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Remortgage
Simon Deeming gives us a recap on remortgaging.
What is a remortgage and how does the process of remortgaging work in the UK?
A remortgage is where you take out a mortgage with a new lender on a property you already own. That could be your home, or a property you rent out to others.
When you take out a mortgage to buy a property, the lender takes an interest in that property called a charge, which is an official legal connection to your property created by a solicitor.
When you remortgage in the UK, a solicitor is involved to move the charge on your property away from one lender and onto the new one.
How long does it take to remortgage and how often can I remortgage my property?
Because of the legal work involved, we usually tell clients to allow around eight to 12 weeks for a remortgage. It helps to speed up the process if you could supply your information and documents quickly, but timing will depend on how busy the solicitors are.
There’s no official limit on how many times you could remortgage your property, but each time you pay off or redeem one mortgage before taking out a new one, you could incur a fee. You need to make sure that the goals of the remortgage are worth it for you financially – as you might end up paying more overall.
Can I switch lenders when remortgaging?
A remortgage technically means moving lenders. Getting a new mortgage for your existing property with your current lender is called a product transfer. So remortgaging implicitly means moving lenders.
What are the main reasons why people choose to remortgage?
There are several reasons. If you’re changing your mortgage without moving property, remortgaging could be an opportunity to reduce your monthly mortgage repayments.
It could help you release equity from your property, to use for a DIY or renovation project, or as a deposit for a Buy to Let investment property. It could enable you to get a more flexible deal that allows you to make overpayments, perhaps. Or you might move to interest only.
When we talk to you about your plans, we’ll help you define what’s most important and look for a new mortgage deal to suit you.
What happens to my existing mortgage when I remortgage and what happens if I don’t remortgage after my deal expires?
Your existing mortgage, that you’re making monthly payments on, will be redeemed or paid off. You won’t need to continue making payments to your current lender.
If your mortgage has a special offer period, like a fixed rate for two, three or five years and you don’t remortgage when that initial period finishes, your mortgage will automatically be switched to the lender’s standard variable rate, or SVR. That is likely to be much higher than other rates generally available on the market.
What factors should I consider when deciding whether to remortgage?
Cost is the biggest thing. When thinking about remortgaging, you’ll pay charges for a new mortgage and to redeem your old one early. So whatever is driving your desire to remortgage, you just have to make sure the benefits outweigh the costs.
If you’ve got a fixed rate deal and it’s coming to an end, you’ll likely end up on your lender’s standard variable rate or SVR. It will be much higher than your current rate, and it might take a few weeks to arrange a new deal. So it’s sensible to act quickly if you’re nearing the end of a fixed rate.
If you’ve got a variable rate deal, you may be worried about rising monthly costs. You may find a fixed rate deal will give you peace of mind – with a monthly repayment that will stay the same.
It’s worth considering the cost of remortgaging, too. Note that fixing into a rate means you may not be able to benefit from repayment reductions in the future.
Your share of the property may have grown because its value has gone up, in which case lenders might be able to offer you better terms. If you are in a better Loan to Value bracket, and you could access a lower rate by remortgaging.
If you want to borrow more money, remortgaging could enable you to release equity in your property – that’s a popular way to raise finances. There may be cheaper ways to borrow, but we could certainly talk to you about releasing equity by remortgaging.
You might want more flexible features, especially if your existing mortgage deal has strict terms regarding overpayment, for example. A lot of lenders cap this at 10% per annum. If you’d like to repay more quickly, a remortgage could switch you to a deal with more flexibility. You could overpay an unlimited amount without incurring fees.
Other mortgage products might provide features like payment holidays when cash flow is tight.
Can I remortgage to consolidate debts?
We often help clients remortgage so that they could pay off debts and regain control of their finances. If you have a bad credit score, make sure you mention it to your broker upfront, as that will reduce the number of lenders we could approach on your behalf.
It may also impact the rate that we could get for you. But we know from experience which ones are happy to lend where there is adverse credit involved. We could investigate your options.
Will I have to pay any fees or penalties when remortgaging?
If you’re at a fixed rate, there’ll be an early repayment charge on your current mortgage and for paying it off before the term ends. There may also be an administration fee for the new loan. We also charge a broker fee for our service, but you’ll only pay that once we obtain a mortgage offer for you.
Any fees or penalties you face for remortgaging with a new lender could generally be added to the new deal – so you don’t have to pay these from your savings if you choose not to.
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How much could I potentially save by remortgaging?
That depends on your specific circumstances. It depends on the size of your current mortgage, the rates available when you remortgage compared to when you first took out your existing deal, and the loan to value that you could achieve for the next mortgage.
One of our team will be happy to talk you through what your new payments could be after a remortgage. On a quick phone call we could go over your circumstances for free.
There’s no cost or obligation initially and we should be able to get you an initial idea of what you could save in 10 or 15 minutes.
What documentation will I need to provide when remortgaging?
It’s the same items you gave when you took out your first mortgage. It’s verification of name and address, payslips – or tax calculations or accounts, to prove your self-employed income – and bank statements for the last three months.
We’ve got an online portal to send those to, so you don’t send us anything in the post. It could all be done on a phone or laptop.
Will I need a new evaluation or survey when remortgaging?
Potentially, yes. Your new lender will want to be confident that the property you’re providing them as security for the loan is worth what you say it is.
They’ll rely on a valuation. The type of survey or valuation you need usually depends on the size of the loan compared to the value of the property. The more of your home that you own, the lower the lender’s risk.
They might have a threshold Loan to Value where they’re happy with a drive-by valuation – where the surveyor views the house from the road without entering the property. There are also desktop valuations and automatic valuations, but we could talk to any client through those potential options.
Is it harder to remortgage if I’m self-employed or a contractor?
I know there’s that perception. It used to be harder to get a mortgage if you were self-employed, but lenders have realised that the way people earn money has changed in recent years.
There are many more people running their own businesses, and many of our clients take an income from property portfolios or work as a contractor.
Sometimes proving your income could take a little bit longer if you don’t have a salaried job.
We need to submit recent accounts or tax calculations – but generally, most mortgages are available to the self-employed.
What happens if my property value has decreased since I initially obtained my mortgage?
If there’s a significant reduction in the value of your property, it could potentially make it difficult to remortgage. The decision on a new loan will depend on how much of the property you own, as a percentage of its reduced value – your Loan to Value – going into the remortgage process.
If, after the value’s dropped, you still own more than 10% of your home, it might be worth remortgaging to a new deal. We could look at the options and explain what the new mortgage would cost.
But if you’ve got less than 5% equity – so you own less than 5% of your home – it’s unlikely we’d be able to find a new mortgage for you. However, there will probably still be options with your existing lender, which you could talk to us about.
What are the advantages and disadvantages of fixed rate versus variable rate remortgages?
With fixed rates, you’ll know where you are each month in terms of repayments. If rates fall, though, you’ll carry on paying the same amount, so you won’t benefit from any reduction until your fixed rate period ends.
Tracker rates could be great when rates are falling, as your monthly payment will reduce every time there’s a Bank of England cut or a lender cut. But they’ll also go up in line with rising rates. You need to be aware of that.
While we could follow and predict loose trends in the market, it’s impossible to know for sure what will happen to rates. Whether you choose a fixed rate or a tracker deal is down to your personal finances and your preference for managing money.
A lot of people ask us for our opinion, but we can only guess. We don’t have a crystal ball.
Can I remortgage if I’m nearing retirement age?
Lots of lenders are more flexible these days. They understand that we’re living longer as a nation and a lot have increased the upper age limit for borrowers.
Some lenders even provide a mortgage term that ends when the client’s in their 90s. Others don’t actually have a maximum, so it’s definitely worth getting in touch if you fall into that bracket.
The lender still assesses you for a mortgage in the same way as anyone else, but they’re looking at the income you receive in retirement. That needs to be enough for you to make repayments on the mortgage and cover your usual bills and outgoings.
Homeowners over the age of 55 could also be eligible for later life lending, which is where you borrow money from a specialist lender using a portion of the value of your home as security against the mortgage.
You could use the money to pay off your current mortgage, make home improvements or adaptations, go on holiday, buy a car or help a family get on the property ladder. With a later life loan, you don’t have to make any repayments if you choose not to. The lender recoups their loan and interest when the borrowers pass away or go into long-term care.
Kelly Flanagan is Mortgage Style’s Later Life Lending Specialist, and is very experienced in helping clients use their homes like this to give themselves a better standard of living in retirement.
What else do we need to know about remortgaging our home?
Just get in touch. We’ll help you look for the right remortgage deal for your specific circumstances. Researching mortgages and getting all the information together does take time.
Some people might experience frustrations going through to lenders directly. We try to reduce that frustration, reduce the time and make things slick, easy and quick. It’s our job to know the different lenders criteria and the different products available.
Our experience comes to the fore and makes that process a lot easier for our clients – and we might be able to save you money as well. We’ve got access to some exclusive deals, and we have access to a really wide range of mortgage lenders and insurance providers.
We’ve got people within the company that advise on insurance. You generally get a wider choice than you would by looking around the high street. We’re a multi-award winning broker, to give you that reassurance, and we’ve worked with thousands of clients over the years and have tons of experience to draw on.
Mortgage Style is five-star rated on Google and TrustPilot across more than 450 reviews that you could have a look at. These will reassure you that you could rely on us to help.
Initial Consultations are completely free of charge. There’s no obligation to proceed and our broker fee will only become payable if we proceed to a full application. The precise amount of the fee will depend on your circumstances and will be discussed and agreed with you at the earliest opportunity. Typically, in most cases, our fee will be £495. We charge £595 for bridging and adverse credit cases; and £995 for Later Life Lending.
Mortgage Style Ltd is registered in England and Wales. Registered Number 5743648.
Registered Office: Elm Tree Farm Estate, The Sheepway, Portbury, Bristol, BS20 7TF.
Mortgage Style Ltd, trading as Mortgage Style, is an appointed representative of the H LPartnership Limited, which is authorised and regulated by the Financial Conduct Authority.