Remortgage
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Remortgage
What is a remortgage and how does the process of remortgaging work in the UK?
A remortgage is replacing your current mortgage with a new mortgage. It’s no more complicated than that.
Let’s say your mortgage is with one lender, and your deal is coming to an end, or you need to borrow some extra money to refurbish your home. You apply for a new mortgage with a new lender. They will conduct affordability checks to ensure that you can afford the new mortgage with them.
It’s like starting a new application fresh. Once the new mortgage has been approved, it repays your old one, which ceases. Your new mortgage carries on where you left off, on a new product with new terms, and you pay it as you always did.
How long does it take to remortgage?
How long it takes varies depending on your situation, but it is generally much quicker than buying a home because the legal process is more condensed.
If you’re ready to go and you’re happy to commit to a remortgage, it can be done in as little as two to three weeks in some cases. We generally say to allow four to six weeks, but as it’s a much faster process, that’s ample time to remortgage.
How often can I remortgage my property?
As many times as you want to, you probably wouldn’t want to be doing it every month because the cost would negate any benefits, but effectively, you can remortgage at any point.
Generally, you have a mortgage for a defined period of time, be that two, three, five, seven, or ten years. When you’re coming to the end of that, you would probably want to remortgage.
Hopefully, the new terms will be improved—but not always. If it was a 25-year mortgage, you might have five remortgages. On a 40-year mortgage, you could have eight. You will probably remortgage every few years.
Can I switch lenders when remortgaging?
Yes. A remortgage is moving from lender A to lender B. It’s the process of repaying your current mortgage with a new mortgage, and 99 out of 100 times, you’re switching from lenders.
What are the main reasons why people choose to remortgage?
There are many reasons. The most common one is that your current mortgage deal is ending. But you may need to raise additional money to make some home improvements, like building an extension or refurbishing the kitchen.
You may want to consolidate debts. You may have accumulated credit card bills or loans for home improvements, for example, and you want to consolidate those into your mortgage.
Perhaps you have a joint mortgage, and you’re going your separate ways, so you need to remortgage to take someone off the mortgage. Or conversely, if you were single and you’re now a couple, you can remortgage to add someone on to the mortgage. Whatever the reason, speak to a broker, and we’ll talk you through the process.
What happens to my existing mortgage when I remortgage? And what happens if I don’t remortgage after my deal expires?
The new mortgage lender repays your previous mortgage. For example, if you currently have £50,000 on a mortgage and your deal is coming to an end, you could take a mortgage with a new lender for £50,000 pounds.
Of course, the figures will vary, but the old mortgage is effectively repaid by the new mortgage.
If you don’t remortgage after your deal expires, most people will roll onto the SVR—the standard variable rate. That’s a lender’s internal rate, and it tends to be higher than the deal you’re coming off.
If you roll onto the SVR, you will ordinarily see a change to your payments. However, whenever you’re on that standard variable rate, there tend to be no redemption penalties and no fees for exiting the mortgage. Generally, you will see a change to your payments, and that standard variable rate can move up and down in line with market conditions.
What factors should I consider when deciding whether to remortgage?
There are many factors to consider, such as whether you need to raise additional money for home improvements, repay debts, or consider moving home in the future.
It could be better to wait until you’ve moved to get a new mortgage, or you could remortgage and potentially port. Of course, there are other factors to consider, such as fees, such as conveyancing fees, survey fees, and lender fees.
It’s generally important to consider what will happen to your payment when you remortgage. Is it going to be higher or lower? Can you afford it?
When remortgaging, you could increase or reduce the mortgage term. Effectively, you should treat it as a brand-new mortgage and see what terms are available at that point.
Can I remortgage if I have bad credit?
It depends upon a few factors – what bad credit you may have, how recent that was, and also the circumstances around your income and affordability.
Some lenders are available for a remortgage when you have bad credit, so speak to a broker for advice on your options and the actions you can take.
Can I remortgage to consolidate my debts?
You can consolidate debts. However, note that when you do so, you may be taking an unsecured debt and then securing it against your property, effectively reducing your equity.
Also, not all debts are equal. If you have a 0% credit card, it’s not sensible to consolidate that. It also depends on the level of debt you have. Unfortunately, the answer is always ‘it depends’. So speak to a broker, and they will advise you on the best option for you.
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Will I have to pay any fees or penalties when remortgaging?
Depending on the lender, there can be broker fees, lender fees for setting up the remortgage, and valuation fees.
You would also expect to see conveyancing fees because you’re moving the mortgage from lender A to lender B. A mortgage is a legal charge on the property that sits on the title deeds.
Depending on your current deal, remortgaging may also involve penalties. For example, if you’re in the middle of a fixed rate and your current mortgage lender has redemption penalties or early repayment charges (ERCs), you may have to pay those to remortgage.
Those ERCs could be rolled into the mortgage, but it’s something to consider at that point. There may be fees and penalties, but it depends on your circumstances and what you want to do. The best thing to do is seek advice.
How much could I potentially save by remortgaging?
When it comes to savings, it really does depend—there’s no hard and fast rule. It depends on your current deal and the new deal you’re moving to.
It’s possibly best not to think about it in terms of savings but what you may mitigate. Let’s assume that you have a certain rate on your current deal, but perhaps interest rates have risen. We know that your mortgage payment may potentially rise, so it’s about keeping that rise as small as possible.
Conversely, if you were paying one rate and the new rate was lower, of course, you may save, but there’s no hard rule about how much. It’s about ensuring you get the right deal tailored to your circumstances and that the mortgage remains affordable.
What documentation will I need to provide when remortgaging?
The documentation is exactly the same as when you first took out your mortgage. A broker will want to see ID and address verification, such as passports, driving licences, and utility bills, to prove where you currently live.
We’re going to need to see income and expenditure documents—pay slips or tax documents to prove your income, bank statements to prove that your income is received and demonstrate your spending, and potentially a credit report to establish any current debts you have.
You’ll need to provide your current mortgage statement to show us your outstanding mortgage and any redemption penalties. Your current lender should send you mortgage statements annually.
Will I need a new valuation or survey when remortgaging?
Yes. The lender will conduct a new valuation to establish the value of your property versus the amount you’re borrowing. That gives the loan-to-value or ‘LTV’ that you have heard of.
It’s really important because it will determine the type of product and deal you can get. A survey is different from a valuation. You probably won’t need a survey, but you always will need a new valuation when remortgaging.
Is it harder to remortgage if I’m self-employed or a contractor?
If you’re a contractor or self-employed, you will need to prove your income and show that it is sustainable. If the remortgage is affordable based on your income, you’ll have access to broadly the same products as those who are employed.
The documentation requirements may differ slightly, and some lenders may treat you better than others. Remortgaging is not necessarily harder; there may just be additional documentation requirements.
What happens if my property value has decreased since I initially obtained my mortgage?
If your property has decreased in value since you originally took out your mortgage, it can have various effects. If you’re in negative equity, where the mortgage’s current value is above the home’s, a remortgage is probably a no-go.
You could put cash in to bring that mortgage balance down, however. If you still have some equity, even if your home price has decreased, then you should still be able to remortgage to a new deal.
If you’re worried about that, speak to a qualified advisor, and we’ll walk you through the options.
What are the advantages and disadvantages of fixed rate versus variable rate remortgages?
The advantage of a fixed-rate remortgage is that when your new remortgage starts, you’ll know exactly what you’ll be paying for a predefined period of time, be that two years, three years, five years, or even longer.
It means that you can budget easily. You’ll have some stability and security because the interest rate isn’t going to change for however long that deal is. It protects you if interest rates rise—but there’s also a disadvantage: If interest rates fall, you won’t feel that benefit.
Many people like fixed-rate mortgages because they give them stability and security and allow easy budgeting.
Variable-rate remortgages are often Bank of England base rate trackers. If your new mortgage is tracking the base rate and that reduces, the following month, your mortgage rate will reduce, and your payments will become a bit cheaper.
Conversely, if the base rate increases, your mortgage rate and payments will increase. This doesn’t give you much stability or security because it’s dependent upon the Bank of England’s actions.
But one of the positives of many tracker-rate mortgages is that you can potentially make significant overpayments with minimal or no penalties. If you’re due a windfall and you’d like to pay that off your mortgage, a tracker rate might be appropriate.
Those are the things that we would consider. We’d discuss the pros and cons of the mortgage type with you to ensure you get the right deal for your circumstances.
Can I remortgage if I’m nearing retirement age?
Yes, however, it’ll be based on many factors, such as how close you are to retirement age and how much you need to remortgage. We also need to confirm that your income is sufficient.
We don’t need to consider age as a factor unless there’s a very short time until you reach retirement age. If you’re concerned about this because it can get a little bit tricky, speak to a broker. We’ll explain your options so you can make an informed decision.
How can a mortgage broker help if somebody is looking to remortgage?
One of the main ways a mortgage broker can help with remortgaging is by assessing all the potential deals you may be eligible for and ensuring you get one tailored to your circumstances.
For most people, a mortgage is your single biggest outgoing attached to your most valuable asset – so you have to get this right. We establish what your circumstances are, what you’re looking to achieve in the future and put together a plan that fits around those life goals.
We get you the right term and the right product. A broker can help in many ways, but the main ones tend to revolve around making sure that you’re protected, looked after, and everything remains affordable.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.
