A remortgage is the process of refinancing your existing mortgage with a different lender. Remortgaging can be an effective way to save money or free up funds for other investments, but it is really important to understand how remortgaging works before making any decisions.
A “product transfer” is when you switch to a new interest rate with your existing lender. Other than the amount you pay each month, not much else will change. Most of the time, there won’t be as much paperwork for a simple product transfer.
You can get the best deal by shopping around and getting advice from a mortgage broker, but you should also see if your current lender can give you a better deal than the one you’re on.
How to remortgage
Remortgaging can be a complicated process, so it’s vital to understand the process and how best to approach it in order to get the best deal. You should have your most recent financial data on hand when applying for a loan, regardless of whether you’re switching to a new lender or staying with your current one.
This will include:
- proof of ID
- proof of address
- tax returns ( for self-employed only)
- bank statements
- payslips and
- your latest P60 tax form.
When and why do most people remortgage?
When a borrower’s initial discounted period or fixed rate with their lender ends, they may think about remortgaging to lower their monthly payments.
After two to five years, the mortgage’s interest rate typically resets to the lender’s standard variable rate (SVR), which is often higher and will increase your monthly payments. A common reason for remortgaging is the chance of saving money every month, but this is just one of many possible reasons.
These range from changes in the economy as a whole to changes in your own finances, such as:
- Changes in your life, whether planned or unplanned, may render your current mortgage insufficient. Whether you’re starting a family or anticipating a substantial shift in your income, remortgaging gives you the opportunity to get a better deal with us for the present and the future.
- You’re anxious about future increases, so you want to secure today’s low interest rates.
- You want to switch to a more flexible mortgage that takes your savings into account, like an offset mortgage, or lets you make extra payments without being charged extra.
- You’ve paid down some of your mortgage, and the property’s value has increased over time, so you’re now eligible for a lower loan-to-value (LTV) ratio and more favourable interest rates.
- You got a mortgage when interest rates were high, but now that rates are lower, you want to refinance to take advantage of the savings.
- You’re tired of the uncertainty of your current two-year fixed interest rate and would like to switch to a longer one, possibly five years.
- You’re considering a remortgage in order to consolidate your debts. Discuss your options with a financial or debt consultant if you’re thinking about doing this.
- You want to take equity out of the house to help pay for renovations or other costly projects.
- You no longer wish to be tied down to a long-term fixed-rate agreement and instead prefer either a shorter fixed-rate term or a variable-rate agreement that adapts to market fluctuations in interest rates.
It’s best to start looking for a new mortgage three to six months before your current one expires, so you have plenty of time to compare rates and terms.
If your existing mortgage arrangement is coming to an end or has already transferred to a follow-on rate, you should look into the most recent offers. If, for example, the value of your home has gone up since you bought it, your loan-to-value ratio may have changed, giving you access to financing options you didn’t have before.
A mortgage advisor can help you determine if and when this is the best course of action for your unique circumstances.
Things to consider before applying:
It’s important to take a few factors into consideration before committing to a new mortgage deal:
- Many lenders will write to you at the end of your current mortgage term and offer you a new deal to switch to, but make sure there isn’t a product fee involved, as this could wipe out any savings you would have gotten from remortgaging.
- Not everyone should remortgage. Remortgage rates may be higher if your financial situation has deteriorated or your property has lost value. Remortgaging may be tough if your income or credit score has reduced.
- You may need to pay off an early repayment charge on your current mortgage before switching to a new agreement. Switching may not be worth it.
- Unfortunately, not all mortgages can be moved to a new home.If you plan on moving soon, you should see if your remortgage can follow you.
- If your mortgage arrangement is ending or has switched to a follow-on rate, it’s worth considering the latest offers. For example, if your property is worth more than when you bought it, your loan-to-value ratio may have changed, giving you more options.
- Ensure mortgage readiness. Just because you have a mortgage does not mean your credit will not be checked again. The lender will still undertake affordability checks, so keep your credit score high.
- Some lenders have a minimum loan amount, usually £25,000, that they would accept as a remortgage, which may prevent you from remortgaging if you just have a little mortgage balance left to pay off.
- Refinancing your mortgage could free up cash for renovations or an expensive purchase, but you should give serious consideration to whether you can realistically afford the increased payment over the course of your mortgage’s full term. You should seek out impartial financial advice if you intend to consolidate other debts as well. If you fail to make the required payments, you may lose your home.
Seek mortgage advice. Our mortgage experts understand lender requirements and can help you find mortgage deals. We have over 170 lenders to save you time and hassle.
How long does the remortgage process take?
Remortgaging your home anywhere from two to four months. It depends on your situation and remortgaging needs. Proof of earnings and other clear, accurate, and relevant papers can speed up the process.
How to find deals
Most importantly, first study the remortgage packages you may be eligible for, which depend on your LTV.
The mortgage represents this percentage of your home’s value. The greater your “equity,” the lower your loan cost. Lenders’ websites offer refinancing calculators to estimate savings.
Prepare your mortgage balance, current monthly payment, property value, and desired beginning rate term. Use a mortgage broker to broaden your search and get better rates.
How does a remortgage work?
When deciding how to remortgage your property, you should take into account your whole financial picture. Remortgaging is a significant financial decision, so it’s important to know what to expect. Here are the steps:
1. Do your research
Shopping around for a mortgage might help you locate the ideal one.
Before shopping elsewhere, ask your current lender about their rates and whether you can move to a new mortgage rate with them. Remember that guidance and support are available to help you decide if remortgaging is right for you and to find the best mortgage rates.
2. Consider all the costs
Check to see if any of the following fees are charged by your potential lender to make sure remortgaging will help you:
- Application fee
- Valuation fee
- Solicitor’s fee
- Early repayment fee
3. Complete the Decision in Principle / Agreement in Principle
Nowadays, AIPs may be obtained from the majority of lenders entirely online. Rather than undergoing a thorough credit check, you can find out if a lender is ready to lend you the money you need this way.
Although it does not guarantee that you will be granted a remortgage, it will help you weigh your options and make an informed decision.
4. Apply for your remortgage
The next step is to apply for a mortgage if you are satisfied with the decision in principle or agreement in principle. There are a few different ways to accomplish this: online, in-branch, or by phone. There will be a thorough review of your credit history and other financial information on file with your new application. This includes mortgage and house insurance documents.
5. Review your offer
In order to make sure your property is adequate security for your proposed new mortgage, your new lender will do a credit check in order to verify your present circumstances and will also make arrangements for a valuation of your property. As soon as this is done and your application is accepted, your lender will send you an offer.
6. Completing your remortgage and legal work
The last few steps of a remortgage are very similar to those of a new home purchase. Even though you are not buying a new property, you still have to fill out some legal paperwork for a remortgage.
This service may be provided at no cost by some lenders. The lenders will select a solicitor or conveyancer to represent you in the transaction, or you may be given the option to select your own.
A conveyancer or solicitor will handle all of the necessary documentation and money transfers on your behalf. Once they verify that the sum of your new mortgage is greater than the amount you owe to your current lender, they will send you the final paperwork to review and sign.