Remortgaging: All You Need to Know About Remortgaging
Most certainly, your mortgage is one of your biggest monthly costs. Making sure you’re on the best deal available will help you from paying too much. A remortgage allows you to switch to a better rate with a new lender and reduce your monthly mortgage repayment. A remortgage broker can help you choose the right options for remortgage.
What is remortgaging?
Switching to a new mortgage product is known as remortgaging. This may be from the same (known as product transfer) or a different lender, but borrowers normally remortgage when their existing loan expires or when they need to release cash for home improvements, debt consolidation or buy new property from their home’s equity.
Reasons Why You May Want to Remortgage:
The primary motivation for remortgaging is to avoid being stuck with a lender’s Standard Variable Rate (SVR). When a deal period expires, this is the rate at which a mortgage defaults. For example, a two-year fixed rate of 1.5 percent on a 25-year £150,000 mortgage may cost you X amount of money per month. However, after the two-year term ends, your mortgage will switch to a standard SVR of 3.59 percent, it will increase your monthly repayment dramatically and you may not be prepared for this extra monthly cost. You can get the most suitable advice from the mortgage broker for remortgaging to a new, potentially cheaper deal which will save you money on your monthly repayment.
Also Read: What is Mortgage – A Beginner’s Guide?
Other Reason to Remortgage:
- Benefit from low interest rates.
- Your present fixed-rate contract is about to expire.
- You’d like to move from interest-only to repayment mode.
- You want to be paying a lower interest rate than you are now.
- You want to be able to make extra payments if necessary.
- You’d like to take out a larger loan.
How Does Remortgaging Work?
A remortgage is when the existing mortgage is replaced with a new one. However, moving to a better deal isn’t always as easy. The process is very much similar to a new mortgage application, and the framework has become more complex after the Mortgage Market Review in 2014. A remortgage broker can guide you with the process. The new lender would like to access your affordability to repay the new loan monthly repayment. If your current mortgage was taken out before 2014 and your circumstances have changed, this could be more difficult, particularly if you are self-employed or have more expenses. If you want to release extra cash from your current mortgage then affordability will be based on the full mortgage amount.
Also Read: Buy To Let Mortgages – Ultimate Guide to BTL Mortgage
Remortgaging with the New Lender:
The new lender may want to do valuation of your home to ensure that it meets their loan-to-value requirements. If your application is approved and your property valuation is settled upon, the new mortgage will be used to pay off your old one, and you will then begin making new payments. If you’re taking cash out of the house, it’ll be deposited into a dedicated account at the end of the process by your conveyancer.
Remortgaging with the Same Lender:
You won’t need legal advice or conveyancing if you remortgage with the same lender because it’s treated as a product transfer, because your provider would already have the information they need, such as the product and property descriptions. If you’re remortgaging to a new lender, you’ll need to go through conveyancing and there will be more ID checks and the lender will make sure the loan to value is as per their lending criteria and the conveyancer reports the changes to the Land Registry.
Things to Consider While Remortgaging:
- Check to see whether your new lender offers a mortgage product with no fee (many lenders would write to you at the end of your current mortgage term offering you a new contract to move to), or if there is a product charge, as this may offset the savings you may have made by remortgaging.
- You will have to pay an early repayment fee on your current mortgage before you can move to a new one if you are changing lender before the end of product term. This might, once again, outweigh the advantages of switching.
- The lower your loan-to-value (LTV), the more mortgage options you will have. You can measure your LTV by dividing your remaining mortgage balance by the current value of your house and then multiply with 100.
- Make sure you’re prepared to take out a mortgage. Just because you already have a mortgage doesn’t mean you won’t be subjected to the same scrutiny when you apply for another. As the lender would also conduct the same affordability tests, make sure your credit score is in good shape.
Also Read: Independent Mortgage Broker in Thurrock
How Much Does Remortgaging Cost?
When you do re-mortgage, you’re usually given an introductory package, which includes a lower interest rate for a fixed period of time as well as perks like a free legal consultation or cash back. Introductory deals will last anywhere from one to ten months, after which you’ll be transferred to the lender’s SVR. Typically, their SVR is much higher than their introductory prices.
You can start planning your next mortgage up to 6 months before your current rate expires. The processing of mortgage offers may take 1 to 4 weeks, and the legal work will take 2 to 4 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 advise your remortgage broker to continue your current mortgage until the end of the current product or the period after which the early repayment charge is not applied. 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.
Consider speaking to one of our independent remortgage advisers in London & Essex. Our mortgage advisers understand the criteria that lenders are looking for and can compare mortgage deals to help find the right one for you. MVFS can help you choose the best options for remortgage. For more details contact us at 02080950120 or give us an email at info@mountviewfs.co.uk with your requirements!
