Most homeowners with a mortgage will consider remortgaging at some point – just as you might regularly compare the market to secure the best deal for your car or home insurance.
Remortgaging your house is essentially the process of switching your mortgage from one mortgage deal to another. The new deal that you choose may be with your existing lender, referred to as a ‘product transfer’. Alternatively, it might be a new deal with an entirely different lender.
In most cases, the idea of remortgaging is to shop around and ensure that you have the best mortgage product available to you. But what’s the process and how do you get started? In this article, we will explain how to remortgage your house.
Firstly, let’s look at the reasons why you might want to remortgage your house. The UK mortgage market is constantly changing. New deals and special rates are regularly being introduced and withdrawn by lenders.
Homeowners can easily find themselves with a mortgage deal that is no longer competitive. This can be particularly true if their financial circumstances have changed or they have owned their property for some time. Remortgaging allows the homeowner to switch to a more favourable deal. This might help to reduce their monthly repayments or allow them to pay off their mortgage sooner.
Perhaps your current fixed rate deal is about to end. You may be due to be put onto your lender’s standard variable interest rate (SVR). To avoid those variable (and perhaps higher) rates, it might make sense to remortgage onto another fixed rate, or some other deal, with the same or a different lender.
The longer you have owned your property, the more you are likely to have paid off your mortgage. At the same time, there is a good chance that the value of your home will have increased. The combination of these two things can have quite a dramatic effect on the loan to value (LTV) that you have on your property.
Your LTV is the percentage of how much mortgage borrowing you have against the property’s market value. Essentially, it determines how much of the home you effectively own. As your LTV decreases and you own more of your home, you are considered a lower risk to lenders. This means you will often get access to cheaper deals. Remortgaging may allow you to get a better mortgage deal and take advantage of your new lower LTV band.
Finally, you may want to remortgage your house to allow you to release capital from the property. You can do this by increasing your mortgage. This would allow you to pay off your current mortgage deal and release some extra cash to carry out home improvements or pay for a new car or wedding – anything you like.
The remortgaging process
If you are unsure of how to remortgage your house, we’ll talk you through the process. The good news is that process is generally fairly straightforward and usually only takes around 2-6 weeks. A mortgage advisor and broker, such as us here at Mortgage Light, will be able to do the majority of the work for you.
There are normally costs involved in a remortgage, such as for the valuation and solicitor. You do need to consider carefully whether the costs justify the saving you may make in switching deals. A good advisor will detail all the costs and savings clearly for you to help you decide the best option to follow.
Check when your current deal ends
Whilst you can remortgage your house at any time, if you are currently on a fixed-term deal then it’s best to start to process around 3-6 months before your current deal ends. If you do remortgage before your fixed-term ends, then you’ll likely be subject to early repayment fees. These can be expensive – sometimes up to several thousand pounds, depending on how far into your current deal you are.
It’s generally not worth remortgaging if you’ll end up spending more in fees than you’d save with the new mortgage product. If you are unsure of whether or not you’ll be hit with an early repayment fee and how much this could be, talk to us at Mortgage Light and we’ll help you work out whether or not this is a good time for you to remortgage.
Speak to a mortgage advisor and broker
If you know your current fixed-term deal is coming to an end, then it’s time to speak to a mortgage advisor and broker about potentially beginning the remortgaging process. At Mortgage Light, we ask our customers to complete a fact find. This helps us to assess your current financial situation, including details of your incomings and outgoings.
We’ll also ask you to supply the following documents to support the fact find:
- Passport or driving license (or another accepted form of ID)
- Details of your current mortgage
- Bank statements and payslips from the last 3 months (including proof of commissions or bonuses). If you’re self-employed you can provide accounts and tax returns in lieu of payslips
- Proof of address
With this information, we can review the market and recommend some remortgaging options that may be worth considering.
Get a decision in principle
If we find a deal for you that you’d like to progress with, we speak to the lender on your behalf. We endeavour to get you a ‘decision in principle’. This is essentially an indication from your mortgage lender that you meet their basic product criteria and of how much they may be willing to lend you. It’s not a remortgage offer, but it’s a strong indication of a willingness to lend to you.
If you wish to proceed, we will then submit a full application on your behalf. We work with you on any additional information that may be needed. Once received, the lender will review and assess your application documents, conduct a valuation of your property. If everything is in order and the terms are accepted, the lender will then issue a formal remortgage offer.
Solicitor’s & third-parties
At this point, you’ll need to appoint a solicitor to help you with the legal proceedings and the paperwork that comes with remortgaging. Once solicitors have completed their work, a date can be set for the current mortgage to be repaid and the new mortgage is drawn down to replace it.
In the case of remortgaging a shared ownership property or to pay off a Help to Buy loan, you will need the involvement of the third-party. This third-party will either be the Help to Buy lender or the other owner of your shared ownership house, such as the Housing Association.
The third-party will need to agree to the proposed remortgage and be party to some of the legal paperwork. In such circumstances, you’ll generally need to get your property valued by a RIC’s approved valuer. This valuation will be needed to determine the current market value of your property and therefore the value of the third party’s share so that you know how much is needed to repay them.
You’ll need to get a RICs valuation report. This is so that both you and the third party in question know how much money will be needed to repay them, and so that they can complete their end of the paperwork.
Here at Mortgage Light, we believe that remortgaging should be simple. That’s why our experts make the whole process as easy and as stress-free as possible for you. We can help you understand all available options for your remortgage and find the right deal for you. Just get in touch with us today.