Guide to Remortgaging

In this guide we go through how it works and whether you should or shouldn’t remortgage.

Remortgaging can help you save money on your monthly repayments, can raise money, help some debt, or find a home improvement project. We’ll explain when remortgaging is an option? what happens? The process and the associated costs.

• What Does Remortgaging Mean?

Remortgaging is the process of switching from lender to lender but staying in the same property.

• Why should you Remortgage?

Some of the main reasons people choose to remortgage include: to save money on a more cost-effective deal; to raise money for things such as a child’s university fees or a wedding; to avoid moving home by raising funds to make necessary home improvements; and to consolidate debts. We do however recommend that you seek financial advice before remortgaging to pay off existing debts. Before you steam ahead and remortgage, you may want to consider a product transfer, this is where you switch your current deal with your current lender, this may be a more cost-effective way then remortgaging, your adviser can talk you through this.  

• 6 steps to remortgaging

The remortgaging process at John Charcol usually goes as follows:

Step one: you contact your current lender for a redemption statement, the statement shows how much is outstanding on your current mortgage on a specific day and any fees associated with repaying it.

Step two: your personal mortgage adviser searches around the market and finds the best remortgage deal for you.

Step three: if you are happy to proceed your adviser present your current situation to the new lender for a decision in principle.

Step four: if the decision in principle is successful your adviser walks you through the full mortgage application which they then submit on your behalf, you supply relevant documentation such as passports, pay-slips, tax calculations, bank statements, and proof of address.

Step five: your new lender will request evaluation or report for your property. Your point its listed then request title deeds together with any lease information if appropriate and any extra questions that they may need answering.

Step six: your lender approves your mortgage application, and your solicitor arranges the completion date, this is the date the solicitor draws the new money down from the lender and uses it to clear the balance with your current lender, any money left over are paid to you.  

• How Long Does Remortgaging Take?

Remortgaging takes on average four to six weeks, but it can take less, its more straightforward than a house purchase, because the deeds are already registered on your name. This eliminates a large portion of the mortgage process.

• Should I apply for a Remortgage?

Many borrowers have the potential to save money for remortgaging but it’s not the right choice for everyone, it depends on your current situation it’s best to speak to a qualified mortgage adviser here are some examples of some candidates who are not suitable for remortgaging:

People with higher early repayment charges. The repayment charges may make remortgaging a very expensive option.

People who need a very small loan, many lenders only accept remortgage application when the loan is above a minimum level of 25 thousand pounds.

People who have recently changed their employment status, you may not have had time to build up a reasonable track record of your future income in the eyes of potential lenders.

People with payment history problems or adverse credit, many mainstream lenders may be reluctant to offer remortgages to these clients.

People with high loan-to-value interest only mortgages, if your mortgage balance is above 75% of the value of your property - most lenders will decline the application on the basis that there isn’t enough equity in it to realistically downsize at the end.

• What is the Cost of Remortgaging?

Remortgaging often cost less than purchasing the property, the associated costs with purchasing profits are even lower or they don’t apply. The cost associated with remortgaging may include:

Early repayment charges, often referred as ERC, these are only applicable if you remortgage before your current deal ends, but there might be a final administration fee for closing the account.

Lenders booking an arrangement fee, these depend on the product that you choose.

Broker fees, we recommend using a broker when you remortgage as they can find you the best deals of the market that are suitable for and your situation.

Valuation fees, you may have to pay valuation fees but often the lender will offer this at no cost to you.

Legal fees, you will definitely require a legal service however lenders will often offer a free standard remortgage legal service or cashback to cover the majority of such cost.

Higher lender charge, also referred to as MIG premium, these are much rarer now than they were in the past, so most lenders don’t charge them.

Before you settle on remortgaging as an option you should look into the fees that you have to pay, especially if there’s early repayment charges on your current deal, you ideally want to remortgage when is suitable and when to maximize your savings.

• What are the Criteria for Remortgaging?

Most lenders are looking for evidence that you keep up to date with your repayments. To become a more attractive borrower you can do the following:

Taking out a credit card, if you keep up with repayments, this can actually boost your credit score by demonstrating you can maintain a credit agreement.

Register to vote, this proves your identity to lenders and can improve your credit score, as it helps credit search systems link up previous addresses with payment histories.

Meet monthly bills, by consistently meeting your current mortgage repayments in addition to other monthly bills and credit commitments will showcase your ability to manage your finances.

Reduce spontaneous spending, lenders won’t only look at your ability to pay bills when looking that you can meet the monthly repayments, they’ll also look at your income and how much of it you’re spending.

All these will work to improve the credit score and increase the likelihood for you to get accepted by the best lenders with the best deals.

So, that was our guide to remortgaging, thank you for checking out the video, be sure to follow us on our social media platforms,

See you next time.