As with mortgaging, remortgaging is a big financial decision and commitment. So, before you get going, here’s what to expect from the process.
Remortgaging is on the up. In fact, according to research*, the numbers are the highest they’ve been in nearly a decade.
Last October alone, 50,500 homeowners remortgaged their property - that’s a 23% increase on the year before. If you’re thinking about joining the 1,000s of others who’re switching deals, before you do, here’s everything you need to know about the process.
What is remortgaging?
Remortgaging is the process of changing your current mortgage to a new deal - either with your existing lender or someone different. People often think you have to move house to remortgage, but that’s not the case.
Another important thing to know about remortgaging is the more equity you have in your property (i.e. the more of your current mortgage you’ve paid off) and the lower your loan-to-value, the better the deals you’ll be offered.
Why do people remortgage?
There are a number of reasons people remortgage, like:
They want to pay less interest every month;
They want the security of a fixed rate;
Raising some cash to start a home improvement project; or
Pulling money together to consolidate debts.
How does remortgaging work?
Step 1: Speak to a mortgage adviser
To make sure you’re getting impartial advice it’s probably best to speak to an independent mortgage adviser. They’ll be able to confirm whether or not remortgaging will save you money, and, because they’re not tied to a single lender, they won’t be biased and will be able to compare deals from lots of different lenders.
Now you can actually remortgage without the help of a mortgage adviser, but given the scale of the commitment, it could provide you with a level of peace of mind you might not be able to give yourself.
If you’re confident in your own skills, first off, make sure you take all potential charges into consideration, like exit penalties, arrangement fees, and valuation fees. Then, you just need to compare the difference between the monthly payments you’re paying over your current mortgage term, versus what you would be paying with the new deal.
Step 2: See if you can afford it in the future
When you’re comparing deals, remember to think of the bigger picture. What appears cheapest to the naked eye might not necessarily be - for example, if it’s a variable rate mortgage and the interest goes up, could you afford the increased instalments?
Step 3: Speak to your current provider
Once you’ve found a competitive deal, let your current mortgage provider know and give them chance to match it. Don’t be put off by the fact you’ve not seen anything advertised online – they might be willing to match your newfound deal in a bid to keep your custom.
Step 4: Start your application
By this point, you should know which deal and lender you’re going with. Once you’re happy with both of these it’s time to get the wheels of your application form in motion.
If you decided to recruit an adviser to help you through the remortgaging process, they’ll support you with your application, including the credit check(s) involved and timeline of what should happen and when.
A few things to be aware of during this stage are:
1. You’ll be subject to a credit check. So, if your credit history has deteriorated since you took out your first mortgage, you might not qualify for better deals.
2. The lender you’re applying with might ask to see additional documents, like proof of earning. To speed the process up and prevent delays, it might be worth gathering any documents like this before you start your application.
3. You may also have to survey your property to get an accurate and reliable value to provide the mortgage lender with. If the lender’s satisfied with everything included in your application they’ll provide you with a formal mortgage offer. This’ll include important details about the mortgage’s terms and conditions, so make sure you take the time to carefully read it.
Step 5: Find a legal expert
More often than not, you’ll need a solicitor to deal with the legal side of the transaction. When it comes to this, different lenders work in different ways. Some will provide you with a panel of firms to choose from, while others will give you complete freedom of choice.
The role of the solicitor is to:
A) Handle the paperwork, and B) Organise the transfer of funds once the remortgaging process is complete.
When should I remortgage?
So, you know what remortgaging is, why people do it, and how to do it, left wondering about the when? Well, if any of these are true for you, it might be time:
1. When your current deal is due to expire
2. Because you’ve decided you want a better rate
3. When the value of your property’s gone up a decent amount
4. You’re worried about interest rates rising
5. You want to overpay but your current lender won’t let you
6. You want to switch your mortgage type - i.e. from variable-rate to fixed-rate.