Remortgaging what is it and how to do it.
Remortgaging is simply replacing your existing mortgage with another, for the same amount sometimes for more.
What is the point in a remortgage?
The biggest reasons are
- To save money, your existing mortgage may have been fantastic at the time but the deal has ended, a remortgage can give you access to new deals
- To release equity from your home, you may be looking to consolidate your debts, buy a car or extend your home, many people remortgage to release equity from their property. When talking to your broker tell them what you need the money for as some lenders will not lend for consolidation of debt.
A remortgage can change your life, but it’s not quick and easy.
How long does a remortgage take?
You should allow for 3-4 months, so if you are on a deal with your existing mortgage company, you should start the process a few months before the deal ends.
When should I remortgage?
The simple answer is anytime when it makes financial sense, and you will only know that by doing some research or get a broker to do it for you.
It’s not always the case but it’s better to remortgage once you are free from any penalty clauses with your existing lender, and be aware if you have been on a discounted rate or fixed rate and it has finished, it does not mean you are free from any penalty for remortgaging, check with your lender or look on your original mortgage offer.
How much are the penalties for paying a mortgage off early?
That all depends on the deal you have with your lender, if you are on the standard variable rate you probably do not have any repayment charges, sometimes on a mortgage deal, you have a period of time where you must stay with your lender or pay a fee.
For example, you take out a three year fixed rate and you are in year four and have been moved to the standard variable rate, the deal may have been 3 years on the fixed rate but you must remain 2 years on the standard variable rate or pay a penalty.
This is normally a percentage and it will either be a flat percentage payable if you remortgage anytime within the period or it will be on a reducing basis, 7% in year one, 6% year two etc.
It does not mean you can’t remortgage, just reduces the benefits, you should consider
- Should you wait until you are out of the charging period?
- Should you speak to your existing lender and see what they can do for you?
How to decide if you should remortgage?
The best way is to get the mortgage broker to check the deals available, some brokers have access to deals the public doesn’t, but also remember that you should see what your existing lender can do.
No harm in trying to negotiate with your existing lender, the chances are they will not offer you the best rates, they reserve them for new clients for some mad reason, so go back to them and tell them what you have been offered and see if they can improve their offer.
You can use the power of the internet as well; visit some comparison websites for quotes.
What is the process of the remortgage?
So you have undertaken your research and decide you are moving from ABC to XYZ.
First, you will need to check exactly how much you have outstanding with your existing lender; you can do that by asking them to send you a redemption statement.
Complete your mortgage application form with your broker, you will need to provide evidence of income and undertake the ID checks, your application will then be credit scored and checked.
Once the mortgage is approved your new lender will need a property valuation, this is normally the time your solicitor gets involved, he will be requesting the deeds, a redemption figure and undertaking any searches.
Once the new mortgage company have the valuation they will go to offer, you will receive a pack in the post with the details of your new loan, all parties to the loan will need to sign this and return it to the mortgage company, its good advice for you to go through the mortgage offer with your broker before signing it.
Completion – the date your old mortgage ends and your new one begins.
What are the fees for remortgaging?
Your potential fees are
Fees to redeem your mortgage, you must check to see what fees are payable, normally just a small admin fee but if you have a penalty clause this can run into £1000’s
Mortgage Application fees for a new mortgage deal, quite often mortgage companies charge an application fee.
Solicitor’s fees, these will be nothing like your Conveyancing fees but will still run to a few £100 so shop around.
Valuation fees, once your mortgage has been approved the mortgage company will require a valuation, this is normally a fee based on the value of your home, these fees will be available from your broker upon application.
Broker fees, most brokers are paid by the mortgage company but discuss alternatives with them.
The good news is the remortgage market is very competitive and lenders normally pay the legal and valuation fees.