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.
When Is It Suitable?
Remortgaging may be suitable for you 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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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 mortgage 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 – 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?
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. Switching to a new deal can help you make significant savings.
It Can Help You Avoid Moving Home
Remortgaging and adapting or adding an extension to your current home can be cheaper 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.
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 Could Face ERCs (Early Repayment Charges)
If you try remortgaging too early - i.e. before the introductory deal on your current mortgage ends - you could face ERCs which can make it expensive.
It Can Take Longer than a Product Transfer with a Further Advance
When you switch to a new deal with a new lender, that lender has to underwrite your application and you have to go through the legal part of the process – although this isn't as extensive 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.
Average Remortgage Fees and Costs
|Lender's Product Fee||Valuation Fees||Legal Fees||Booking Fees|
|£0 - £2,000*||£0 - £1,500*||£0 - £500 (Plus VAT)*||£99 - £250*|
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Scott Barron provided an amazing service for a few key reasons. Firstly, as a Kenyan resident (ex UK), he found a product for me. This wasn't easy to find and certainly took time to get approved. Scott was constantly in touch, updating me all the time and pushing the lender for confirmation regularly. Felt like he was really taking care of my interests. I'm very grateful to Scott and the team at Charcol.Posted
I have just done my second mortgage application with Scott Barron and as usual his service was first class. He has helped me outside of his normal working hours and his determination to get the best for me was faultless again. I will always use Scott for my mortgage needs. Toni was also excellent and communicated throughout professionally and made the process simple for me. Can’t recommend highly enough.Posted
I would highly recommend John Charcol. Emily and Andy Cairns were brilliant! Emily was always available to explain and assist with what was not an easy situation and I am happy to have exchanged and completed on my new house. Many thanks to both of themPosted
Scott Barron and Chantelle Parker were extremely helpful and communicative throughout the process. They helped me find solutions to my slightly complex mortgage situation. I would refer family and friends to Scott and Chantelle.Posted
Excellent service and support. This was a somewhat complicated re-mortgage, but we were supported at all times and the process was very smooth and successful.Posted
Ryan Guy at John Charcol helped me out recently and was absolutely fantastic. He diligently contacted about 40 mortgage providers and gave me good, clear, helpful advice. He regularly called and emailed me with updates. Top bloke and top servicePosted
We had the pleasure of using John Charcol for the purchase of our first home. They made everything so simple for us. From sourcing our mortgage to finally getting us over the line on completion Day. Norbert and Samantha worked tirelessly. They chased our solicitors at every opportunity and kept us up to date on a daily basis. If one of them wasn’t in, they handed over to a colleague to make sure there was continuity at all times for us. I would definitely recommend John Charcol and I would certainly not go anywhere else myself.Posted
How Long Does Remortgaging Your Home Take?
Remortgaging takes about 4 – 6 weeks on average. It can take slightly less or slightly more.
Do I Need to Wait Until My Current Deal Ends?
Remortgaging before your introductory deal ends is possible, however it’s likely you’ll face ERCs which can make doing this expensive.
You can start arranging your new mortgage 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 I Raise Money on My Current Property to Buy Another House?
Remortgaging can be a way 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.
Will Having Bad Credit Affect My Options?
Having bad credit will limit your choice of lenders, depending on the extent of the bad credit and how recent it was.
Can Remortgaging Help Me Pay Off Debt?
Remortgaging can help you pay off your debt in the sense that it can allow you to consolidate multiple other debts – e.g. car loan, credit card balances. The new mortgage that you would take out would need to be for an amount that's higher than the amount remaining on your current mortgage. This would enable you to release some equity that you could 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, this may be a suitable option 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?
Remortgaging can be a way for you to borrow some extra money to fund home improvements. Essentially, you borrow more on the new mortgage than the amount you have outstanding on your existing mortgage. This extra amount can then be used to pay for improvements on your property.
One major benefit of raising funds this way 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.
Will I Need a Solicitor When Remortgaging?
You’ll need a solicitor 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. Many people choose to switch to a new deal with a different lender when their existing introductory deal ends as another lender’s deal will almost certainly always be cheaper than going onto their existing lender's SVR.
We can find you a solicitor to manage the conveyancing part of the 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.