How to Remortgage: A Comprehensive Guide
- A TREE PLANTED FOR EVERY MORTGAGE
How Does A Remortgage Work?
Remortgaging is the process of switching your current mortgage to a new one. This could be with your existing lender or a different one. It’s a crucial financial decision, as your mortgage is likely your most significant financial commitment. There are numerous options to choose from, and you’ll be tied in for several years, so it’s essential to understand what remortgaging entails and what you need to consider.
“As a mortgage advisor at YesCanDo Money, I often tell my clients that remortgaging offers them the perfect chance to assess and make adjustments that could potentially save thousands over the life of their mortgage. Remortgage shouldn’t just mean finding lower interest rates; rather, it should help your current and future goals align with each mortgage offered on the market – every decision must be informed as making the wrong remortgage can seriously compromise financial health.” – Grant Humphires (Mortgage Adviser at YesCanDo Money)
Why Do People Remortgage?
Understanding why people remortgage provides insight into a wide array of financial strategies and personal considerations, which could yield substantial advantages to homeowners. Understanding this will allow you to assess whether or not remortgaging is right for you.
Below are 7 common reasons why people remortgage:
1. Avoiding Standard Variable Rate (SVR)
As your current mortgage term ends, remortgaging can prevent you from being transitioned onto your lender’s more expensive Standard Variable Rate (SVR), saving money with lower interest rates. With the current average SVR in 2024 veing around 7%, switching can save you a lot of money!
2. Raising Funds
Remortgaging can help fund major expenses such as home improvements, consolidating debt, or investing in another property by unlocking equity from your home to release funds that provide enough for these large expenses.
3. Lower Monthly Repayments
One of the primary incentives of refinancing is the opportunity to lower your monthly payments. By choosing a mortgage deal with lower interest rates, you can decrease outgoings and ease your financial strain.
4. Overpayment Flexibility
A change in your financial circumstances might allow you to overpay on your mortgage, speeding up its payoff timeframe and cutting interest costs. Remortgaging could provide more favorable terms that accommodate and even encourage overpayment.
5. Responding to Base Rate Changes
Should the Bank of England’s base rate fluctuate, this may have an impactful ripple-through to your variable-rate mortgage contract. Remortgaging could offer protection from potential interest rate increases by switching into a fixed-rate loan contract instead.
6. Capitalising on Property Value Increase
If the value of your home has increased, taking advantage of that increase might qualify you for more competitive mortgage rates and monthly payments. Remortgaging could reduce your loan-to-value ratio and possibly bring lower interest rates and monthly payments if remortgaged at this time.
7. Switching to Fixed Rate
For those expecting changes in their financial circumstances or interest rates, remortgaging can provide stability and predictability when planning their finances.
These motivations underscore the strategic considerations behind the decision to remortgage. Whether it’s to save money, relieve financial stress, or tap into the equity of your home, remortgaging can offer numerous advantages tailored to meet your specific needs and goals. Understanding the reasons why remortgaging might make sense is crucial to making an informed decision that supports your long-term financial wellbeing.
Timing Your Remortgage
Knowing when to remortgage is vital in helping you save money. It's good practice to remortgage every few years to ensure you're on the best deal and not paying over the odds. Set a reminder for three months before your fixed deal is due to end. This amount of time gives you plenty of space for comparison shopping and making an application to switch over to a better deal.How To Remortgage: What are the steps to remortgaging?
Remortgaging may seem complex, but breaking it down into steps can make the process more manageable. Here is a detailed guide that can help guide your journey:
1) Receive Communication from Your Current Lender
If you’re on an introductory deal, your lender will contact you well in advance of its expiry date. This is your cue to start considering remortgaging options.
2) Request a Closing Balance
Ask your lender for a redemption statement. This document outlines the amount needed to pay off your remaining mortgage loan, including fees. This is the amount you’d need to borrow if you decide to remortgage.
3) Engage a Mortgage Broker
A mortgage broker can help you find the best deal for your circumstances. They can search the whole market and often have access to exclusive deals.
4) Decide on the Type of Mortgage
Choose between a repayment or interest-only mortgage. Interest-only mortgages have lower monthly repayments, but you’ll need a plan to repay the loan at the end of the term.
5) Instruct a Solicitor (if Switching Lenders)
If you’re changing lenders, you’ll need a solicitor or conveyancer to handle the legal aspects, such as drawing up and signing the mortgage deed and transferring the property title.
6) Prepare for Eligibility and Affordability Checks
Gather documents like bank statements, payslips, utility bills, credit card statements, ID, records of regular outgoings, proof of bonuses or commission, and your P60. Having these ready can speed up the process.
7) Obtain a Mortgage in Principle
If the lender is satisfied with your documents, they’ll issue a Mortgage in Principle (MIP). This is a non-binding indication of how much they might be willing to lend.
8) Arrange a Valuation
The lender will arrange a valuation to confirm the house is worth the amount you’re asking to borrow. This is usually paid for by the customer, although some deals include it.
9) Submit Your Mortgage Application
Provide information about your job, industry, income, spending habits, spending patterns, credit history and deposit size as part of your application for credit. The more evidence there is that shows you can be relied upon, the higher the likelihood that your application will be approved.
10) Receive Your Mortgage Offer
If approved, the lender will send you and your solicitor a mortgage offer letter. This outlines the amount you can borrow and any conditions. Check it thoroughly and inform the lender if anything is incorrect or if your circumstances have changed.
11) Solicitor Draws Down Mortgage Funds
Your solicitor will request the money from the new lender and use it to pay off your old mortgage.
12) Register the New Mortgage
Your solicitor will register the details of the new mortgage holder with the Land Registry and transfer title deeds if applicable to their new lender.
Remember, each journey to refinancing can differ and the process will depend on both your circumstances and lender requirements.
How Long Does the Remortgaging Process Take?
Wondering how long does it to remortgage? The timeline for the remortgaging process can vary significantly. On average, it typically takes between 18-40 days from application to mortgage offer. However, this timeline can fluctuate based on several factors. These include:- the specific lender's processes and current timescales,
- your unique financial situation,
- the efficiency of the solicitors involved,
- and the complexity of the property transaction.
Unveiling the Costs of Remortgaging
Remortgaging involves several costs, including early repayment charges, exit fees, new lender arrangement fees, legal fees, and valuation fees. It’s crucial to factor these into your decision-making process.
1) Early Repayment Charge
If you are on a fixed rate or discounted mortgage deal, you’ll likely have to pay an early repayment charge to end that arrangement. These charges are usually calculated as a percentage of the balance still owing on the mortgage.
2) Exit Fees
Many lenders charge an exit fee for closing your mortgage account. These fees usually range between £50 – £300.
3) Arrangement Fees
Lenders can charge you for arranging the mortgage. These fees usually cost around £1000 but can be £1500 or more.
4) Legal Fees
The majority of legal fees on remortgages are usually covered by the lender themselves. If there is a charge, it will need to be paid upfront and can’t be added onto the new mortgage. Remortgage legal fees can cost from £300.
5) Valuation Fees
These will depend on the value of the property and lenders will have their own fee scale. These can vary significantly from £100 up to £1500.
6) Broker Fees
When you engage a broker to assist you in the remortgaging process, they may charge a fee for their services. YesCanDo Money strives to make the remortgaging process as straightforward and cost-effective as possible, which is why we provide our fee-free service; lenders pay us directly once your mortgage completes and so there are no additional costs for us or you in most standard situations. That way you can benefit from expert advice without incurring additional financial strain.
Exploring Different Scenarios for Remortgaging
Remortgaging can be a strategic decision based on various scenarios. Whether you’re looking to extend your existing mortgage, invest in a Buy to Let property, or remortgage an existing Buy to Let property, it’s important to understand the implications and potential benefits.
Extending Your Existing Mortgage: Is it Possible?
Remortgaging your existing home loan over a longer term can decrease monthly repayments but increase the overall cost.
Reduced monthly payments
Increased overall mortgage cost
Longer mortgage term
Remortgaging to Invest in a Buy to Let: A Viable Option?
Remortgaging your property can provide the capital necessary for investing in rental properties, but consider the additional debt.
Capital for investment
Increased potential income
Added mortgage debt
Remortgaging a Buy to Let Property: What to Know
Refinancing an existing Buy to Let property to a better deal can decrease your monthly expenses and increase profitability.
Lower monthly mortgage payments
Better interest rates
Increased profitability
Remortgaging for Debt Consolidation: A Viable Option?
Remortgaging to consolidate unsecured debts into your mortgage can simplify finances but may increase the mortgage amount and term.
Consolidated debts into one payment
Simplified financial management
Increased mortgage amount and term
Remortgaging for Home Improvements: A Strategic Investment
Using remortgaging to fund home improvements can lead to improved living conditions, energy savings, and a potential increase in property value.
Fund for home improvements
Improved living conditions
Potential increase in property value
Remortgaging and Interest-Only Mortgages: What You Need to Know
Switching from an interest-only to a repayment mortgage can provide a clear repayment path but may increase monthly payments.
Transition from interest-only to repayment mortgage
A clear path to mortgage payoff
Likely an increase in monthly payments
Remortgaging and Rising Interest Rates: A Protective Strategy
Remortgaging to a fixed-rate deal can offer protection against rising interest rates, ensuring consistent monthly payments.
Protection against rising rates
Fixed monthly payments
Stability despite changes in the base rate
Remortgaging and Financial Difficulties: A Potential Solution
Remortgaging can potentially offer relief in financial difficulties by reducing monthly payments but it’s crucial to seek professional advice.
Possible reduction in monthly payments
Extension of the mortgage term
Need for professional financial advice
Case Study: A Successful Remortgage
Best Remortgage Rates
As you browse the best buy remortgage rates table below, keep in mind that interest rates depend on average property prices and other factors. With access to over 90 lenders offering 14,000 mortgage products from different categories, finding your ideal rate may be difficult – for assistance and guidance through this complex world reach out to YesCanDo Money experts; they specialise in finding you the optimal loan product at an ideal rate!Potential Barriers to Remortgaging
Several factors can hinder your ability to remortgage:
Negative Equity: If you are in negative equity, it is very unlikely you will find a remortgage deal.
Credit Rating Issues: If you have any issues with your credit rating, this can also affect your chances of a new mortgage.
Self-Employment: If you are self-employed you may struggle to remortgage if you can’t provide adequate evidence of your income.
Age Restrictions: Many of the bigger banks will lend into retirement but they will often have an upper age cap, with the majority asking for loans to be repaid before your 70th or 75th birthday.
Income and Outgoings: Lenders also often demand higher salaries relative to loans than in previous years and take into account your outgoings as well as your income when deciding to offer you a mortgage.
Property Type: If you live in a flat, your mortgage lender may ask to see the building’s EWS1 form.
Choosing the Best Deal: Should You Stick with Your Existing Lender?
A question we often get asked is should I remortgage with the same lender or switch? Before your current mortgage deal ends, you have two choices: stick with your existing product or shop around for better rates and deals. While it’s worth speaking to your existing mortgage lender about remortgaging, it’s also essential to shop around for the best rate. A fee-free broker can save money and help you compare mortgage deals from your current lender and other lenders.
Staying with Your Existing Lender
Choosing to stay with your current lender can offer a convenient path for remortgaging. They already have your details, understand your property, and this familiarity can significantly simplify the application process. When your existing deal ends, you transition seamlessly to the new deal and start making your new monthly payments.
Pros:
Simplified process: Your lender already has your details, which can streamline the application process.
Cost savings: You can save on legal and admin fees as there’s no need to switch providers.
No credit check: Your current lender won’t need to check your credit file again.
Cons:
Limited options: You’re restricted to the deals offered by your current lender.
Potential for higher rates: Your lender may not have the most competitive rates on the market.
Complacency risk: Staying with your current lender might mean missing out on better deals elsewhere.
Switching to a New Lender
Opting to switch to a new lender can open up a wider range of options. This process involves providing all your financial data to the new lender, including proof of earnings, bank statements, and your P60 tax form. Once your application is assessed and your credit history checked, the new lender, if approved, will pay off your old mortgage, and you’ll start making your new monthly payments to them.
Pros:
Access to better deals: Switching lenders can give you access to more competitive rates and deals.
Potential for lower payments: A new lender might offer a lower interest rate, reducing your monthly payments.
Fresh financial assessment: A new lender might be more accommodating of changes in your financial circumstances.
Cons:
More complex process: Switching lenders involves a more detailed application process.
Potential costs: You might face additional costs, such as valuation fees and legal fees.
Credit check: The new lender will check your credit history, which could impact your credit score.
Assessing Your Remortgage Options: Affordability and Eligibility Criteria
Before considering remortgaging, it’s essential to understand affordability and eligibility criteria. These factors play a critical role in determining if and under what terms a new mortgage deal can be secured.
Affordability
One of the primary criteria lenders use when reviewing your remortgage application is affordability. Lenders will assess your income, expenses, and any outstanding debts to determine whether you can afford your new mortgage payments within your budget. Therefore, it’s crucial that you gain an accurate picture of your finances prior to making this decision.
Eligibility
Remortgage eligibility criteria vary among lenders, and can include factors like your credit score, employment status, age, and equity in your home. Lenders also take into account factors like property type and condition before making their determination on approval for a remortgage loan application. Understanding these factors is the key to being approved for a refinancing loan.
Remortgage Calculators: Estimating Potential Savings
Navigating the process of refinancing can be complex, but our remortgage calculator can make it simpler. By simply entering details about your current mortgage into the tool, this user-friendly tool enables you to estimate possible increases in payments if remaining on an SVR with your lender.
Once your discount, tracker, or fixed-rate mortgage ends, you’ll typically be moved onto your lender’s SVR, which can significantly increase your monthly payments. Our calculator can help you understand the potential cost implications of this switch.
By calculating the difference between your current payments and potential new ones under the SVR, our calculator can give an approximate annual increase in payments you could face without refinancing. This feature is particularly helpful if your existing deal is coming to an end as this calculation takes into account all payments over a full year’s worth of payments.
Our Remortgage Calculator can serve as an invaluable asset in making smart financial decisions. Use it to find out what staying with an SVR may cost and explore all your available options for making smart switches.
Please be aware that this calculator offers only an estimate based on your inputs, and should only be used as a guideline. For a more precise view of your potential savings and optimal remortgage options for your circumstances, it would be beneficial to speak to one of our mortgage advisors and receive fee-free advice.
An Experts Opinion on Remortgaging
Conclusion
Throughout this article, we’ve navigated the diverse landscape of remortgaging, exploring various scenarios where remortgaging can provide significant financial advantages. From extending your mortgage term, investing in a Buy to Let property, consolidating debt, to funding ambitious home improvements, remortgaging offers a multitude of solutions tailored to individual needs and circumstances.
However, like any financial decision, remortgaging isn’t a one-size-fits-all solution. It requires careful consideration, strategic planning, and expert guidance. If you find yourself contemplating the path of remortgaging, remember, you don’t have to navigate these waters alone.
Reach out to a dependable mortgage advisor who can offer tailored guidance based on your unique situation, or use our remortgage calculator for an estimated estimate of potential savings and costs involved.
Remortgaging’s power lies in its strategic use. Be it to mitigate rising interest rates, alleviate financial strain or move towards greener and more energy-efficient homes – it could be exactly the tool you need to bring them all true!
Frequently Asked Questions
How do you qualify for a remortgage?
To qualify for a remortgage, it’s necessary to fulfil all the criteria set forth by your chosen lender. This typically includes having good credit scores, stable incomes, and sufficient equity in your home. Lenders also take into consideration factors like your age, property type, and income vs outgoings ratios when considering applicants.
How hard is it to remortgage?
The difficulty of remortgaging depends on your individual circumstances; if you have an excellent credit score, reliable income, and enough equity in your home it should be straightforward. But self-employed borrowers or those in negative equity could find the process more complex; engaging a broker may make things simpler as they provide expert advice as well as navigate you through the application process to make remortgaging less daunting and more manageable.
Do you get money when you remortgage?
Yes, if you choose to remortgage for a higher amount than your existing mortgage (known as “equity release”), you can receive the difference in cash. This is often used for home improvements or other large expenses.
How does it work when you remortgage?
Remortgaging involves switching your current mortgage to a new one. This could be with your existing lender or a different one. You’ll need to apply for a new mortgage, and if approved, your new lender will pay off your old mortgage, and you’ll start making repayments to them.
Why do you get money back when you remortgage?
Whenever you refinance, if your new mortgage loan exceeds what is owed on the existing one, the difference can be converted to cash – this process is known as “releasing equity”.
Do you have to put a deposit down to remortgage?
No deposit is typically necessary when refinancing. Instead, your home equity serves as the deposit.
How can I remortgage my property?
To remortgage, start by reviewing your current mortgage and consulting a broker. Check with your current lender for any better deals, then apply for your new mortgage. If you’re switching lenders, you’ll need a conveyancing solicitor to handle the legal aspects.
Can I remortgage my house and take money out?
Yes, this process is known as a cash-out refinancing or equity release. With it, you remortgage for an amount higher than your existing mortgage and receive any difference as cash payments.
Do I need to value my house to remortgage?
As part of the remortgage process, your lender will arrange a home valuation. This assessment helps them assess the current market value of your property to help determine how much loan money they’re willing to lend you.
Does your mortgage go up when you remortgage?
Remortgaging will have different impacts on mortgage payments depending on its terms. Remortgaging to a lower interest rate or lengthening the term could reduce payments, but releasing equity or switching to a higher rate could cause them to increase.
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