Remortgaging

There are several reasons why you may wish to remortgage, perhaps your fixed rate is coming to an end, you may wish to make some home improvements or consolidate debt. Our handy guide will talk you through how remortgaging works.

What is it?

It is a new mortgage on a property you currently own. It can be with your current lender or with a new one.

Reasons to remortgage

You can potentially get a better deal and lower monthly repayments.

• You may wish to keep your monthly repayments locked down for another few years.
• You have enjoyed the stability of fixed repayments, but when your fixed rate is ending, you wish to remortgage for another fixed rate.
  
• Remortgaging can be used to borrow money for home improvements, debt consolidation or anything else you may need funds for.

Can I remortgage?

Firstly, you must own your property, whether with an existing mortgage or outright. Then lenders will want to know that you can afford the repayments of the new mortgage and that you have enough working years left to pay it off.

They will also calculate your LTV ratio or Loan to Value. This is how much you would need to borrow to pay off your current mortgage, compared to the value of the property. If your loan to value is 95% or higher, then you are unlikely to be eligible.

How does it work?

We will look at different deals from lenders, making sure that we find you a great deal. We’ll ask you questions about you and the property that you wish to remortgage. This is so we can find out what best suits you. This will cover your job, income and outgoings, family and plans for the future.

Once this is done and you satisfy the lending criteria, we will be able to find you a mortgage in principle, this tells you what you can borrow in theory. Following this, we’ll take you through the application, preparing the necessary documents and then submitting to the lender.

Once the lender carries out their checks (runs a credit check, makes sure the property is worth the value of the mortgage and assesses what you can afford), they will make their decision.

Once you’re approved, you will receive a mortgage offer. When you accept the offer, you can then instruct your solicitor to complete it.

This is when the new mortgage starts. If you have remortgaged to borrow additional money, the funds will be transferred to you.

How long does it take?

It’s a faster process than getting a mortgage the first time around. Though every case is different, it takes between four and eight weeks to remortgage.

When can I do it?

You can remortgage anytime you like, but there are things you may wish to consider before you do.

If you’re currently on a fixed-rate mortgage, you may have to pay a penalty to leave it. If you wait until the fixed-rate period ends, you will avoid having to make an early repayment charge. Having said that, if you can save more by switching than the cost of early repayment, it may still be worthwhile.

If you remortgage before you have paid much off, this can cause issues because your loan to value may be too high for most lenders.

What are the costs?

There are different costs when it comes to remortgaging and again before you make the decision, you may wish to consider these.

Exit fees – you can be charged between £75 and £300 to close your account by your lender if you remortgage with a new one.

Arrangement fees – also known as a completion fee, this changes depending on the lender and depends on the mortgage size.

Valuation fees – if you remortgage with a different lender, then you may have to pay to have the property valued. Some deals waive the fee, but the cost could between £150 and £1500, dependent on the property’s value.

Legal fees – there are potential legal fees, such as the cost for transfer of equity.

The different types of mortgage

You will have a choice of different mortgages:

1. Fixed-rate mortgage – the monthly repayments stay the same for a set number of years.
2. Variable-rate mortgage – the lender can change the rate from one month to another, dependent on economic changes.
3. Tracker mortgage – these follow the Bank of England’s Base Rate and the rate is set a percentage above or below.
4. Capped rate mortgage – these work the same as a variable rate mortgage, but they have a cap on how high the rate can rise.
5. Discounted mortgage – these offer a discount on the lender’s SVR.
6. Offset mortgage – these offset your savings against your mortgage balance to reduce the amount you pay in interest.