Remortgaging: How Does it Work?

Remortgaging is the process of taking out a new mortgage to replace your current one on a property that already belongs to you. When you buy your mortgage, you don’t have to think of it as something that you’ll be held to for the rest of your life. Instead, think of it as something to re-evaluate periodically to make sure you’ve got the best deal for your situation.

When should you consider remortgaging?

If approved, you can remortgage at any time, so you might be in a position to remortgage and not even be aware of it. A mortgage broker and adviser can help you figure out if remortgaging is right for you.

You might want to remortgage for many reasons:

You want to borrow more
When your deal is coming up to expiry, a broker can research raising additional money against the security of your house if you need extra money. Be prepared for your lender to ask for evidence of where the money is going. For example, if you’re raising funds to build an extension, you can show the lender quotes from builders and your planning permissions.

You can borrow more money against your house for a few reasons. You might want to:

• Raise money for home improvements
• Buy a new car
• Put down a deposit on a second home
• Pay off a Help to Buy loan
• Staircase out of Shared Ownership
• Pay university costs
• Consolidate debts

Your current deal is about to end
If the current term of your mortgage is ending, this is a great time to remortgage. If you want to remortgage before the term ends, it’s likely that you’ll have to pay early repayment fees which may cancel out any savings you’ll make when remortgaging.

It’s also a good time to remortgage if the fixed-rate term of your mortgage is ending. It’s probable that when this term ends you’ll be put onto your lender’s Standard Variable Rate (SVR). This is likely to be higher than your previous interest rate, and higher than other rates you may be eligible for. If you’re worried about these higher/variable rates, you may be able to remortgage for a cheaper rate.

You want to change the length of your mortgage
If you’re finding the monthly payments are a bit too expensive for you, you can remortgage to extend your mortgage over a longer period of time. This could be over 25/28/30/33/35 & up to 40 years (age permitting).

If the opposite is true and you’re finding yourself left with some extra money at the end of each month, you can reduce your term down from 23 or 22 years, to 15 or 10. This would result in paying it your mortgage off early.

If you don’t want to pay your mortgage off early but you want to be able to overpay a little sometimes and your current lender doesn’t allow you to, you can remortgage with a lender who will allow overpayments.

The value of your home has increased
When you take out your mortgage, you’ll be put in a certain loan-to value (LTV) band based on the value of your house. If your property has risen in value since you took out your mortgage, chances are that you could remortgage to be placed in a lower LTV band and be eligible for lower rates. Keep in mind that unless you’d make a pretty big saving, the cost of remortgaging could negate the savings you’d make. A mortgage adviser can help you figure out what the best options are for you.

Whether you’re remortgaging for a better deal, to pay off Help to Buy loan or other debts, or to help you raise funds for home improvements, remortgaging is a straightforward process.

What’s the process of remortgaging?

Remortgaging usually takes 4-8 weeks, and you should be looking into your remortgage up to six months before your current deal ends. That way, your new mortgage can be approved and is ready and waiting to replace your current deal once your existing mortgage has expired.

Whatever the reason for remortgaging, the process is simple and made easier by working with a mortgage broker and adviser.

Here’s how the process works:

Step one:
Speak to your adviser to complete a fact find. You can download and complete a fact find online here. This will assess financial factors (like incomings and outgoings) to help you and your adviser to figure out where you really stand financially.

You’ll need to supply relevant documentation to support the fact find. This includes:

• Passport (or another accepted form of ID)
• Proof of address
• Current mortgage details
• Payslips from the last three months, or accounts and tax returns if you’re self-employed
• Proof of any commission or bonuses
• Bank statements

The mortgage adviser will recommend the best options for you, and you’ll discuss what your preference would be.

Step two:
Your mortgage adviser will complete a decision in principle with the recommended lender and then submit a full application. A lender will do a valuation (often remotely, without needing to go the property), and assess your documents. Then an offer will be issued.

Whilst remortgaging is simpler than the process of initially buying a house (as you already own the property) you will need to appoint a solicitor to take care of the legal side of things.

Step three:
With the solicitor’s side of the paperwork completed, a date can be set for the new mortgage to start.

If you’re remortgaging to staircase out of Shared Ownership or pay off a Help to Buy loan, there is an extra step here and the process can take longer due to the third party involvement.

If you are paying back a loan, you’ll need to contact Help to Buy or the Housing Association to let them know that you want to repay the loan, so they can complete the paperwork in-house.

You’ll need to obtain a RICS valuation report to supply to the third party – either the other owners of your shared ownership property or Help to Buy/the housing association – so that all parties know how much needs to be repaid.

How can a mortgage adviser help you?

Here at Mortgage Light, we’re a team who specialise in remortgaging. We believe that mortgaging and remortgaging should be straightforward and accessible. We want to make the transaction easy for you. Remortgaging shouldn’t feel intimidating or impossible, and we’re here to help.

A mortgage adviser will get to know your situation and help you understand and narrow down your choices for remortgaging. We’re on your side and want to help you get a mortgage that works for you. Get in touch with us today.