Remortgaging is the process of getting a new mortgage on a property that you already have. There are a number of factors that can contribute to such a move. Remortgaging normally takes place when you have reached the end of your mortgage deal. However, there can also be other good reasons to switch. This expert advice guide covers all that remortgaging entails; why you might consider it when to consider remortgaging, the costs of remortgaging, and step by step approach on how to do it.
What does Remortgage Mean?
When you opt to switch from one mortgage lender to another on a home you already own, the process is referred to as remortgaging. This might mean making a new deal with your present lender or you might opt to move to a new mortgage lender. Your mortgage is likely to be the biggest financial commitment that you decide upon. Remortgaging is equally an important decision and should be undertaken with utmost seriousness just like the first mortgage.
There are a number of remortgaging options that one can choose from and here are some of the key things the process entails;
Why Consider Remortgaging
There are a number of reasons why you should consider remortgaging and having knowledge of them can be of great help. Here are some of the reasons for remortgaging;
Your current term of the mortgage is coming to an end
When the mortgage term is coming to an end, you need to put on the lender’s standard variable rate (SVR) which you may want to at all cost avoid. This is because the interest rate you are likely to pay might be higher.
You intend to increase borrowing so as to free up your cash for some major expense
You may consider remortgaging if you have some major expenses that you want to free cash for. It can either be a home improvement project that you might want to fund, a buy-to-let property that you might want to invest in or other major expenses.
Reduce monthly repayments
You might be on the lookout for a cheaper mortgaging deal that you might find to be affordable each month. You really don’t have to borrow more so as to switch into a better deal with better repayment rates. Remember there might also be fees associated with exiting the present deal but remortgaging could still be worth it.
You intend to overpay then consider remortgaging
Once your financial circumstances might have changed, you might prefer working with a mortgaging company that allows you to overpay. By overpaying your mortgage installments, you also get to reduce the length of time you’re required to make payment in the process which is great.
Change in the base rate for the bank of England
If in case you are on a variable rate mortgage, then you might consider shopping around for a rate that’s more competitive.
Your property has increased in value
When your property has increased in value it means a lower loan to value (LTV). It might therefore mean that you qualify for a cheaper mortgage.
Fix your payments when considering remortgaging
You may consider remortgaging if you intend to fix your payments. If you know that your payments are going to increase then you can opt for remortgaging to a fixed-rate deal. A fixed-rate deal will provide you with that certainty on the amount to pay each month.
When to remortgage
Remortgaging is something that you can consider every few years. It helps in ensuring that you are on the best deal and that you are not paying higher amounts. Ensure that you set a reminder three months prior to the end of the fixed deal. Doing such will provide you with plenty of time. You can use to shop around and have your remortgage application completed in time before switching to a better deal.
If in case you have repaid a good amount of your mortgage in the past years and have gained some equity on your home, switching to a different mortgage can help reduce the interest that you get to pay each month. You will then be able to take advantage of some of the most competitive deals. According to the lending trends in the UK with regard to mortgage finances, there were 21,370 new mortgages in May 2019. This was alongside additional borrowing where the homeowner borrows more than the original mortgage amount was at 20% compared to the same month previous year.
Please note that if you choose to switch before your current mortgage deal comes to an end, you may incur some penalties. Ensure that you do your math well for it might even be cheaper having to pay the penalties then switching.
The remortgaging process
Now that you are aware of when and why remortgage, let’s also have a look at how to remortgage.
Get into paperwork
Take time and remind yourself of the current of the mortgage deal. Get to know the type of mortgage that you are on, what the current interest rate is, and the length of time left to repay the mortgage.
Consult a free-mortgage broker
A mortgage broker will help you with workings on whether remortgaging is capable of saving you money. A broker will also help you compare a number of lenders that you can compare so as to land the best deal. They will also include fees and penalties for the calculations.
Check with your lender for remortgaging
Allow your current lender the opportunity of matching the deal that your mortgage broker recommends for you. That is if they are capable of offering something similar.
Prepare your mortgage application
Let your mortgage broker use the information that you have already provided to populate the lender’s application form. It then makes the whole application process easier for you and you can do it online. Remember that you can also track your application online.
Engage a conveyancing solicitor
If in case you remortgage with the current lender then it might be described as product transfer. Therefore, no additional legal work may be required in the process. However, when remortgaging from a new lender, you will need to engage a solicitor.
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