1. Review and compare your current mortgage
If you’re nearing the end of your mortgage deal, we suggest you look into switching to a better deal - either with your current provider or a different one.
Otherwise, once your current mortgage offer ends, you’ll automatically move to your lender’s Standard Variable Rate (SVR). This is often more expensive than your initial interest rate.
You may be eligible for lower interest rates, especially if your property’s value has gone up. An increase in value normally results in an increase in equity (the percentage of the property you own outright). This can make you more attractive to lenders.
Also, think about how flexible you want your mortgage to be. Some lenders allow payment holidays and larger overpayments, for instance. Consider what type of mortgage you’d like going forwards as well.
In some cases, you may already be on the best deal for your circumstances. Or you might not qualify for a remortgage. If you don’t find a suitable offer right now, you can always keep an eye open in the future. Remember, once you’re on the SVR, you’re free to switch at any time, without penalty.
If you need help deciding, it may be worth speaking to a mortgage adviser or broker. At Ocean, we have trained advisors ready to take your call.
2. Check if fees apply
Be aware that if you’re part-way through your agreement, you might incur early repayment charges for switching too soon. Your existing provider will be able to confirm if this is the case. You’ll need to weigh up the cost of ending your contract early, against the potential savings you could make by switching.
If you're moving to a new provider, you may need to pay mortgage arrangement fees, solicitor fees and valuation fees to set it up. You won’t need to pay these fees if you remortgage with your current provider.
However, it’s still worth shopping around in case you can find a better deal that’ll save you money overall. Sticking with your current provider isn’t necessarily the cheapest option.
3. Get a mortgage in principle
Before you remortgage with a new provider, you should apply for a mortgage in principle. It gives you an idea of how much they’d be willing to lend you - but it doesn’t guarantee approval.
When you apply for a mortgage in principle, the lender will usually carry out a credit check. They’ll review your past financial behaviour to decide how risky it’d be to lend you money. Some lenders only run a ‘soft check’, which won’t affect your credit score.
Some lenders run a ‘hard check’ instead, which can result in a temporary drop in your credit score. So it’s best to ask the lender (or your mortgage broker) what type of credit check they want to carry out.
Also, multiple credit applications within a short space of time can give lenders the impression that you’re struggling. So it’s best to avoid applying for credit just before you remortgage.
4. Make an application
Once you’ve got your mortgage in principle, you can apply to remortgage. On average, the process takes around four to eight weeks, depending on the lender and your individual circumstances.
When you apply, your lender will run affordability checks to make sure you can pay the mortgage repayments on time, every time. They may ask for proof of your incomings and outgoings.
Every lender follows its own criteria and the specific documents they ask for will vary on a case-by-case basis.
They’ll usually check your credit report to get an up-to-date picture of your finances. The more responsible you are with money, the less risk they’re taking, and the better your chance of approval. So before you apply, check your credit file and clear up any mistakes to make sure it’s in tip-top shape.
You can do this by contacting the main three credit reference agencies in the UK: Experian, Equifax and TransUnion. You can also check your Equifax credit report for free (for life) through CredAbility.
Remember, your home could be put at risk of repossession if you don’t maintain the repayments on time, every time.
5. Book in a valuation of your property
The lender will usually instruct a surveyor to estimate the value of your property. This enables them to give you an accurate remortgage offer. There’s usually a fee involved, but some lenders offer free valuations.
If you’re remortgaging with the same provider, they’ll normally just use the House Price Index instead, which won’t cost you a penny. There’s the option to request a full valuation if you think your house value has risen more than estimated.
An increase in your house value can pay off in terms of paying less interest. The lower your outstanding mortgage, and the higher your house value, the less risky you’ll appear to lenders. So if your house price has risen, you may be eligible for more competitive interest rates.
The ratio between your mortgage and house value is known as your ‘loan-to-value’ (LTV) and is normally expressed as a percentage. For example, if you owe £100,000 and your house is worth £300,000, then your loan-to-value is 33% (because your loan is a third of your property’s value).
6. Instruct your solicitor to carry out searches
You’ll need to instruct a solicitor if you are remortgaging with a new lender. They’ll work behind the scenes to transfer funds from your new lender to your old lender. They’ll also update the deeds with the Land Registry.
7. Finalise the mortgage offer
Once you receive a mortgage offer, you need to sign it and return it to your lender, if you agree to the terms and conditions. Then your new mortgage provider will release the funds to your conveyancer to pay off your old lender. You will then start making mortgage payments to your new provider going forwards.
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