What does “remortgage” mean?
In essence remortgaging is when your current initial mortgage rate finishes, you remortgage to a different lender offering a better rate than your current lender.
Are you considering asking your lender for a new loan? Remortgaging is becoming a more popular choice for people who want to change their current contract. We’ll go over exactly what that decision means in this guide. Around 3 months before your current ends with your
Since a mortgage will last for several years, it’s important to consider all of your financial choices carefully. The choices you make when remortgaging are just as important as those you made when choosing your first mortgage.
Even if you’ve had a mortgage for a long time, you could be uncertain about the advantages of switching lenders or what happens when you remortgage. There is a range of remortgaging options available, each with its own set of best-remortgaging rates and rewards.
What is remortgaging?
Remortgaging is switching the current mortgage to a new one, either with the same lender or with a different one.
The more equity you have and the lower your loan-to-value (LTV), the better deals you’ll be able to get.
Making the switch can be motivated by a variety of factors, including:
- To lower your mortgage’s interest rate.
- To lock in your monthly payments and shield yourself from any rate increases.
- Raising funds to make changes to your’ home.
- Obtaining a lump sum of cash by releasing equity in your home.
- Debt consolidation is a great way put your payments of your debt into one manageable monthly payment.
- Taking advantage of a new interest rate could save you a significant amount of money securing unsecured debt such as personal loans and credit cards against your house, it may end up costing you more in the long run.
If you can afford the new repayments, releasing equity from your home can be a safe way to get a cash lump sum.
Could a remortgage help you?
While most homebuyers have heard of remortgaging, they do not understand what it means. We’ll go into how it works and when you should – and shouldn’t – remortgage in this guide.
Remortgaging will help you lower your mortgage payments, pay off current debts, or finance a home improvement project. However, it is not appropriate for all. Below, we clarify whether it’s a viable choice, what happens, the steps you must take, and the costs you can incur.
The days of holding your mortgage with the same lender for the duration of your loan have passed. More and more people realise the financial benefits of switching from their current mortgage lender to a new one.
Good remortgage offers are to be had right now, when interest rates are at historic low, particularly if you have good credit and have been a reliable borrower, so we can shop around for the best rates because we can look at the whole of the market.
If you think you are paying too much on your current mortgage, why not get in touch and we can search to see if it is financially viable for you. In the long term, it might save you thousands of pounds.
When you use a mortgage broker like Mortgage Saving Experts , you’ll get unbiased advice and assistance in finding the best deal for you.
Call us right now to discuss your remortgaging choices.
Common reasons to Remortgage
Many homeowners want to adjust their mortgage every few years to take advantage of the new rates available in today’s competitive market. Many who stay on their lender’s SVR (standard variable rate) after their initial product has expired can miss out on a variety of benefits, including the chance to lower their monthly payments by a substantial margin in some cases.
Below are some of the most common explanations why people remortgage.
To Save Money
If your fixed rate is about to expire, remortgaging could help you save money. You can shift lenders and take out a new rate rather than going into your lender’s SVR, which is usually slightly higher than their introductory rates.
However, before you go ahead and remortgage, you may want to check with your current lender to see if they are offering you another lower interest rate. If you’re on a fixed or reduced rate, your lender will normally send you a letter a few months before it expires informing you that you’ll be transferred to their SVR. They will request that you contact them or your broker to discuss your options. Your lender wants you to stay with them, so they’ll give you the option of choosing another deal for current customers, which aren’t quite the same as the products available to new customers. This could save you money on your monthly payments or allow you to pay off your mortgage faster.
If your current lender does not have any good or appropriate rates, you should consider moving to a different lender. However, you can consult us before making any final decisions. We will assist you in comparing mortgages.
To Consolidate Your Debts
Debts such as car loans or credit card balances, may be consolidated by remortgaging. You use the extra money you raise by remortgaging to pay off these debts’ loans,
We advise you to consider your options carefully before consolidating your debts in this manner. A new mortgage can help you reduce your monthly payments by consolidating onto your mortgage but the overall cost of that debt will increase because you will take the debt over a longer period of time, even though interest rates are typically lower.
Nonetheless, it could be the best choice in certain cases. Before you decide to consolidate your debt, you should seek advice. You must ensure that you can make the payments on time. Otherwise, your home will be repossessed.
To Raise Money
You could remortgage and raise more funds to help pay for big outgoings like home renovations, a wedding, or your child’s university costs. This could eliminate the need for a separate loan.
To Avoiding Moving Home
Remortgaging your home can be a convenient way to raise funds for home improvements such as a new kitchen or bathroom. That way, you won’t have to uproot your lives and relocate to meet changing family needs.
When can you remortgage?
When you remortgage, you’re usually given a package, which includes a lower interest rate for a fixed period of time as well as free legal service from a solicitor provided by the new mortgage lender and a free valuation, although this does not happen in every case and depends on the lender and product you (rate) you choose
You can start planning your next mortgage up to 6 months before your current rate expires. The processing of mortgage offers will take 3 to 4 weeks, and the legal work will take 2 to 3 weeks.
The new mortgage deal is also available for up to 6 months, so if all is finished and ready to go early, you may tell the solicitor to wait until your current lender’s early repayment charge period has expired until continuing. It’s always worth shopping around for better deals until your current deal expires, as you might end up paying more than you need to – particularly if your new mortgage isn’t ready when your current deal expires, and you’re put on your lender’s SVR.
How long does it take to remortgage?
Remortgaging takes around 4 to 8 weeks on average, although it can take less time. It’s much easier than purchasing a new home because the property’s deeds are already recorded in your name when you remortgage, eliminating a major administrative component of the mortgage phase.
How does remortgaging work?
Typically, our procedure is as follows:
1 – You request a redemption letter from your new lender. The statement indicates how much of your existing mortgage is still owed on a given day, as well as any costs associated with paying it off.
2 – Our mortgage consultants search the whole market for the right deal for you.
3 – If you want to move on, your adviser will present your current situation to the new lender for a Decision in Principle (DIP)
4 – If your DIP is approved, your adviser will walk you through the proposed mortgage illustration and the full mortgage application, which they will then apply for on your behalf. You provide passports, payslips, tax calculations, bank statements, proof of address, and other necessary documents.
5 – Your new lender requests a valuation report for your property.
6 – If your mortgage and valuation is affordable and satisfactory the lender will formally make you a mortgage offer and send a copy to you, your solicitor, and your mortgage adviser.
7 – Your solicitor will look at the title deeds, as well as any leases that may be present, and any additional questions that may need to be answered.
8 – You and your solicitor set a completion date. This is the date on which the solicitor will get the money from your new lender sent to them and then they will pay off your existing lender. Any money that is left over is given to you.
Choosing the right remortgage deal
When deciding which mortgage to get, look at all of the existing options and the relative benefits they provide for your situation. Lenders want you to remortgage with them, which means you can leave your current lender and turn to them. They need to give you a reason to switch lenders, so they offer low-interest rates and free features to make the transition as simple and inexpensive as possible. Deals can differ, and what works for one person may not work for another – and vice versa.
To understand what to expect, compare remortgage rates on our website, or see our mortgage types explained to learn about the various products available.
Do you need a remortgage valuation?
It would help if you first determined the value of your home before looking at mortgage rates. It’s important to be realistic since your lender will ultimately perform their own valuation to validate your estimation – either by an online desktop valuation or an internal inspection.
You can arrange for your own valuation for an impartial surveyor to determine the value of your home, but this can be costly, as the lender would also need to commission their own appraisal. A simple thing to do is just look on a property selling website to see the value of similar properties in your local area to see how much they are up for sale for.
Remortgage costs and legal fees
Remortgaging is often less expensive than purchasing a new home. A lot of the fees associated with property purchases don’t apply to you or are significantly reduced.
A remortgage will help you save money on things like:
Legal fees – Since the legal process for a remortgage is less complicated than buying a home, solicitors’ fees should be smaller if not free in some cases.
Stamp Duty Land Tax (SDLT) – You only pay SDLT when you purchase a property, so you won’t have to pay it because you already own it.
Homebuyer’s report or survey – you’re unlikely to replicate this exercise because you already own the home and are familiar with its condition.
Remortgaging costs may include:
Early repayment charges – these apply only if you remortgage before your current deal expires, but you could be charged a ” closing administration fee” for closing the account.
Booking and contract fees charged by lenders vary depending on the product you select.
Broker fees – When remortgaging, it’s better to use a broker so they will give you the best offers on the market that are right for you and your situation. Some brokers charge a fee, and some do not.
Valuation fees – most lenders would do one for free but not in all cases.
Legal fees – You will certainly need legal assistance, but lenders also have a free standard remortgage legal service or cashback to cover these expenses.
Higher lender charges/’MIG’ premiums – these are much rarer now than they used to be, so most lenders don’t charge them.
Before you decide to remortgage, look into the fees you’ll have to pay, particularly if your current loan has an early repayment charge. The amount you pay on an Early Repayment Charge may determine if it is viable to remortgage. You can remortgage when it makes the most financial sense. This is typically when your current mortgage rate is due to come to an end, so you have no Early Repayment Charges.
Remortgage advice and criteria
The majority of lenders want to see proof that you will make your payments on time.
Take out a credit card.
Taking out a credit card if you don’t have any can sound counterintuitive, but it may actually improve your credit score by showing your ability to keep a credit agreement.
You can only use your credit card to make transactions for which you already have the funds. Then you set aside the funds and pay off your credit card at the end of the month, preferably in full, to avoid interest charges. As long as you make your monthly payments on time and in full, you’ll be on your way to better credit. But don’t wait until the last minute to start this exercise, or you’ll miss out on the opportunity to build up your payment history and potentially improve your credit score.
You may also set up a direct debit for either the entire balance or the minimum payment per month, ensuring that you never miss a payment and, as a result, destroy your credit score. TIP: Do not take cash from a credit card as this will reduce your credit score also.
Reduce gratuitous spending
When looking for proof that you will fulfil the monthly repayments, lenders can look for more than just your ability to pay bills. They’ll even look at how much money you make and how much you spend. Consider the significance of your daily outgoings. Do you want a cup of coffee in the morning daily? Are you making use of your gym membership? If you believe it is a waste of money, eliminate it to boost your disposable income.
Register to vote
Voter registration is a way to demonstrate your identity to lenders. It can help credit search systems connect to previous addresses with payment histories, which can increase your credit score. Before beginning a mortgage application, make sure you’ve registered to vote and that all of your electoral roll information is right.
Meet monthly bills
Meeting your current mortgage repayments, as well as other monthly bills and credit obligations, consistently would demonstrate your ability to control your finances. It will boost your credit score, increasing your chances of being approved by lenders who offer the best terms.
Can You Remortgage Early?
Early remortgaging is possible, but you’ll almost always have to pay an ERC (early repayment charge) to your current lender. If you pay off your mortgage before the end of the introductory period, you’ll be charged an early repayment charge. The fee is normally calculated as a percentage of your unpaid mortgage debt and may be substantial.
Remortgaging can be complicated, particularly if you want to get out of your current contract early. At Mortgage Saving Experts, we’ll walk you through the process, explain your options to you and find the best deal for your situation. Our advisors will provide you with all of the information you need.
Who shouldn’t remortgage?
Remortgaging offers many homeowners the opportunity to save money, but it is not the best option for all.
Below are some examples of when it may not be appropriate. Give us a call if you fit one or more of these descriptions. We’ll assist you in determining your choices.
People with High Early Repayment Charges
If you’ve only recently taken out a fixed-rate, tracker or discount mortgage, your early repayment charges can make remortgaging prohibitively expensive.
Those Who Need a Very Small Loan
Many lenders would only consider remortgage applications if the loan amount is greater than £25,000. Fees will eat into any savings you produce. In this case, you could be better off negotiating a new loan with your current lender. I would generally suggest getting an interest rate or product with no arrangement fees because the rate with no fee may be slightly higher, but you will not save enough in the interest to quantify paying the arrangement fee.
People Whose Employment Status Has Changed Recently
Lenders want to know if you’ll be able to pay back your loan, so they ask for your expected future earnings. If you’ve recently changed your employment status from employed to self-employed but haven’t yet had the opportunity to establish a solid track record of one year or more, it might be difficult to find a lender who will work with you.
Those with Payment History Problems or Adverse Credit
If you’ve had trouble keeping credit agreements in the past, you might find yourself ineligible for traditional loans. In this scenario, sticking with your current lender and switching to a new product might be a better option. We recommend speaking with a broker first to assess the probability of a good remortgage or arrange a product transfer on your behalf.
People Who Have an Interest-Only Mortgage with a High LTV
Most lenders would turn down those that have an interest-only mortgage with a high LTV (loan to value ratio), e.g., if your mortgage balance is more than 75% of the value of your home, most lenders would turn down your application on the basis that there isn’t enough equity to actually downsize at the end. It’s possible that sticking with your current lender and negotiating a new rate with them is the better option. Your mortgage advisor will tell you how likely it is that your application will be approved.
Assessing Your Options
On our website, you can compare remortgage rates for free. We’ll help you figure out the remortgage product is right for you because the best choice isn’t always the cheapest.
Finally, call us at 01273 738 072 to talk with one of our mortgage experts or send an enquiry. We’ve completed hundreds of remortgage, so you can trust that we’ll find the right deal for you.