A remortgage is when you apply for a new mortgage on your property, either to replace an existing mortgage or to borrow money against your property. According to Martin Lewis, around a third of home loans are remortgages in the UK, but how do you know whether this is the right option for you? In this remortgage guide, we aim to help you to decide whether you should remortgage and borrow more, or not.
What is remortgaging?
“The act of switching your existing mortgage to a new deal, either with your existing lender or a different provider. You’re not moving to a new house and the new mortgage is still secured against the same property.”
Therefore, if you would like to remortgage your home, you must find a mortgage lender who is willing to pay you the remaining amount of money for your current mortgage, as well as any extra money you would like to make any improvements to your property.
For example: Let’s say you have £100,000 outstanding on your existing mortgage and you’d like £20,000 to put towards any home improvements? In this case, you would need to find a mortgage lender willing to lend you £120,000 to cover the remaining money as well as any changes to your home.
Why do people remortgage their property?
In this remortgage guide, we have outlined the various reasons for why a homeowner may choose to remortgage their property.
Interestingly, most homeowners choose to remortgage their home when their introductory mortgage rate ends, in order to find a better deal before being transferred to your lender’s standard variable rate (SVR) mortgage – this is often significantly more expensive.
According to Money Saving Expert, there are several reasons for making the switch, such as when:
- Your current deal is about to end
- You want a better rate
- Your home’s value has increased
- You’re worried about increasing interest rates
- You want to overpay but your lender won’t let you
- You want to switch from interest-only to repayment mortgage
- You want to borrow more money to carry out home improvements
- You want a more flexible mortgage
When isn’t a good time to remortgage a property?
- Your mortgage is really small
- Your early repayment charge is large
- Your circumstances have changed
- Your home’s value has decreased
- You have little equity in your home
- You’ve had credit problems since taking out your last mortgage
- You’re already on a good rate
Whatever your reason for remortgaging your property, this will help you to ascertain which mortgage type is best for you. But where do you start? Read on in this remortgage guide to find out.
Where to start?
After you have decided that you would like to remortgage your house, check the small-print in your current mortgage, as you may not be able to pay off the mortgage early without being charged. However, if there is no fee, this can be the best and cheapest option of all, as you may be able to avoid paying for a new mortgage valuation or legal fees.
Once you are aware about what your current lender can offer you, look around to find other mortgage options available, to see if another lender can improve on the offer. Moneysupermarket is a good place to start, as they compare all deals to find the best one for you.
However, before going ahead, it is important to investigate the different types of mortgage available. There are three main types of mortgage – fixed, variable or tracker. To ensure you are choosing the right one for you, you should carry out extensive research, and also getting a second opinion from a financial advisor.
How does remortgaging work?
Just like when securing your first mortgage for the property, you will need to submit specific paperwork to your new chosen lender. They will conduct a credit history check, as well as looking thoroughly into the following documents:
- Proof of your income
- Information about your expenses and outgoings
- Proof of your residency, such as passport or driving license
The ability to remortgage is based on the individual circumstances of a homeowner. Beware that the criteria for lending is likely to be stricter than when you got your initial mortgage, so it would be advisable to get professional mortgage advice to help you find the right deal for you and your needs.
Once your mortgage has been agreed by your mortgage lender, your home will require a valuation. This can either be a quick drive by, or a surveyor may decide to visit your home to carry out a detailed inspection of your property – this is dependent entirely on the company.
If your lender’s valuation is less than you expected, you can get a Chartered Surveyor to survey your property and provide a valuation to see if your lender will reconsider their original valuation. To do this, you will need to appoint a remortgage conveyancing solicitor to:
- Undertake a local authority search or to organise search indemnity insurance (a cheaper policy covering anything that might have been discovered in a search)
- Organise the transfer of debt from one lender to another
Please note: The process of remortgaging a property usually takes between 4 and 8 weeks.
How much does it cost to remortgage?
It is important to factor in the costs involved in remortgaging a property, as you need to ensure the cost of remortgaging is not higher than the saving you would make by switching to a new mortgage deal.
The fees you must pay are:
- Solicitors fees
- Land Registry fees
- Early redemption feels, if applicable
- Arrangement fees with your new provider, if applicable
- The cost of the property valuation
Once you have read this remortgage guide, you will know that remortgaging your home is fairly simple and can be quick too. However, if you are having difficulty raising enough money for your home improvements and mortgage lenders are unable to help you, it may be worth selling your home and moving to a new property. At Fast Sale Today, we guarantee a cash offer in just 48 hours, and a sale within 7 days – get in contact with the team today to get your free valuation.
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