Remortgaging

Find out how remortgaging can help you save on your monthly payments.

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What is remortgaging?

A remortgage describes a scenario in which you take out a new mortgage on a property that you already own. Remortgages account for about a third of home loans made in the UK.

For most people, a mortgage is the largest financial commitment they will have. In the same way that you might search for the best deal on a new car, it makes sense to review your mortgage periodically to make sure that it is still the right option for you.

Our friendly advisers have expert knowledge of the options available and can help you to review your individual circumstances and take any appropriate action.
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Things to consider before remortgaging

There are always costs involved with remortgaging and these need to be taken into account when considering whether remortgaging will be beneficial.

You may have to pay an early repayment charge to your existing lender if you remortgage.

If you are currently in a fixed rate deal that has not yet expired you will almost invariably be subject to payment of an early repayment charge (ERC), in order to leave. This is usually a percentage of the mortgage balance, depending upon how long you have left.

If you want to release equity from your property to get a lump sum, this means you will be increasing the overall amount you are borrowing and will, therefore, see a rise in your mortgage payments. Depending on the amount of equity you have in your property and the amount you are seeking to release, you may also see an increase of interest rate as your loan to value (LTV) may have decreased.

If you are thinking of remortgaging as a way to consolidate debts or to pay for a project, make sure you do your sums carefully. Remortgaging may seem attractive as mortgages have relatively low interest rates when compared to credit cards or loans but borrowing over a long period may cost a lot more in the long term.

Things to consider before remortgaging
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Because we play by the book we want to tell you that...

Your home may be repossessed if you do not keep up repayments on your mortgage.

There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1.5%, but a typical fee is 0.3% of the amount borrowed.

You may have to pay an early repayment charge to your existing lender if you remortgage.

When is a good time to think about remortgaging?

Your current deal is coming to an end

If you have a fixed interest rate, tracker or discount mortgage deal at the moment, this will come to an end after a fixed amount of time. This will usually be between 2 and 5 years.

A good time to start searching for a new deal is shortly before your old deal is due to end so that you can take advantage of better rates as soon as possible.

You have a standard variable rate (SVR) mortgage

When your fixed deal rate ends, you will normally be moved on to your mortgage provider’s SVR. This may be higher or lower than what you were paying before but it will change in line with the Bank of England base rate meaning that the certainty of knowing exactly how much your mortgage will cost every month will no longer be there.

If you are currently on an SVR, you may be able to save money by moving to a fixed deal. A move to a fixed deal can also help you to manage your monthly household bills as you will know exactly how much your mortgage payments will be for the lifetime of the deal.



You think that a better rate may be available

If you are committed to an initial deal then it is important to consider that early repayment charges may be payable when you move lender. These can be quite significant and there is usually a small exit fee to pay as well. However, it may still be worth considering remortgaging. The savings can be considerable, especially if you have a large existing mortgage, but it is important to work out what the costs may be first so that you know whether this will be right for you. Our expert advisers can help you to work out whether this is a good option for you.

Your property has significantly increased in value

If you have owned your property for a while, or market changes mean that it has increased in value quickly since you got your mortgage or last had your property valued, it may be worth seeing if you could get a better deal. If the current value of your home means that you are now in a different loan to value (LTV) bracket, it may be possible to get a lower rate of interest and reduce your monthly mortgage payments. Equity is the amount of the property you own debt free. The higher the percentage of equity in your property, the more likely it is that you’ll get a better mortgage rate.

You need more flexibility

Sometimes the mortgage you chose when buying your property no longer meets your needs. It may be that your personal circumstances have changed and you would like a mortgage with the flexibility to allow you to take an occasional payment break. Or you may want to make a regular overpayment so that you can pay off your mortgage earlier, but your current mortgage deal would penalise you for doing this. There are lots of different mortgages out there which may suit your revised needs.

You want to change from an interest only mortgage to a repayment mortgage

Perhaps you are now in a position to pay a little more every month so the option of a repayment mortgage where you have the comfort of knowing that your debt will be fully repaid at the end of the term seems attractive. The monthly amount would increase but it would be consistent and you would no longer have to find a big lump sum at the end of the term to pay off the amount borrowed. Whilst many lenders may be happy to make the change for you, if you are considering this, it still makes sense to review the market to see whether you can change to a repayment mortgage and take advantage of a better deal than your current lender may be able to offer.

You need to release equity from your home

If you have enough equity in your home, you may be able to remortgage it to release some equity to provide you with a lump sum. You will need to let your lender know why you want to remortgage to release equity. For example, to redecorate or remodel your home, build an extension or use the money to invest elsewhere, such as a buy to let. If you release equity from your home you will be increasing the overall mortgage value. The Mortgage Hut has a handy calculator to give you a guide as to how much you can borrow.

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Preparing for remortgaging

Once you’ve decided that you want to go ahead and apply for a remortgage. There are several things you can do to ensure the process goes smoothly and you gain the most benefit.

1. Check your credit score

New lenders will carry out credit checks on any potential new borrowers when you make an application. They need to know that you are the sort of person that manages their financial commitments well and that they can expect to be able to collect mortgage payments from you without any problems.

A credit check will search your credit history to find out if you have a good track record of making repayments on loans. The credit report will list your past credit cards, overdrafts, mortgages, other loans and even bills such as your mobile phone contract and utilities. It will cover all accounts open within the last six years.

The Mortgage Hut has partnered with UK Credit Ratings so that you can access your report online easily and quickly. Even if your credit report reveals a lower score than you expected, there may still be remortgage options available. Our expert advisers can work with you to review the options.

1. Check your credit score
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2. Start Early

Whilst you can decide to remortgage at any time, to gain the most benefit you ideally want to be in a position where you don’t have to pay potentially hefty early repayment charges. However, you don’t want to wait until your old deal has finished either.

You can start looking at your options up to six months before your old deal is due to end. A lot of mortgages will allow you to switch to a new deal up to three months after you are accepted. Some will allow up to six months. This means that you could secure a new rate now to use in up to six months’ time and potentially protect against rate increases. 

There is a small risk in doing this. If a better deal comes out in the meantime, you could find that it would have been better to have waited. The mortgage deals in the market change all the time. If that happens and you decide not to use the first product, there would be new fees to pay to the potential new lender. Whether this is worth doing depends on the market at the time. Whilst no-one has the power to see into the future with accuracy, a good adviser will be able to offer advice to help you make the decision as to whether to apply earlier or later.

3. Check how much you can borrow

Even if you’re not looking at increasing your mortgage overall by releasing equity in your home, it is still important to check how much you can borrow.

Every lender has a different approach to calculating how much they would be prepared to lend you, but the Mortgage Hut calculator will give you a rough guide as to how much you may be able to borrow.

Lenders will look at your earnings, other income including commission, bonuses, second jobs and benefits.

They will also review your outgoings. This will include items such as: food shopping, debt repayments, credit card balances, maintenance payments, utilities and so forth. They use this information to work out your disposable income.

They will want to know that your disposable income will cover not only the mortgage payment, but also an increase if the rate increased after any deal had ended.
3. Check how much you can borrow
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4. Pick the right date

If you are still tied into a deal with your current lender, there may be an early repayment charge if you remortgage during this period. You can check if this applies to your mortgage. If it doesn’t, you can remortgage at any time. If it does, and the charge outweighs the benefits of the remortgage or you simply don’t want to pay it, choose your remortgage date as the next working day after your current deal ends to avoid paying penalties.

5. Check the paperwork

If you are self-employed or perhaps work in a way in which you may find it difficult to prove your long- term income, maybe because you are a contractor and take a series of short-term assignments, for example, getting approved for a remortgage can be more complicated. However, there should still be options available to you. If this describes your personal circumstances it pays to be prepared for the documentation you may need to provide.

  • Business Accounts - if you run your own business or are self-employed you should be able to provide three years of accounts. Some lenders will accept two.
  • Tax Returns - if business accounts aren’t available, or practical for the way you work, then 2-3 years of tax returns can be accepted by a lot of lenders. The lender will assess your income on your net profits, not your business turnover. 
Our advisers will be able to advise as to the evidence the different lenders are likely to need.
5. Check the paperwork
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6. Do some housekeeping on your finances

You may have an excellent credit record but if your finances are a bit of a mess, or appear to be, this can influence a potential new lender. Lenders like to know that you manage your money well and that you will be a reliable borrower. If you are considering remortgaging it would be helpful to avoid applying for other credit just before applying for your new mortgage. It can also help to avoid heavy or inconsistent spending and avoid using your overdraft in the weeks and months before you apply.

7. Get your documents together

You will need to provide the same type of paperwork for a remortgage as you had to provide when you took out your original mortgage. If you can get everything together so that they are easily to hand, this will speed up the process and avoid unnecessary delays. A new lender may want to see some or all of the following:

  • Your payslips for the last three months and if self-employed, the last three years’ business accounts or tax returns
  • Your bank statements for the last three months. Although we are encouraged to go paperless these days, a lot of lenders still won’t accept printed statements from the internet. If you don’t have original bank statements, check with your adviser whether it would be wise to ask your bank to send original copies
  • Proof of commission or bonuses. This may be on your payslips Your most recent P60 form issued by your employer to show the income and tax paid from the previous tax year
  • ID documents. This will usually be your passport, but your adviser can guide you as to which documents will be acceptable if you don’t have a passport
  • Proof of address. This will be items such as utility bills, council tax bills or credit card bills

Helpful tips when remortgaging

Our specialist mortgage advisers can help you with every step of the process, but here are some useful tips you might find handy to know.

Take professional advice

t usually makes sense to take professional advice when considering remortgaging. An expert can help you to find deals which you may not realise are available or which are only available through intermediaries. Our advisers will search across thousands of mortgages, taking into account penalties and fees, to find the right remortgage option for you.

Cheaper isn't always better

Just because a cheaper deal is available doesn’t mean it is the right deal for you. You should consider what will suit your individual circumstances. For example, if you need the certainty of knowing exactly how much you will pay each month, and that you won’t be affected if interest rates rise, then a fixed rate product will offer you that comfort.

Making the application

Your new lender may also want to have a survey carried out on your property to establish its value before they formalise your new offer. Once the new lender is happy that all their criteria have been met, they will issue a formal mortgage offer. This will include a key facts illustration which will lay out the terms and conditions of your new loan.

Legal Advice

A solicitor will usually be required to manage the legal side of the new transaction. Some lenders have their own panel of firms from which you can choose. Others will leave the choice up to you. The solicitor handles the legal paperwork necessary for a remortgage and will arrange for the funds to be transferred when the remortgage is completed.
Enquire now about Remortgaging

We can help

If you’re looking to remortgage please contact us today on 02380 980304 to speak to a qualified adviser free of charge and with no obligation. We’ll talk you through the next steps and how we can help you to navigate the mortgage process quickly and easily, taking the stress out of finding the right lender and deal for you.

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