How Does Remortgaging Work?
Remortgaging is where you take out a new mortgage with a new lender on a property you already own and have a mortgage on. The new mortgage takes the place of the mortgage you originally had on the property.
Who May Want to Remortgage?
You may want to remortgage if:
- The introductory deal on your current mortgage is due to end soon and you’d like to avoid being transferred onto your lender’s SVR (standard variable rate)
- You want to consolidate multiple other debts
- You need money to fund home improvements
- You have a large expense coming up - like a wedding or school fees, or you want to help your children with a deposit, etc.
Remortgaging may be unsuitable for you if:
- You need a small mortgage below £25,000
- You need to borrow a very high percentage of your property’s value
- You took out your current mortgage very recently
- Your mortgage has high ERCs (early repayment charges)
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Use our free remortgage comparison tool to find the best remortgage deals and rates currently on the market.
Why Use a Remortgage Broker like John Charcol?
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We work around your schedule to help you arrange a mortgage that suits your circumstances, no matter how complex.
1. First Call
When you contact us, we’ll arrange an appointment between you and one of our advisers – this can be over the phone or face to face. Your adviser will ask you some questions and, once they have all the right information, they’ll go away and find you the best remortgage for your current and future needs. They’ll then organise a follow up appointment to tell you about their recommendation.
2. Decision in Principle
After your adviser has presented you with their recommendation and you’re happy to proceed, they’ll work on securing your DIP (Decision in Principle). Your DIP is a promise from the lender that they’ll loan you the money on the condition that the information you’ve provided is correct and subject to a valuation on the property.
3. Pre-Application and Submission
Once the lender secures your DIP, we’ll start to prepare your mortgage application. We’ll send you a pack that explains all the different documents the lender needs. You’ll be assigned a client relationship manager who’ll go through your documents and get everything ready for submission. Your adviser will then submit your full mortgage application.
4. Lender Underwriting and Valuation
The lender carries out a process called “underwriting” where they check all the information and documents you’ve provided in your application. They’ll also instruct a mortgage valuation on the property to make sure there are no significant problems with it. Sometimes a lender will only instruct a desktop valuation for a remortgage – rather than a physical valuation – as your property would have likely had a valuation and internal inspection when you took out your first mortgage.
5. Mortgage Offer
Following a successful underwriting process and valuation, the lender will accept your application and send you a mortgage offer. They’ll also send a copy to us.
After you accept the mortgage offer, you’ll go through conveyancing which is where a solicitor arranges all the legal paperwork so you can transfer from one lender to another.
Finally, after you’ve signed all the paperwork, your solicitor will set a date to draw down the new money to clear the outstanding balance with your current lender. Any excess funds will be returned to you. This is called completion.
Is Remortgaging a Good Idea?
Benefits of Remortgaging
|You Can Save Money||When you come off your introductory deal you’ll go onto your lender’s SVR, which will be higher than your original rate. Remortgaging onto a new deal can help you make significant savings.|
|It Can Help You Avoid Moving Home||It can be cheaper and more convenient to take out a remortgage and adapt or add an extension to your existing home, than to move home entirely.|
|You Can Raise Money||Remortgaging for an amount that’s larger than the outstanding balance on your remaining mortgage can help you pay for major outgoings, rather than borrowing separately - and in some cases more expensively - from other sources.|
|It Can Help You Accommodate a Change in Your Circumstances||If your financial situation has changed, you may need a new mortgage that accommodates different needs – like higher overpayments or a lower monthly rate. Remortgaging is a way to replace your current mortgage with one that better suits your requirements.|
Potential Issues with Remortgaging
|You May End Up Paying More Overall When You Consolidate Debts||Remortgaging can help you pay off urgent debts but, as you would typically have a mortgage for a long period of time, you could end up paying more interest in the long term even though mortgage interest rates are usually lower than those for a lot of other types of loan.|
|You May Face ERCs (Early Repayment Charges) if You Remortgage Before Your Introductory Deal Ends||It’s extremely common to remortgage when your introductory deal ends, so that you can avoid being transferred onto your lender’s SVR. However, if you try to remortgage too early then you may face ERCs which can make remortgaging expensive.|
|Remortgaging Can Take Longer than a Product Transfer with a Further Advance||When you remortgage, the lender underwrites your application and you go through some conveyancing – although not as much as when you purchase a new property. Therefore, if you need funds quickly, you may find a product transfer with a further advance more suitable as there’s no underwriting or conveyancing involved.|
What Are the Average Costs of Remortgaging?
|Lender's Product Fee||Valuation Fees||Legal Fees||Booking Fees|
|£0 - £2,000*||£0 - £1,500*||£0 - £500 (Plus VAT)*||£99 - £250*|
How Much Could You Save by Remortgaging?
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How Long Does It Take to Remortgage Your Home?
The average time it takes to remortgage is about 4 – 6 weeks. It can take slightly less or slightly more.
Can You Remortgage Early?
It’s possible to remortgage before your introductory deal ends, however it’s likely you’ll face ERCs which can make doing this expensive.
You can start arranging your remortgage up to 6 months before your current introductory rate ends. If it’s ready early, your solicitor can wait until any ERC period passes before taking the final steps to put it in place.
Can You Remortgage to Buy Another House?
You can remortgage to raise funds to buy another property, whether it’s a second home, holiday let, buy-to-let, etc. These funds can form part or all of the deposit on another property or, if you raise enough, you can buy the property outright with cash. You’ll need to declare to HMRC and/or your lender(s) which property will be your new main residence.
If you want to release equity from your existing property to buy another and convert your existing property to a buy-to-let at the same time, you’ll go through a process called let to buy.
Can You Remortgage with Bad Credit?
It is possible to remortgage with bad credit but your choice of lenders will be limited, depending on the extent of the bad credit and how recent it was.
Can You Remortgage to Pay Off Debt?
You can remortgage to pay off your debt in the sense that it can allow you to consolidate multiple other debts – e.g. car loan, credit card balances.
To consolidate your debts, you can remortgage for an amount that’s higher than the amount remaining on your current mortgage. This will enable you to release some equity that you can use to pay off your debts.
It’s important to note that remortgaging to consolidate debts can sometimes result in you paying more overall as, although mortgages have lower interest rates than a lot of other loans, they come with longer terms which means you earn and pay interest for a longer period.
Nevertheless, remortgaging to consolidate debts may be suitable for you if your current debts have high interest rates or you need to pay them off soon.
How Does Remortgaging for Home Improvements Work?
You can borrow some extra money to fund home improvements when you remortgage. Essentially, you borrow more than the amount you have outstanding on your existing mortgage. This extra amount can then be used to pay for improvements to your property.
One major benefit of remortgaging to fund home improvements is that all of your mortgage will be on the same introductory product rather than some of it being on a further advance rate, as these can often be higher than introductory rates. Another benefit is that the value of your property should increase after the work's done - assuming there are no sudden decreases in property values.
Do I Need a Solicitor to Remortgage?
You’ll need a solicitor when you remortgage as you still have to go through conveyancing, although it will be much more straightforward than buying a new property since there won’t be an exchange of contracts or change of ownership.
Will Remortgaging Be Cheaper than Being Transferred onto My Lender’s SVR?
A lender’s SVR is often at least 2% higher than their current products. A lot of people choose to begin the remortgage process up to 6 months before their introductory deal ends because another lender’s deal will almost certainly be cheaper than going onto the SVR.
When you remortgage onto a new deal, you’ll be put on a new introductory rate for a certain period.
We can find you a solicitor to manage the conveyancing part of the remortgage process with JC Legal. We choose from an exclusive panel of carefully selected solicitors and conveyancers, saving you time and ensuring you receive excellent service.
It’s easy to overlook your property as part of your finances, but your home is probably the biggest asset you have. Release money from your home with John Charcol's partnership with Key Retirement. Find out more and start the process today.