How does remortgaging work?

The single most important thing about a mortgage deal is that it works for you.

You should be sure that you’re getting the best value for money with the lowest rates over the shortest time. However, if you’re getting the feeling that your current bank or other mortgage provider could be offering you better mortgage terms than your current deal, it may be time to consider remortgaging.

So what are the benefits of a remortgage and how does the remortgaging process work?

What is a remortgage?

Remortgaging is simply changing your mortgage provider from one lender to another. This is different to just switching onto a new deal with your existing lender, often called a rate switch or a product transfer.

Why do people remortgage?

There are many reasons why people change lender, for example to get a cheaper deal than the current lender can offer or because their existing lender will not let them do what they want or need to do.

If your current lender has relatively expensive products, then remortgaging will give you access to other lenders and products that might save you money both now and in the long run. If you are looking to extend the overall term, change repayment methods or even borrow more money but your existing lender will not let you, then you may be able to do that with a new lender by remortgaging.

Sometimes borrowers need additional flexibility with overpayments to clear the outstanding balance more quickly than their current lender will allow, therefore switching lender is the best option for them.

Whatever the case, there’s likely to be a lender out there offering mortgage terms to better suit you and your future needs.

 Why should I remortgage?

You want to save money with a cheaper mortgage rate

Whether it’s phone or TV packages, new customers get all the best deals, don’t they? That’s the case with mortgages too. New customers will often be given more competitive rates — an initial deal — for the first two to five year period of their mortgages. Once that introductory rate ends they will automatically move on to the lender’s Standard Variable Rate. Lender’s variable rates  are nearly always the highest rate they charge therefore many borrowers would look to avoid that by either taking a new product with that lender or look around for a cheaper deal elsewhere.  In fact, shopping around before your current deal period ends can be a good way to save a great deal of money and minimise your monthly costs. There are caveats though.

If you look to leave your current lender before your current deal ends you may be in line for substantial early repayment charges. These can be up to 5% of your outstanding mortgage balance. Also, the new lender may have a product or arrangement fee for the rate you are looking to apply for. . There may also be solicitor and valuation fees to be factored into the remortgage cost although many lenders have products that have a ‘free valuation’ and a ‘free standard remortgage legal service.’ If your outstanding mortgage is below a certain threshold (generally less than £30,000) or if you don’t have much time left, this might mean that repayment charges, exit fees and new product fees could negate any savings you could make. For a large outstanding mortgage though, it could mean that you can save hundreds on your monthly payment. Could it be time to start checking-out mortgage calculators and remortgage options?

Your house price has risen

With rising average house prices, your home might be among those which has seen its value climb steadily in recent years. If so, you may be in line for more favourable mortgage repayment rates. Your Loan-to-Value ratio (LTV) is the sum you borrow compared to the current value of the property.  If you bought a property five years ago with a 10% deposit then at the time the LTV was 90%.  If prices have risen then the LTV could be as low as 80% and that means you would be in a lower price range of products as a result.  Remortgaging could be a very good option for you to take advantage of this reduction in your property’s LTV.

Checking mortgage calculators will show you what kind of mortgage payments you could be paying regardless of whether the bank has you on a variable rate mortgage or a fixed-rate mortgage. How does your current deal compare? If you’ve been working hard to pay-off your mortgage while at the same time the value of your home has been rising, it probably means that your LTV has come down even further.

Remortgage to release equity

If you’ve had your current mortgage for some time, the chances are, especially with rising house prices, there’s quite a bit of cash tied-up in the value of your home. Remortgaging can be a useful way to release some of that equity.

Do you need to borrow more money for home improvements or to consolidate debts like personal loans or other financial commitments? Perhaps you want to remortgage to buy another property or pay for a wedding or even university fees? It could be time to look for some mortgage advice: remortgaging to release equity is often a very cost-effective way of borrowing for major expenditure and raising extra money. This may not be possible, however, for those in negative equity or for those who still have a high LTV ratio. Remember too, that converting short-term debt, like credit cards or personal loans, into long-term debt, like mortgages, could mean that you end-up paying more in interest  over time, so be sure to get some professional debt consolidation advice before you do it.

You need a mortgage to suit some new circumstances

Changing career? Going back to education? Got some extra cash burning a hole in your pocket and want to make higher mortgage payments? Do you feel like it’d be easier to budget your monthly costs with a fixed-rate mortgage? Maybe you’d be better temporarily switching to an interest-only mortgage? Depending on your personal circumstances, you may be able to change from one lender to another just to get a mortgage arrangement that is flexible enough to suit those circumstances. If your current mortgage doesn’t suit your circumstances, there are plenty out there which could, and a professional broker is well-placed to give you the best mortgage advice on a remortgage deal. Remortgaging could give you the flexibility you need to pursue your personal goals, invest your extra cash or pay-off other personal loans/cards at much lower rates. If you feel like your current deal is holding you back, ask yourself: “Is it time to remortgage?”.  If so please call 020 4527 3223 talk to one of our advisers or arrange a call back at a time that suits you.

Getting ready to remortgage

So you’ve run the numbers through the remortgaging calculator, but you’ll still need to do a little homework before you can begin the remortgaging process. Before you speak to either a bank’s mortgage adviser or a mortgage broker, you should think about the following questions.

What do you want from a mortgage?

Take a look at some of our reasons to remortgage above. Do you just want a better deal than your current lender can offer? Is mortgage flexibility your primary concern? Do you want to consolidate debt, personal loans or borrow extra money? Are you on a variable rate mortgage and think a fixed-rate mortgage could be more suitable? Do you need to switch to an interest-only mortgage for a while, or convert your interest-only mortgage to a repayment loan? Are you curious about your LTV? Want to release equity? Whatever the answers, there are mortgage options to suit you.

How much is my home worth?

With rising average house prices, be sure to do a little research to get a decent value for your property. Luckily, we can help with that, especially if you have carried out some significant home improvements since you bought the property. The up-to-date value of your home will determine things like LTV, your total equity in the property and interest repayments. This is especially important if you want to release equity in your home. Those in negative equity, however, should seek mortgage advice before starting the remortgage process.

In partnership with Hometrack, Coreco have access to their market-leading Automated Valuation technology and can produce a personal guide to the value of your home. Contact us now if you would like to receive one of these reports.

What does it cost to remortgage?

Remortgaging may incur substantial costs like account closing fees with your existing lender and valuation/legal/product fees for the new lender.  You will have to to figure out if the costs and exit fees of remortgaging outweigh any savings you’ll make. Most people remortgage when their current product expires to avoid actual penalties, and we recommend you speak to a broker and start the process just over six months before your current rate expires to ensure the timing is right and you get the very best rate.

How’s your credit score?

Any potential mortgage lender will ask a lot of questions and check your credit history as an indicator of future behaviour like your ability to meet your mortgage payments regularly and on time. A good credit history is important because if your overall credit score has suffered due to missed payments on an outstanding loan (i.e. you have bad credit), it may make it more difficult to get a remortgage deal with a new lender..

How the remortgage process works

When you find a lender whose mortgage product ticks your boxes, what happens next? What are your remortgage options? How does the remortgage process work?

Time

In terms of time, you’ll need to get in touch with any potential mortgage providers about four to six months before you want to switch. That gives you a chance to think about what you really want from your new mortgage lender and the broker enough time to find the best remortgage deals, show you the most competitive mortgage options and give you the soundest mortgage advice. Afterwards, it’s a pretty straightforward process.

Agreement in principle

This is a preliminary step towards mortgage approval. Based on a few details regarding your current circumstances and a credit search with the credit reference agencies, you can find out if a lender is potentially prepared to lend you the amount you need. If so, they will issue an Agreement in Principle, sometimes called a Decision In Principle. You don’t have to choose a specific product yet, and a good broker will do this online with the lender for you as part of the full mortgage application.

Calculating remortgage costs

So, what does a remortgage cost? In addition to any fees from your existing lender and any early repayment penalties you may face other costs when applying to a new lender. These could include application fees and arrangement fees (product fee), but property valuation fees and solicitor’s fees may also have to be factored-into the remortgage cost. While most lenders will now offer a free valuation and free legal fees as part of any remortgaging deal, if you need to move quickly it is often better to use your own solicitor. Sometimes, instead of a free standard remortgage legal service a lender will instead give cash back towards you appointing your own solicitor, which a professional broker will be able to assist with.  Solicitors are required to ensure that not only the existing lender is paid in full but also that the charge over your property is switched to the new lender.  They will also perform a number of checks on behalf of the new lender.

Application

Once you have decided on a mortgage product and how you want your new mortgage to be set up based on the advice and recommendation of your broker you can move to the next step – a full mortgage application. If you have indeed already done the Decision In Principle there is not that much more to do.  Your broker will give you a list of documents they will need for the lender’s underwriters and ask you a few more questions to complete the application.  Commonly requested documents include bank statements, payslips, P60s, self-employed applicant’s accounts, your most recent mortgage statement and possibly your credit reports. It is really important that the full application is as accurate as possible. Even tiny mistakes can complicate mortgage applications, though this handy guide should help.

Once you have the paperwork in order, you broker can submit your mortgage application for approval.

Mortgage Approval

After doing its due diligence including delving into your credit history with a full credit check, the new mortgage provider will hopefully approve your application and release your ‘mortgage offer of advance’ with copies going to you, your broker and the solicitors.

Choosing a mortgage provider

It pays to shop around for the best mortgage deal and remortgage options. Easier said than done, you might say. Mortgages are often mired in jargon with various percentage rates, a variety of fees and warnings but also differing flexibilities, options terms and conditions.] You could easily be forgiven for not wanting to even think about it.

Thankfully, there’s a much easier way than going it alone. That’s where a mortgage broker like Coreco comes in. With 25 years of experience, access to over 90 lenders, and 12,000 products, you can be sure that Coreco will offer you the best mortgage advice, explore the most suitable mortgage options and get you the most competitive remortgage deal possible, even from your existing bank or mortgage lender.

Let us help with your remortgage and find a remortgage deal that works as hard as you do.

Give us a call on 020 7220 5110 or fill out the form below to arrange a no-obligation chat!

Your home may be repossessed if you do not keep up repayments on your mortgage.

There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.