Remortgaging has grown increasingly popular among the clients we work with as a way to either pay off a current mortgage with a new mortgage with better terms, or to quickly acquire funds for a variety of purposes. In either case, it’s an opportunity for you to reevaluate your borrowing needs and improve your financial situation.
You may desire to remortgage for a variety of reasons, including consolidating existing short-term loans, reducing the size of future mortgage repayments, making home upgrades to raise home value, financing another property purchase, funding a new business, or simply making a one-time purchase. Whatever you’re looking for, as specialist advisors, we’ll be able to help you discover it.
Remortgaging has a number of advantages for those looking to reduce their overall debt or receive the funds they require to improve their situation.
- Reduce your monthly payments by securing a better interest rate than you presently have on your current mortgage.
- Reduce the length of your mortgage and potentially save thousands of pounds over the course of the loan.
- If there is adequate equity in the property, release part of the value and use the surplus to restructure debts or make home improvements.
- Raise cash for a variety of personal reasons, such as starting a business, assisting family, purchasing another property, or making a major purchase, if the property has enough equity.
You should be able to remortgage — that is, swap your current mortgage with one from a different lender – at any time, technically. However, while there are no circumstances that will preclude you from remortgaging, there are those that will make it a potentially risky decision.
Early repayment penalties will be one of these reasons. Many lenders have stipulated a tie-in time for their mortgage deal of possibly two, three, or five years – usually coinciding with their introductory offer on the deal, or even longer in certain exceptional situations – especially in the previous few years. They may levy a fee during this time to compensate for the loss of interest profits if the loan is repaid early.
Early repayment fees, which are often set as a percentage of the mortgage total, can add up to thousands of pounds, and you must factor them, as well as other prospective fees, into the overall costs of remortgaging. You need to be sure that every financial decision you make benefits you, and if the costs of remortgaging outweigh the savings from a contract with a different lender, you might want to reconsider.
In purely practical terms, the optimal time to refinance is when your current mortgage’s introductory term expires. Most arrangements will revert to the lender’s Standard Variable Rate (STR) at this time, which may be much higher than the beneficial rate you had been paying up to that point, resulting in a large rise in your monthly payments.
Although you may be able to get a better bargain with another lender, don’t rule out the possibility of sticking with your existing one. In order to keep your business, some lenders may offer to move you to another mortgage product in their own line, eliminating the need for additional underwriting, recalculations of the allowable loan, or a new property value (unless it would be to your advantage, and the lender offers it as part of the deal).
Looking for a new mortgage to replace your current one is similar to looking for your first one: there are various elements to consider that will vary depending on your circumstances, and whether remortgaging is the best option for you will be determined by how they all stack up.
First and foremost, how much do you wish to borrow? This will be the outstanding sum on your current mortgage if you are merely replacing one mortgage with another. Many property owners, however, use remortgaging to borrow more (especially if the property’s value has improved) to fund home upgrades, a large purchase such as a car, or any of a number of other reasons.
Then there’s the question of the new mortgage’s term. Will it last as long as your existing mortgage, or will you opt for something with a shorter or longer term? What will the product’s term, or introductory period, be? Deals are typically for two, three, or five years, with longer-term deals lasting up to ten years. You should also think about the product kind, such as fixed rate, tracker rate, or a discount deal.
Most consumers will look at the interest rate when considering a remortgage option. While this is obviously essential because it affects the cost of the mortgage over time, you must also evaluate the other elements that surround the mortgage. Will you have to pay significant arrangement fees on the new mortgage, or will you have to pay a large early repayment fee on your present mortgage? Will you have to pay a repayment fee if you wish to switch back when the deal’s term ends, or do you want to risk locking yourself in for a long time? Finally, would the new mortgage allow you to make overpayments or pay off the loan early part-repayments from time to time without a penalty?
You may decide that now is not the best time to remortgage, or that it is simply not financially viable, after considering all of the facts surrounding your present mortgage contract. You will often be locked into a mortgage for a period of 2 to 5 years, during which time you will be required to pay early repayment penalties if you choose to switch lenders. This payment could be in the thousands of pounds.
If the size of your loan isn’t significant enough to result in a financial benefit from moving, you might want to contemplate remortgaging. Arrangement fees and other set-up costs charged by a new lender may negate the interest savings realised by switching products, and a new mortgage may end up costing you more in the long run.
In many ways, remortgaging is similar to obtaining a traditional mortgage when purchasing a home, although it is a little easier in a few aspects.
As you might think, your home will need to be valued, and you’ll need a solicitor to manage the deed transfer and guarantee that all contracts are in order. However, under a ‘fee-free’ refinancing contract, it’s now quite normal for the lender to provide these as part of their total service.
Your application will be submitted to the lender as usual, and they will conduct their own assessments and checks on the loan’s affordability and your creditworthiness, which may include a credit record check with one or more of the UK’s major credit reference agencies.
If all legalities are found to be in order, your previous mortgage will be paid off by the lender and your new mortgage will begin after your application is completed and you receive your mortgage offer. Remortgaging does not require a specific period of time and differs from lender to lender; however, depending on any issues, it might take anywhere from 4 to 8 weeks to complete.
Because this is a competitive market with a variety of lenders all vying for your business, the expenses of remortgaging can be relatively low in some situations. Many programmes come with a variety of benefits, such as free mortgage assessments and a free legal package to cover the conveyancing, but this isn’t always the case.
Some lenders will ask you to pay for your appraisal and legal fees in exchange for a lower interest rate. If you can afford the up-front costs, this may be the best option in the long run. On top of that, you may have to pay mortgage arrangement fees and broker’s fees, as well as an early repayment fee if applicable and any administrative fees associated with closing your present mortgage account.
All costs associated with the mortgage products under consideration will be known to our mortgage consultants, and they will be taken into account when determining which remortgage package is ideal for you.
The quantity of goods on the market that are offered fully free of fees is an important consideration to consider when considering a remortgage. You won’t have to pay any arrangement fees with these loans, and the lender will cover the costs of valuation and legal procedures. Some packages may also offer a small cash back to reimburse any closing costs incurred by your current lender when you close your existing mortgage.
However, keep in mind that a plan with no costs may not always be the best option for you in the long run. Speak with one of our mortgage consultants to find out what might be the best option for you.
Yes, because a shared ownership mortgage is treated similarly to a traditional mortgage. The only stumbling block will be a lack of options due to the fact that not all lenders offer shared ownership mortgages.
The best lender to approach will depend on your specific circumstances and needs. Our expert mortgage experts will thoroughly examine your circumstances and present you with all of your options. Get in contact with us today for a free consultation.
Yes, this is possible, but keep in mind that lenders will analyse your application using the same criteria as a regular Buy-to-Let mortgage. Rather than focusing solely on your own income, they’ll base their estimates on the expected worth of monthly rental revenue on the open market, as well as the property’s valuation and equity.
A member of our knowledgeable mortgage team will be able to examine your entire situation and provide you with an unbiased opinion on whether you can reduce your monthly payments or unlock the equity in your home.
This is conceivable, but keep in mind that not all lenders give mortgages to persons who are using the government’s Help to Buy programme. As a result, you’ll want to pay close attention to what’s offered and how the new loan compares to your current one.
Despite the fact that the loan-to-value of the remortgage is smaller than if you had a regular mortgage, a lender may assume that you have more than one commitment on the home to repay, depending on where you are in the timeline of your present mortgage. The process may not always be simple, but whether you’re on the original Help to Buy 1 or the succeeding Help to Buy 2 scheme, you should be able to get a remortgage.
Our specialist team of advisors has an in-depth understanding of the Help to Buy scheme and all of the complexities surrounding it, and will be able to tell you which lenders may be able to offer you the best prices for your remortgage.
Yes, you can remortgage your home if you’re already on an interest-only mortgage. However, because these sorts of mortgages are considered higher risk by the regulator, there are some specific requirements you’ll need to follow in order to succeed.
Lenders will usually only consider an interest-only refinance in the following situations:
- The borrower may be able to demonstrate a higher level of income.
- The maximum loan-to-value on the mortgage is 75 percent.
- The property has a substantial amount of equity.
- The property value exceeds the minimum requirement.
One of our knowledgeable experts will examine every aspect of your case, including your present and future demands, and make an unbiased suggestion for the best remortgage deal to meet your circumstances. It’s possible that a shorter-term 2 or 3-year fixed-rate agreement is suitable for you, or that a longer-term fixed-rate plan of 5 years or more is required.
As whole-market brokers, we have exclusive access to many mortgage packages and lenders that you won’t find on the high street. Whatever your requirements, we are in the greatest position to act quickly and efficiently to achieve the best offer for you.
The best mortgage lender at any given moment will be determined in large part by which lenders are offering which products at the time you are shopping, and which of those products will be most suited to your specific needs. Remember that the loan market is a two-way street: lenders offering the ‘best’ rates will each have their own set of criteria for evaluating applications, and they may or may not be prepared to lend to you, or to lend all of what you’re asking for.
Because the mortgage lending industry is constantly changing, with established lenders changing their products or creating new ones in response to market conditions and new challenger banks entering the market, you should keep in mind that what appears to be the ‘best’ lender in a chart or based on one set of criteria may not be the best lender for you. Also, depending on the borrower’s unique situation and needs, the best lender for you might not be the best lender for the next borrower.
We believe that using the word “best” in this situation might be deceptive, and even harmful, if it leads a borrower to choose an unsuitable product. The greatest lender for you, in our opinion, will be the one who best matches your demands, delivers the finest product for your situation, and does it with excellent customer service.
The term “product transfer” is used in the industry to describe a process in which your mortgage remains with your current lender but your interest rate changes. This normally happens as the deal time draws to a close – or closes entirely – and the scheme reverts to the lender’s Standard Variable Rate.
Rather than remortgaging with a new lender, it may be more cost-effective to stay with your present lender if they are willing to offer you a better deal in order to keep your business. The biggest advantage is that if you are merely moving products and not borrowing additional funds, the lender will not need to perform any additional underwriting or affordability checks, making the procedure very simple.
While it is a competitive market, and many lenders are more flexible and proactive in their efforts to retain consumers, sticking with your current provider may not be the best course of action, and you may be able to get a better deal with another provider. The Mortgage Centres is always up to date on market changes and new products that become available. When we make our recommendations to you, we will consider any offer your current supplier is prepared to make and compare it to other appropriate products on the market, as well as any expenses or fees associated, so you can be confident you are getting the complete picture and can make an informed decision.