What is Re-Mortgaging
In a nutshell all you are doing with this is changing from one lender to another to get a better rate or cheaper deal. The two do not necessarily go hand in hand. Let me explain.If you have a small mortgage, you will probably find it is not worth while paying an arrangement fee to the lender to go on a low rate. You may find it cheaper by going on a slightly higher rate and paying no arrangement fee with the lender at all. Always best to speak with someone before deciding on which deal to go for as you don’t want to be caught out by getting a more expensive deal overall even though the rate is much lower. Be careful!
One benefit of remortgaging is that you will not pay for any valuation or solicitors fees although not everyone does qualify for this. The reason being, it depends solely on your circumstances at the time of remortgaging.so please check or ask your adviser.
Borrowing More Money
There are a couple of ways to raise more money on your mortgage. If you have recently ties yourself into a nice low or you set up your mortgage several years ago and already have a nice low rate and do not wish to change it then there may be other options available to you
- You can ask your existing lender to borrow more money. This is called a Further Advance. Sometimes this is a little tricky because some lenders do not allow this if you have had y7our mortgage for less than say 6 months although not all lenders think this. All this means is your current mortgage is not touched and you would borrow more money and you would need to apply to borrow the money again and still prove your income so it’s not just a given. You will also have to choose a new product or rate for this new deal i.e. a new fixed or tracker rate and certain limits will apply for how much you may borrow and what rates you can have on that new borrowing.
- You can look at applying for a secured loan. This will be provided by a different lender to your mortgage lender. They may potentially be able to lend you more money by securing a loan against your property (via a second charge as your mortgage lender would have first charge). The interest rates on secured loans are normally higher but if your current lender is unable to lend you more money, then a secured loan lender may be able to assist.
One thing I would say is if you have life or critical illness cover then this may need to be added to if you borrow more money as the cover you may have may be insufficient to meet the increase in borrowing. Please speak to an adviser regarding this as it is important.
You can remortgage when separated. If you have separated and you are still in contact with the ex-partner then you will need their signature to remortgage with both of you on the property deeds and on the application of the mortgage, however this may be a great time to consider taking them off of the mortgage and ownership of the property so you can remortgage and do a “Transfer of Equity” to remove your ex-partner but they do need to sign documents and get their own legal advice on this matter..
If you have separated and you wish to take off your ex-partner, then you can still do this, but this will involve a “Transfer of Equity”. This transfers the equity into the sole name of the person remortgaging. The ex-partner and the person remortgaging will BOTH needs to sign the Transfer of Equity TR1 form. There will be extra costs you will need to pay the solicitor for doing the “Transfer of Equity”. Solicitors costs to do the “Transfer of Equity” can vary but they can range from £250 to £600 plus VAT approximately. Sometimes the mortgage company doing the remortgage who offer free legal services will not include the Transfer of Equity in this but only charge a few hundred pounds more for this extra service.
Most remortgages take around one to two months. Its a quick process really but can take up to around three months depending on your circumstances.
A good adviser will contact their clients three to four months prior to their interest rate increasing to ensure they have enough time for the process to go through.
There are many reasons why people remortgage. The most common reason is because they can get a better deal with a new mortgage lender than they can with their current one. Their current deal is coming to an end and their rate is about to increase to the lenders variable rate which is normally much higher than a new deal offered by either their current lender or another lender. Other reasons to remortgage could be to reduce or increase the term of their mortgage, to raise more money for home improvements, raise money to buy a new property (either to rent or live in), or buy a new car.
If you have had bad credit in the past then there are several lenders out there who would potentially consider you for a remortgage, but it depends on what bad credit you have had i.e. defaults, IVAs, CCJs or bankruptcies. With these mortgages you will need to speak with a mortgage adviser to arrange this for you as most of these lenders do not deal with the public directly.
For more information on bad credit mortgages please see our bad credit mortgages section or Get in Touch to find out more
The costs to remortgage can vary immensely. If you are remortgaging your own residential property through a high street bank, they normally offer you a free valuation and free legal costs, providing you use the lenders own solicitors. Some offer you cashback instead of free legal services and some even offer free valuation, free legal services and cashback.
Lenders may offer a few different rates.
1. A low rate with a higher arrangement fee
2. A slightly higher rate with a lower arrangement fee
3. A higher rate with no arrangement fee at all
So, its best to work out the overall cost of the mortgage when choosing your rate and fees associated with it because if you have a small mortgage i.e. under £100,000 then it may be worth while you paying a higher interest rate and pay no fee whatsoever. Your adviser will be able to tell you this and make a recommendation based on how much mortgage you have and over how long.
The main thing to think is that the arrangement fees can normally be added to the mortgage if the lender allows this and the valuation and legal costs are paid by the lender so in essence you don’t really have any upfront costs.
Just remember that if you add your arrangement fee to your mortgage you will pay interest on it so think carefully before you add it.
If you are remortgaging a buy to let property or if you have had bad credit in the past, then you could potentially pay an arrangement fee, valuation and legal fees. These fees will be explained to you before you decide to proceed with your mortgage so no surprises.
The fees to set up Buy to Let mortgages can be very high so please ask your adviser what the fees will be. There are several buy to let lenders who will offer free valuation and free legal fees but again it depends on the free.
If you have had bad credit in the past it may be advisable to stay with your existing bank if you are with a high street bank because many sub-prime or bad credit mortgage companies will charge a higher rate of interest and you will have to pay valuation and solicitors fees to switch so its worthwhile speaking to your adviser to see if it is worthwhile switching your current mortgage deal with your current lender
Remortgage rates are not normally higher than home moving or purchase rates. They are comparable so no real difference. It is worth noting that it is normally cheaper to remortgage to another lender or even stay with the same lender to switch your existing deal onto a new rate. A mortgage broker can advise you what your best option is when remortgaging. On the rare occasion it is not financially viable to switch deals so just don’t touch your current mortgage