Are you thinking about switching your mortgage? Whether you want to switch before your current mortgage rate ends or just find a better rate, knowing how to remortgage will help you decide if remortgaging is right for you.
When you remortgage, you switch to another mortgage with your current mortgage lender or take out a new mortgage with another provider. If you do it right, remortgaging can help you get a much better deal that could lower your monthly repayments, help you pay your mortgage off quicker, or free up some money to spend on home improvements or consolidating debt.
What Are the Reasons for Remortgaging?
There are several reasons why you may wish to remortgage your home, for example:
- Your current mortgage deal is due to end - when your current mortgage deal ends, your lender may put you on their standard variable rate mortgage, which is usually higher. Remortgaging may help to move to a mortgage with a lower interest rate
- You’re on a high interest rate - if your mortgage is on a variable rate, your mortgage payments could increase with a rise in the Bank of England base rate. Remortgaging may help you find a more competitive mortgage deal
- Release equity - remortgaging can release equity from your home, which you can use to pay off debts or for home improvements
- Reduce your monthly mortgage repayments - if you shop around, you could find a mortgage deal that offers lower monthly payments to that you’re currently paying
- Fix your monthly mortgage payments - remortgaging can let you swap from a variable rate mortgage to one with a fixed rate to give you more stable monthly payments
- Opportunity to make mortgage overpayments - remortgaging can help you find a lender that offers more flexible terms, enabling you to overpay on your mortgage without incurring penalties
- Consolidate debts - mortgage interest rates are typically lower than what you may have on loans and credit cards. Combining your debts into your mortgage will reduce how much interest you pay and the number of payments you make. However, increasing the length of your mortgage could cost you more in the long term
- Remortgage to buy another property - If you want to purchase a second home or a buy-to-let property, remortgaging can help you raise the money you need for the deposit. This could, however, increase your monthly payments while reducing how much equity you have in the property
- Adapt to changes in your circumstances - If you’re splitting from your partner, have had a pay rise or need more money for a particular reason, remortgaging can help you find a better option that better suits your new financial situation
How Long Does It Take to Remortgage?
While the timescale for remortgaging will vary depending on the lender, it can take up to 2 months typically, sometimes longer if issues within your application cause a delay. If you want to remortgage before the end of your current mortgage deal, make sure you get the timing right to give yourself enough time to avoid moving to your lenders more expensive standard variable rate.
The remortgage timeframe will depend on how complicated your mortgage application is. Lenders treat remortgages as a new mortgage application. This means you’ll have to go through the standard hoops of applying for a mortgage, such as a mortgage interview, property valuation, credit checks and review of your income and expenses. Mortgage lenders are now stricter on income and affordability assessments and whether borrowers can still afford the mortgage should the rate increase. If your income or expenditure has changed significantly since you last applied for a mortgage, you may find it harder to get a remortgage.
If there are any queries or issues with the property valuation (for example ‘down valuations’ – where your lender values your property at a lower value), this may hold up the remortgage process as the lender may want to be more careful about lending to you above a certain loan-to-value threshold. If the value of your property has dropped below what is remaining on your existing mortgage, this could also cause further delay, and you may have to either wait for the price to recover or make up the shortfall yourself.
The legal and conveyancing aspect of the remortgage can also delay the process while waiting for the Land Registry, property, and financial information to be completed. Remortgaging with your current lender may be faster as it can be treated as a product transfer and avoid the extra legal work.
How to Remortgage Your House
Depending on your situation, it can take anywhere between a few weeks to a couple of months to remortgage. It's a good idea to start the remortgaging process 3 to 6 months before your current deal is due to end. That’ll give you time to find a good deal that the lender will reserve until your current deal ends. Make sure you compare a broad range of deals and don't just stick to your current lender. But do check their rates to give you a reasonable benchmark.
1. Check for Charges
If you remortgage before the end of your initial period, you may have to pay an ERC (early repayment charge), which is a percentage of your current mortgage balance. You'll find the amount set out in the terms and conditions of your mortgage or you can check with your lender.
2. Know Your Credit Rating
When you apply to remortgage, lenders will want to look at your credit report. They’ll want to see that you have the financial discipline required to meet your repayment obligations. Your credit report is a detailed record of your credit and debt history. It includes details of how much loan and credit card debt you have, and if you have any missed debt repayments. It's a good idea to check your credit report before you start the remortgage process by using one of the following free credit reference agencies:
If a lender was to turn down your application, it will affect your credit history and make it harder for you to get credit in the future.
3. Find Out Your Property's Value
The more equity you have in your home, the better the remortgage deal you'll get. Equity is the amount your home is worth minus how much you have to pay on your mortgage. Your property's value may have gone up or down since the time you purchased it. Do some research or get an estate agent to value your home to give you a more accurate figure to use when it comes to looking at deals.
4. Get Your Finances in Order
You may have an excellent credit record, but if your finances are in disorder, your mortgage lender will want to know why. You should and shouldn't do a few important things in the run-up to applying for a remortgage deal. For example:
- Don't go into your overdraft
- Don't apply for any form of credit before your mortgage
- Avoid any heavy or erratic spending before you submit your mortgage application
Lenders will want to see that you manage your money well and have enough left after your key outgoings to repay them each month. Dipping in and out of your overdraft or splurging on big items will not make you look like a reliable and low-risk borrower.
5. Get a New Mortgage Deal
The three key ways to find a new mortgage deal are:
- With your current mortgage provider
- By checking a mortgage comparison website
- Using a mortgage broker
6. Remortgage with Your Current Mortgage Provider
It may be quicker and easier to remortgage with your existing mortgage lender, but this doesn't mean you'll get the best deal available.
7. Checking Mortgage Comparison Websites
A mortgage comparison site can give you a good picture of what mortgage deals are currently available on the market. However, there may be deals you cannot get as it’ll depend on the lender and your situation.
8. Speak to a Mortgage Broker
One of our expert brokers can help you decide what type of mortgage best suits your circumstances and find the right mortgage deal. We offer deals from whole of market, so you can rest assured we’ll find the best deal for you. We also know which lenders are more inclined to lend to someone who is self-employed or has bad credit.
9. When to Contact a Solicitor
If you’re remortgaging with your current mortgage provider, you won't need a conveyancer or solicitor. However, you’ll need a solicitor if you’re moving to a different provider. Some mortgage lenders may use their own solicitor at no cost to you or offer you cashback if you want to use your own solicitor.
Types of Remortgages
There are several different types of remortgages available on the market:
You may want to remortgage a buy-to-let property to:
- Buy another property
- Make home improvements
- Get a better rate
- Pay off or consolidate debts
- Swap to a residential mortgage
The process of a buy-to-let remortgage is very similar to that of remortgaging your home. However, a buy-to-let mortgage tends to have higher fees and interest rates than a residential mortgage. Mortgage lenders will also have certain criteria that you must meet for this type of mortgage.
Interest-only mortgages require a borrower to only pay interest on the monthly repayments, resulting in low monthly payments. To have an interest-only mortgage, you must show the lender you have a plan to pay the loan off in full at the end of the mortgage, such as:
- Selling another property
- An endowment
With this type of mortgage, borrowers often repay some interest and the loan in their monthly repayments. When you remortgage, you can either switch to a repayment mortgage or get a better interest-only deal.
If you've got an endowment policy, you should find you have a big choice of lenders and remortgage options available to you. Lenders will typically make an offer based on the central figure projected in your endowment statement. Paying off the mortgage capital by selling your home or using savings will offer a much smaller number of options.
Remortgaging to Buy Another House
Remortgaging can enable you to take out some of the money in your home to buy another property as a second home or to rent out. However, borrowing more could increase your repayments. If you plan to buy a home to rent out, you'll need to apply for a buy-to-let mortgage.
Remortgaging for Shared Ownership
If your home is under shared ownership, you may choose to remortgage to buy more shares of the property or get a better interest rate. With a shared ownership home, you’ll own between 25% and 75% of its value, and the rest you will pay rent on. Taking out a larger loan by remortgaging can enable you to buy more shares until you own the whole property – which is a process called ‘staircasing’.
Remortgaging for Home Improvements
You can use a remortgage to release equity in your home to pay for home improvements. The money borrowed from your home is added to your mortgage, which could increase your monthly payments.
Remortgaging to Release Equity
When you take away the amount of mortgage you have outstanding from the value of your home, you’re left with the equity, which is what you own. Remortgaging to release equity frees up money you can spend on anything from home improvements, your children's education, or a deposit to buy another property. The amount of equity you take from your property will be added to your mortgage for you to pay back.
Remortgaging with Bad Credit
If you have bad credit, you may find fewer mortgages available to you and struggle to get a good rate. Try to improve your credit score before applying for a mortgage, as the lender will look at your credit report while deciding whether to let you have a mortgage.
Remortgaging for Debt Consolidation
If you have several unsecured debts, such as personal loans or credit cards, remortgaging lets you take equity from your home to pay off these debts. Paying off your debts by remortgaging could cost you less than a debt consolidation loan or using a balance transfer credit card.
Remortgaging When You Own Your House Outright
If you own your home outright, all the equity is yours. If you need a cash lump sum, you may be able to remortgage. When your mortgage is paid off and there are no loans against it, this is known as 'unencumbered'. Some mortgage lenders will offer remortgages if your property is unencumbered, while others offer new purchase deals. Remortgaging a house that's unencumbered is similar to a standard remortgage. The lender will want to look at your credit report and finances to ensure you can afford the mortgage. However, you may also get a better rate and be offered certain incentives, such as a free valuation.
If you remortgage a home you own outright, you’ll likely have more lenders and mortgage products to choose from. The lender's risk of lending to you will be considered lower, and the fact that you've already paid off a mortgage shows you are a reliable borrower.
How Much Can You Remortgage Your House For?
The amount you can remortgage for will depend on several factors. For example, a lender will want to ensure you can afford the new mortgage and will check your income and expenses. They’ll also look at how much equity you have in your home. If your home has increased in value since you took out your current mortgage and you've kept up with your repayments, you should have built up a reasonable share of equity that you can draw on.
Each mortgage lender has its own formula for calculating how much it’ll lend borrowers. However, in general, you can expect your mortgage provider to add together your basic salary and a share of any other income you have. This typically includes money from things like commission, bonuses, benefits and a second job if you have one. To calculate your disposable income, it looks at your general outgoings, including debt repayments, school fees, maintenance payments, utilities, groceries, and other household expenses. Your disposable income must cover both the new mortgage and mortgage payments if the rate rises by 3%. This ensures there’s a sufficient cushion should there be a rate rise.
Your mortgage provider may decide to reduce its initial figure to ensure you can comfortably afford the remortgage and to give you some breathing space should your circumstances suddenly change.
Remortgaging can be more difficult if you’re in arrears on your current mortgage. If you’re in arrears or think you’re about to go into arrears, speak to your lender as soon as possible.
Insurance for Mortgages
Keeping up with your mortgage payments is vital to ensure you don't lose your home. Your mortgage is likely to be one of the biggest loans you’ll have, so you may wish to consider taking out mortgage protection insurance. This will ensure that even if there's a sudden unexpected change in your circumstances, such as losing your job or becoming seriously ill, the payments on the mortgage are still covered. Mortgage protection policies are often taken out in conjunction with taking out a mortgage. There are 3 main types of mortgage protection insurance you may wish to consider:
- Life insurance - life insurance pays out to your nominated person, such as a close family member, if you die
- Income protection - income protection covers part or all your regular income if you become too ill to work
- Critical illness cover - this will also pay out if you become very ill and unable to work
If you need advice on how to remortgage and what options are available to you, speak to one of our experienced advisers at John Charcol. We’ll discuss your requirements with you to help you find a remortgage solution that's right for you. Give us a call on 0330 433 2927 on enquire online today.
Compare the latest remortgage rates and deals with our comparison tool and discover how this type of mortgage works, the process and if it’s suitable for you.
Remortgaging means to switch to a new deal with a different lender but stay in the same property. Learn about remortgage costs, valuations and see our advice.
9 Reasons to Remortgage
Read our nine reasons why you should consider remortgaging your home. You can save a lot of money on remortgaging, so make sure you get the best deal.
Do I Need a Solicitor for My Remortgage?
Looking to remortgage your home? We explain when and why you may need a solicitor to help support you through the remortgaging process.
How to Find the Best Remortgage Rates and...
Learn how to find the best remortgage rates & remortgage deals here. We go through what to consider when comparing deals, which lenders there are & more.
When NOT to Remortgage
Not sure whether now’s the time to remortgage? Find answers to all your remortgage questions.
Here you’ll find our free remortgage calculator which helps you work out how much you could potentially save each month if you remortgaged onto a new rate.
Help to Buy Guide
Support from the government-backed Help to Buy initiative is available for first-time buyers and existing homeowners who are finding it difficult to move up the housing ladder.
On this page you’ll find our detailed mortgage terminology glossary. There’s a lot of jargon out there but we’re here to make it easy.
There are many valid reasons to remortgage. If you’re considering remortgaging your home but need help finding the right option for you, contact John Charcol. Our team of experienced mortgage advisers can recommend a range of remortgage options to suit you. Request a call back or call us on 0330 433 2927 to get in touch.
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- 9 Reasons to Remortgage
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