personal circumstances and carefully compare available mortgage deals before deciding if remortgaging is right for you.
What is a remortgage example?
A remortgage example could be a homeowner who initially took out a mortgage with a fixed interest rate for five years. After the fixed-rate period ends, the repayment mortgage reverts to the lender's standard variable rate, which may be significantly higher. By remortgaging to a new fixed-rate deal with a lower interest rate, the homeowner can potentially save money on their monthly mortgage payments.
What is the downside of remortgaging?
The downside of remortgaging can include an early repayment charge if you're leaving your current mortgage deal early, fees associated with the remortgaging process (e.g., valuation fees, legal fees, arrangement fees), and the possibility that your financial circumstances or property value may make it difficult to secure the best deal. Additionally, remortgaging can be time-consuming, requiring research, application processes, and liaising with mortgage lenders, solicitors, and other professionals.
How does it work when you remortgage your house?
When you remortgage your house, you're essentially replacing your existing mortgage with a new one. You'll need to research and compare available mortgage deals, either with your current lender or new lenders, to find the best option for your needs. Once you've chosen a new mortgage, you'll typically undergo a property valuation, credit checks, and provide financial documentation. After the application process, your new lender will pay off your existing mortgage, and the new mortgage will take its place, usually with updated terms and rates of interest.
How does remortgaging work when house value increases?
When your house value increases, your loan-to-value (LTV) ratio decreases, potentially leading to better mortgage rates and terms. Remortgaging involves switching your existing mortgage to a new one, either with your current lender or a different one, to access favourable rates or release equity. Research the market, compare rates and fees, and discuss options with your existing lender. Select a lender, complete a formal application, and provide necessary documentation. After approval, the new mortgage replaces the old one, potentially offering lower monthly payments or a shorter mortgage term.