“Should I remortgage?” Remortgaging your home can save you money on what is likely to be your biggest ongoing monthly expense. So, read on for information on whether you can and should remortgage, and how to remortgage your home.
What does remortgage mean?
Very simply, remortgaging is where you switch your mortgage to a better deal, potentially saving you thousands of pounds on your annual repayments or meaning that you can pay it off quicker. You can also remortgage to release equity, which is where you increase the amount you are borrowing to free up some cash. This reduces the share you own in your property, but you could remortgage for home improvements, to support a loved one or even to buy a new car.
Remortgaging your home can be daunting, particularly if getting your initial mortgage proved to be a little tricky or time consuming. If you’re apprehensive about switching provider, your current lender may have remortgage deals you can take advantage of. This will mean you don’t have to go through the same affordability checks, application process or the expense of a new valuation when you switch. However, another bank or building society may be able to offer you a much better deal.
A homeowner may choose to remortgage for the following reasons:
- To take advantage of cheaper deals to bring down their monthly repayments
- To avoid the standard variable rate at the end of their current mortgage term
- To increase their borrowing amount
- To overpay their mortgage
When to remortgage?
- There’s no time like the present if your current deal is about to end.
- If your home has substantially increased in value, shop around for the best interest rates and for products with more flexibility. Your greater equity in the property gives you a better loan to value (LTV) ratio, giving you access to the best rates.
Can you remortgage early?
Even if you’re on a fixed term deal with a number of years left to run, it could be worth checking out the exit fees involved. You can add the cost of terminating your contract early to any fees charged for a new deal and work out whether you’ll be saving money based on your new monthly payments.
When not to remortgage?
Remortgaging may not be a suitable option for all homeowners, consider the following when deciding if you should remortgage:
- If the value of your home has dropped, remortgaging may not make sense, even if interest rates appear to be favourable at first glance. This is because you’ll own less equity, so your LTV ratio will be higher. To work out how much equity you currently own, all you need to do is subtract the amount remaining on your mortgage from the value of your property. If you have very little of it then a remortgage could be a bad idea, especially if you already have a decent interest rate.
- Likewise, if you don’t have much left to repay on your mortgage, the savings you can make by changing deals may be outweighed by the fees and costs involved in switching. High early repayment and set-up fees can also put a dampener on your remortgaging ambitions, along with any credit problems you’ve had since you last took out a mortgage.
How does remortgaging work?
Remortgaging your home can save you money, so read on for information on how to remortgage your home:
- Instruct your conveyancer who will check the legal status and title of your home.
- Check your current mortgage status as any outstanding payments due on your current mortgage must be repaid at completion.
- Do your checks as some mortgage lenders require your conveyancer to carry out local, drainage or mining searches which can make the transaction slower and costlier. For other lenders indemnity insurance may be sufficient.
- Sign your offer and return this to your conveyancer as quickly as possible, to avoid any delays. Make sure that the repayment method is correct and checking any early repayment fees. You need to be sure that the amount you’re going to be paying will work for you during the period of the new mortgage. Make sure that you fully understand all of the terms and conditions of your new offer. For instance, if the new mortgage amount is less than you owe to your existing lender, you’ll be expected to make up the difference. This will need to be paid before the completion date, so make sure you don’t leave yourself any nasty surprises.
- Your conveyancer will register the new mortgage at the Land Registry and provide proof of this to your new lender, as well as deal with various mortgage security issues.
How long does a remortgage take?
The remortgaging process typically takes between four and eight weeks after application, while you can usually expect the quickest turnaround when you stick with your current lender. As you want to avoid moving onto a standard variable rate (SVR) – which is likely to involve much higher interest rates – you’ll need to time your remortgage to coincide with the end of your current deal.
As you can secure a new deal six months in advance, it’s prudent to start the remortgage process as early as possible. This gives you or your mortgage broker the time to compare products and find the best rate, as well as the opportunity to sort out your finances ready for inspection and to get all of your documentation in order, including things like your identification, bank statements, pay slips and proof of address. If you’re self-employed or have your own business, you’ll usually need to supply your last three years’ accounts or tax returns.
Disclaimer: This article is for informal and general advice on remortgaging