A remortgage is when you apply for a new mortgage on your property, either to replace an existing mortgage or to borrow money against your property. According to Martin Lewis, around a third of home loans are remortgages in the UK, but when do you know when you should follow this route? In this remortgage guide, we aim to help you to decide whether you should remortgage and borrow more, or not.
What is remortgaging?
Essentially, remortgaging is “the act of switching your existing mortgage to a new deal, either with your existing lender or a different provider. You’re not moving to a new house and the new mortgage is still secured against the same property.”
This means that if you would like to remortgage your home, you must find a mortgage lender willing to pay you the remaining amount of money for your current mortgage, as well as any extra money you would like to make home improvements.
For instance, if you have £150,000 outstanding on your existing mortgage and you’d like £20,000 to put towards any home improvements, ideally you would need to find a mortgage lender willing to lend you £170,000. You would then be able to use the £170,000 to pay off your existing mortgage and fund the work on your home.
Why do people remortgage their property?
More often than not, remortgaging occurs when an introductory mortgage rate ends, and homeowners want to find a more competitive rate in order to save money.
The main reason why you might want to remortgage your property is to save money. But there are several other reasons for making the switch, such as when:
- Your current deal is about to end
- You want a better rate
- Your home’s value has increased
- You’re worried about increasing interest rates
- You want to overpay but your lender won’t let you
- You want to switch from interest-only to repayment mortgage
- You want to borrow more money to carry out home improvements
- You want a more flexible mortgage
- You want to release equity on your home
Source: Money Saving Expert
When isn’t a good time to remortgage a property?
- Your mortgage is really small
- Your early repayment charge is large
- Your circumstances have changed
- Your home’s value has decreased
- You have little equity in your home
- You’ve had credit problems since taking out your last mortgage
- You’re already on a good rate
One of the most important questions you must ask yourself is why you wish to remortgage your property. Whatever your reason may be, this will help you to ascertain which mortgage type would be best suited to you. But where do you start? Read on in this remortgage guide to find out.
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Where to start?
If you have decided that you would like to remortgage your house, you must decide which mortgage to go for. The next plan of action is to conduct thorough research of the different mortgage types on offer.
There are three main types: fixed, variable or tracker.
Next, you should dedicate time to evaluate which mortgage option would work best for you, taking into account your salary and monthly outgoings. Browse the various deals available and consider whether the monthly repayments are viable – you can do this via websites such as MoneySupermarket or CompareTheMarket, for example.
After you have done this, you should be in a better position to go ahead and begin applying to remortgage your property. However, before you do this, it is highly advisable to get a second opinion from a professional.
It is also worth getting in touch with your current mortgage lender to see if they can offer you a better deal for your remortgage. But if you choose to go down this route, remember to ask your current lender about early redemption penalties – the last thing you need is to foot a large bill for leaving your mortgage before the agreed date. If there is no fee, this can be the cheapest option of all, as you may be able to avoid paying for a new mortgage valuation or legal fees.
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How does remortgaging work?
Just like when securing your first mortgage, you will need to submit specific paperwork to your new chosen lender. They will conduct a credit history check, as well as looking thoroughly into the following documents:
- Proof of your income
- Information about your expenses and outgoings
- Proof of your residency, such as passport or driving license
Whether it is possible to remortgage, or not, is based on individual circumstances of a homeowner. Beware that the criteria for lending is likely to be stricter than when you got your initial mortgage, so it would be advisable to get professional mortgage advice to help you find the right deal for you and your needs.
By taking on a new mortgage with a better interest rate, it could help to save you a significant amount of money. By doing this, it can also help to consolidate all of your debts into one payment – however, be aware that as this means securing more debt against your home. This may cost you more in the long run, so it is advisable to get advice before going ahead.
Once your remortgage has been accepted by your mortgage lender, your home will require a valuation. This can range from a quick drive by, to a surveyor visiting your home for a detailed inspection of your property.
If your lender’s valuation is less than you expected, you can get a Chartered Surveyor to survey your property and provide a valuation to see if your lender will reconsider their original valuation. To do this, you will need to appoint a remortgage conveyancing solicitor to:
- Undertake a local authority search or to organise search indemnity insurance (a cheaper policy covering anything that might have been discovered in a search)
- Organise the transfer of debt from one lender to another
The process of remortgaging a property usually takes between 4 and 8 weeks.
How much does it cost to remortgage?
It is important to factor in the costs involved in remortgaging a property, as you need to ensure the cost of remortgaging is not higher than the saving you would make by switching to a new mortgage deal.
The fees you must pay are:
- Solicitors fees
- Land Registry fees
- Early redemption feels, if applicable
- Arrangement fees with your new provider, if applicable
- The cost of the property valuation
However, if you cannot get approved or are finding it’s too much hassle, you may want to sell your home instead. If you are looking for a quick house sale, we will buy your home – no matter what its condition – for cash. If you want to find out any more, do not hesitate to get in touch with us.
Feature image credit: designer491 / Shutterstock
