What is a Remortgage?
Remortgaging simply means replacing your current mortgage with a new mortgage, whether that’s with the same lender or a different one. The new loan is used to pay off the old one, and your monthly payment now goes towards the new loan.
When you remortgage, you can make changes to the loan amount, term and interest rate, so it can be useful in many ways.
When it’s time to remortgage, we would use that as an opportunity to review your entire mortgage and your goals. We could potentially reduce your monthly payment, plan to pay your mortgage off earlier, or release some equity for you to do with as you please – that could be investing, making home improvements or consolidating debt, amongst other things.
Most commonly, people remortgage when their current fixed rate is coming to an end. If you do not remortgage, then you are likely to roll onto the lender’s standard variable rate (SVR), which can be very expensive, and your payments would vary depending on outside influences such as the Bank of England base rate. Remortgaging can save you money as the vast majority of deals will be on a lower rate than the SVR.
You can remortgage before your current deal ends, but you could possibly incur early repayment charges if this is the case. This isn’t always a bad thing; it can make financial sense to pay these charges in order to make changes to your mortgage loan depending on what your goals are. We would discuss this with you in full once we have assessed your circumstances and understand what you are trying to achieve. It’s our job to look at all the options and explain your choices clearly so that you can make an informed decision.
As most mortgage offers are valid for 6 months, we recommend starting the remortgage process 6 months before your current deal ends. We will help you to figure out the best new deal available to you. Once your mortgage offer is issued and we are waiting for your current deal to end, if the interest rates go down and there is a better product available for you, we can still change you onto the lower rate. So by remortgaging 6 months in advance, you protect yourself from any rate increases in that time, but can still benefit from any decreases made before you complete.
Remortgaging – step by step
The first thing to do would be to check when your current deal ends.
When you take out your new loan, why not put a reminder in your calendar for 6/7 months before your deal ends? We do this for our customers too; with your permission, we will keep track in our diary and contact you when the time is right to start your remortgage so you don’t have to worry about it.
The next step is to find out exactly how much you owe – your current mortgage balance and any other fees or charges for redeeming the mortgage.
Loan to Value (LTV) is important to consider when remortgaging. It is likely to have changed since you bought the property – through your mortgage payments decreasing the loan and changes in property value. For example, if the value of your house has increased since you moved in 5 years ago, that increase would make up some of your equity and would lower your LTV. The lower the LTV, the better interest rates you may qualify for when remortgaging.
After assessing your circumstances – your income, regular outgoings, credit commitments and current mortgage details, we will have a better understanding of your options, and you can decide if you want to make any changes to your loan.
If you are not looking to make any changes, then you have two options – stay with your current lender and tie in to a new deal with them (called a Product Transfer) or remortgage to another lender. We would compare both options and help you decide which is best for you.
If you are looking to make any changes such as reducing or extending your mortgage term, borrowing more or paying off a chunk, then we would do our research and let you know what options are available to you.
If you are remortgaging to another lender, then you would need to instruct solicitors to handle the legal transfer from one lender to another. They will manage the transfer of funds and update the Land Registry. Many lenders offer free legals or a cashback element (to cover the solicitors’ fees) as an incentive with their mortgage products. We can help get a quote and instruct a solicitor on your behalf.
If we handle your remortgage, once the mortgage offer is issued, we will continue to monitor the rates, and if they go down before you complete, we can change you onto a better deal.
We always aim to have your new mortgage start the day after your old one to avoid you going onto the SVR. Your solicitors would handle the changeover and will let you and us know once it has taken place. Following completion, your new lender will be in touch to let you know exactly what payments will be taken and when.
We would then pop your new deal’s expiry date in our diary and contact you 6 months before it is due to start the process again.
FAQ
Can I borrow more?
It may be possible to borrow more money by increasing your loan amount when you remortgage. This will depend on your circumstances and affordability.
If you are still mid-mortgage deal, then it may still be possible to borrow more with your current lender. This is known as a further advance and again will depend upon your affordability and circumstances. Anytime you are considering your options, give us a call; we are more than happy to explore your ideas and offer advice on how to achieve them.
Can I consolidate debts into my mortgage?
Some lenders will allow you to consolidate debts such as credit card balances, loans or finance agreements into your mortgage, as it can be easier to manage one monthly payment than multiple. We have calculators we can use to see if it would be of benefit to you. This would be very specific to your own circumstances, so we would need to do a full review in order to offer advice. Give us a call if you would like to discuss it further.
Can I make overpayments?
Making overpayments on your mortgage can be beneficial as it reduces the amount of interest you pay on the loan, shortens the mortgage term and improves your loan to value. Most lenders will allow you to make overpayments of up to a certain percentage of the mortgage balance each year without incurring any penalties. If you were to pay more than this, you may be subject to early repayment charges.
