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Remortgage
What is a remortgage and how does remortgaging work in the UK?
A remortgage is essentially moving from one mortgage provider to another. You will typically have reviewed your mortgage and want to make changes, for a better rate or perhaps for another reason. You apply to a new mortgage lender, they essentially pay off your existing mortgage, and you move across.
How long does it take to remortgage? How often can I remortgage my property?
It normally takes around about four to six weeks. It’s very dependent on the legal side. Things that can make a difference to that is if you’ve got a leasehold property, for instance, or there’s more complexity around the type of home. But it should be fairly straightforward.
You can remortgage as often as you’d like, but you probably won’t want to financially, because you could have early repayment charges with your current lender.
What are the main reasons why people choose to remortgage? What factors should I consider when deciding whether to remortgage?
Most commonly, you would look to remortgage if your existing mortgage product or interest rate is coming to an end. You’re being contacted by your mortgage broker or by your lender to say the deal is ending, and you need to pick a new product.
If you were to remain with your existing lender and take on a new deal, that’s called a product switch. If you were to review the market, you may find more appropriate options by switching lenders.
You might want to secure a lower interest rate or a cheaper product. But it could also be because you need additional money for home improvements or to repay some debts.
It could also be an opportunity to shorten your term – if you’re now earning more money or your interest rate is reducing, you could look to pay the mortgage off faster. It could also be an opportunity to make a large payment off your mortgage balance – perhaps you’ve built up savings, you’ve come into some inheritance or received a gift.
What happens to my existing mortgage when I remortgage?
Your existing mortgage will be replaced with the new mortgage. The new lender takes over the debt, repays the old lender and clears that mortgage down. The legal charges against the property will change from one lender to the other.
What happens if I don’t remortgage after my deal expires?
If you don’t remortgage when your deal expires, you will go to the lender’s standard variable rate. That can be quite a big difference from what you may have been paying each month, , especially in today’s market. Your mortgage payments will go up – so it’s always good to review before you go over to the standard variable rate.
Can I switch lenders when remortgaging?
Yes – the two options you’ve got when remortgaging are your existing lender’s products and switching to a new lender. Staying with your existing provider is a simpler process. You will be given product options and, as long as you have adhered to the terms and conditions of your existing mortgage contract, it’s easy to move to a new deal.
A remortgage is a new application to a new lender, so there’s a little bit more legwork, but it’s usually worth it to achieve your objectives.
Can I remortgage if I have bad credit? Can I remortgage to consolidate my debts?
The answer to both of those is yes. But your credit is a key factor in remortgaging. The severity of that bad credit can affect whether you can move to a new lender.
With regards to consolidating debts, as professionals we have to make sure it’s financially beneficial for the client to consolidate. The majority of the time, people are consolidating credit cards and loans – which are unsecured.
They are then securing them against the property and potentially having them over a longer term. We just go through and assess that and make sure that it’s right for the client.
Will I have to pay any fees or penalties when remortgaging?
It depends when and why you are starting the process. If it is simply because your deal is coming to an end, we try to contact you three to six months beforehand to put a plan in place for your next mortgage. It might be with a new lender or your existing lender.
Then, of course, we tie that together so that your new deal starts as soon as your existing deal ends. That’s usually the most appropriate thing to do, because you may have early repayment charges if you switch to a new deal sooner. It does depend on the type of interest rate that you have.
Any new mortgage will potentially incur additional fees called product fees or application fees. There could be valuation fees. It’s always important that we look at the overall cost and the pros and cons of your next mortgage product.
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How much could I potentially save by remortgaging?
It depends where you are and when you took out your mortgage. At the time of recording, it’s December 2024. If you got a mortgage a couple of years ago, it might be beneficial for you to remortgage for some of the newer rates. They could be lower and bring you a saving.
If you’re on a product from the lowest point, four or five years ago, it’s probably going up, unfortunately. Advice can really help you decide what to do at that stage, whether you change the term or do something else to suit your situation.
When you have been offered a new product with your existing lender, you will want to know whether there are any cheaper products available. The interest rate and the cost of the product is one factor, but are there other aspects that can save you money in the long term?
As I mentioned, if you create a saving by switching lender, can you utilise that to shorten your term and get your mortgage paid off sooner? That could bring your retirement goals one step closer.
By shortening the term, you’ll also end up paying much less in interest, so there’s a saving there as well. It just depends on what aspects you’re looking for and what type of saving is the most important for you.
What documentation will I need to provide when remortgaging?
As with any new mortgage application, you will always have to provide ID, proof of income, bank statements and details of your commitments, usually with a credit report.
As mortgage professionals, we’re giving advice and therefore we will get these documents as standard, whether you’re remaining with your existing lender or moving. We need to make sure that whatever we’re recommending to you was fully validated with these documents and is therefore the right advice.
Will I need a new valuation or survey when remortgaging?
You will need a new valuation. The new lender might need to go out to the property and will appoint a surveyor. For many remortgages, lenders offer the survey valuation free of charge to attract your business.
Nowadays these are often desktop valuations, which makes it a slicker process than arranging a time for someone to come out to you. Hopefully it will be an advantage to have a new valuation carried out on the property, because it may have gone up in value. You’ll then have a better Loan to Value, which is how lenders calculate their interest rates.
Is it harder to remortgage if I’m self-employed or a contractor?
It depends. If you’re trying to remortgage by approaching the lenders directly, you may find it a more stressful process. Each lender has their own way of assessing a self-employed person’s income, particularly if they’re a limited company owner with either salary and dividend or salary and net profit.
A broker will know exactly where to place you, so there’s no time wasted going to lenders that aren’t going to accept your application. From our perspective, we ask for a few additional documents that an employed person wouldn’t need to provide.
But generally speaking, the process is no more complex than any other application – and of course it’s our job to take the stress out of the transaction.
One thing to add is around the timing of your mortgage review. Lenders will have criteria around the date range of your tax return or your financial accounts. Sometimes a little planning is needed, depending on those dates. But generally speaking, it shouldn’t be that much harder.
What happens if my property value has decreased since I initially obtained my mortgage?
The worst case scenario is that you go into negative equity. That means your mortgage is more than the value of the property. There are still options available, because lenders are aware of this. There may be products from your existing lender, which we would look at and advise on.
A fall in value may change the Loan to Value of the property. That’s quite key for lenders because that’s how they work out what interest rates they’re offering. If you go into a different Loan to Value banding, your mortgage rate might increase slightly.
What are the advantages and disadvantages of fixed rate versus variable rate remortgages then?
Obviously with a fixed rate, you know exactly what you’re getting. Most people prefer the peace of mind in knowing what their payments are for a set period.
With tracker and variable rate products you’ve got to be quite open to risk. There is rate volatility – in the last couple of years we’ve seen the base rate increase to its highest levels in over a decade, and now it’s gradually reducing [podcast recorded in December 2024].
People often consider trackers and variables if they need flexibility with their mortgage. For example, if your mortgage was coming to an end and you’re thinking of moving within the next year, you often find that trackers or variable rates have no tie-in period.
If you were to sell your house within the next 12 months, you’re not going to have a hefty early repayment charge, which can often be a percentage of your remaining mortgage balance.
Can I remortgage if I’m nearing retirement age?
You can, but obviously it depends on your age and the remaining term of your mortgage. Lenders have different ages at which the mortgage needs to end. With some it’s state retirement age, with others it can be 70, 75 or even 80.
Lenders want to know if you’re contributing towards a pension. If you can show evidence of that, you should be able find a lender even if you’re nearing retirement.
How can a mortgage broker help? Any final thoughts?
People often come to us to see if we can get them a better rate, but it’s not just about that. We can access the lenders across the market, and getting you a saving tends to involve more than just the interest rate.
It’s more important to review your mortgage regularly. It’s no secret that the average First Time Buyer is now in their 30s, and gone are the days of having a 25 year mortgage like our parents or grandparents. First Time Buyers are typically at least 30 and need a 35 or 40 year mortgage term – which takes them right up to retirement.
So don’t just get a mortgage and pick new products here and there without taking professional advice. No one wants to be paying a mortgage at the age of 65. If you can review your mortgage regularly with a mortgage advisor, we can help you reduce the term at the right opportunity and make sure you’re not paying interest for such a long time.
You might just want to explore the offer from your current lender and do a product transfer. We would monitor that for you. It’s all part of our service, to get it dealt with as early as possible, but if there are benefits in changing before that new deal completes, we make it happen.
Over the last few months it’s been a constant battle, because interest rates have been going up and down and people don’t have time to watch that. We do it for you. When we get emails from the different lenders telling us about new changes, we’ll just advise you how much we have saved you. That’s all part of the service.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.