Mortgages are a huge financial commitment, possibly the biggest you will make in your lifetime and as a result, need to be well-researched and fully understood. The length, the rates, the costs, are all things that matter when it comes to securing the loan that helps you finance the house you have been hoping for.
Adding to the potential confusion or uncertainty is whether remortgaging is right for you. In some cases, you may not even know it is an option or what it involves. That is where we come in, in this week’s guide we dive into the world of remortgaging so you know whether it is the right option for you.
Before we start though, we should explain, at least in brief, what remortgage means.
Remortgaging is when you move from one mortgage deal to another, possibly with the same lender. Possibly with a new one. This mortgage then replaces the original one and should save you money.
What does remortgaging mean?
Remortgaging, as we touched upon earlier is where you move from one mortgage deal to another to save money on your mortgage repayments. Just like utilities and other contractual services you may have at home, you can shop around for great deals and exclusive offers. Then when you find one that works out better for you, you can switch to it. This could be for a variety of reasons, of which we will go into later on!
But before jumping right in, there are a few things to consider first.
Things to consider when looking to remortgage
If you have started shopping around and found a few mortgage offers that may be beneficial to you, you should check a few things first. Research is extremely important to help you avoid early repayment fees, higher rates of interest or additional costs.
Look for fee-free mortgages as they could save you plenty of money. Your potential new lender could try and lure you in with such an offer but also be mindful of product fees. These could see you spending more than necessary and negate the benefits of remortgaging.
Leaving your current mortgage for a new deal could seem appealing at first but before committing to anything, you should look to see if your current deal has any form of early repayment charge. Similar to the product fees we mentioned above, this could counteract the remortgage benefits.
Your LTV could open you up to many great mortgage deals but if it is too high you could be missing out. Divide your remaining mortgage amount by the property value to see what your LTV is.
A remortgage is still a mortgage so you will need to be just as prepared when applying as you were for the initial mortgage. The same affordability checks will be carried out, so it pays to make sure your circumstances have not changed dramatically.
Why should you remortgage?
Reasons and circumstances for remortgaging vary from person to person but they tend to centre around one, or a combination, of the below:
- Low-interest rates have become available
- Your current deal is up for renewal
- You want to borrow more money and use it for home improvements or debt consolidation
- You want to be on a better rate than the current mortgage
These tend to be the most common reasons, but you may have your own that do not feature here. If these reasons or any others mean that remortgaging may be the best option for you or at least an option you want to investigate, it is best to know how remortgaging works.
How does remortgaging work?
There are a few steps and as mentioned at the top of the page, research is key so shopping around and discovering deals that may suit your needs is important.
We also touched upon the effects of leaving your current mortgage, but it isn’t just early repayment fees you may have to worry about. Sometimes, the benefits of remortgaging are outweighed by the costs you may encounter. These could not only include those early repayment fees but also:
- Conveyancing costs
- Property valuation costs
- Any booking or completion fees charged by the new lender
Next, you would need an agreement in principle. Just like when you first applied for a mortgage. It will assess whether you can afford the new mortgage you are asking for. It will not affect your credit score and is also not a guarantee of acceptance for the mortgage.
If the agreement in principle has been granted, then you can apply for your new mortgage. This application will be treated like a regular mortgage application with hard credit checks, among other things.
The legal work then begins as it would in any other house-purchasing situation. The solicitor or conveyancer will manage the paperwork for you and assess that the new mortgage is enough to pay off the existing one. If all is good, you will have the chance to review the offer.
A lender will value the property and check that it will provide security for the new mortgage. Once that is done, and the mortgage lender has given the green light, you will be able to review, accept, and sign. With this being the final stage, a completion date will be set and this is where the new mortgage takes over the old.
How long does remortgaging take?
Depending on your circumstances, the timeline can vary but it is normally expected to take anything from 4-8 weeks from your date of application. If, though you have not conducted enough research in advance, you could find the whole process taking significantly longer. Therefore, it is advised to start looking into remortgaging options around 3-6 months before your current deal expires. This allows time for you to find suitable deals and investigate costs. Most of the time, you can secure a new deal before your old one ending, it can then seamlessly switch from one to the other.
Can you remortgage early?
Ultimately, this depends on where you are in terms of your original mortgage agreement. If it is still in its initial discount period, you will almost certainly be charged an early repayment fee. This can be a significant sum and may mean remortgaging is not worthwhile. As part of your research, you should look at your current mortgage and not just new ones. For example, how much does it currently cost, how long does the initial discount last and what the early repayment charge might be. Should you be considering remortgaging to borrow more money or consolidate debt, a house sale may be a good option to consider. With SOLD you could have a sale completed, with no fees, fully managed and with zero stress. Because we sell your house for free, you take the full amount with you, ready to go towards your next property project or clear existing debt. Speak to us today and see how we can get it SOL