Remortgaging: Your Complete Guide
Your home may be repossessed if you do not keep up repayments on your mortgage.
Debt Consolidation - Think carefully before securing other debts against your home.
Consolidating debt may reduce your outgoings now, but you may end up paying more overall.
All information was accurate at the time of publication.
9th August 2024
I specialise in helping clients navigate the complexities of home ownership. While many of my clients are enjoying the excitement of purchasing a new property, the reality is that mortgage terms eventually come to an end. This is where remortgaging becomes crucial. In this blog, we’ll delve into the remortgage process, providing clear guidance on when to apply, what to expect, and how to make informed decisions.
What is a remortgage?
A remortgage is essentially a renewal of your mortgage deal.
Most people opt for fixed-rate deals lasting two or five years, but other options, such as tracker rates, are available.
If you don’t actively choose a new deal when your current one ends, you’ll typically revert to your lender’s standard variable rate. This can be significantly higher than competitive rates. For instance, Nationwide, Santander, and HSBC currently offer variable rates of 7.74%, 7.50%, and 6.99% respectively.
To avoid the potential for higher costs, remortgaging allows you to secure a new deal with a better interest rate. It’s similar to transferring a credit card balance to a 0% card before a high interest rate kicks in. By remortgaging, you can potentially save money and enjoy more favourable terms.
When can I remortgage?
To ensure you secure the best possible mortgage deal, I recommend starting to consider your remortgage options approximately six months before your current deal ends. You can easily find this date on your latest mortgage statement. If you’re a previous client of mine, feel free to get in touch, and I’ll happily remind you when your deal is due to expire.
While it’s technically possible to remortgage at any point during your mortgage term, there may be early repayment charges to consider. These fees can often outweigh the potential benefits of switching. However, if you’re interested in exploring this option, please don’t hesitate to contact me, and we can assess your situation together.
Early repayments are fees payable when you repay a mortgage before the end of an initial fixed rate or variable rate. These will be listed in your illustration and any mortgage statements.
Once your remortgage application is successful, your lender will provide a mortgage offer, similar to when you first bought your home. These offers typically last for six months, which is why planning ahead is essential.
When remortgaging, should I stick with my existing lender?
The best approach to remortgaging will vary depending on individual circumstances. Some lenders excel at retaining customers, and I’ve recently helped several clients successfully transfer products with Santander. This straightforward process involves switching to a different deal with your existing lender without borrowing extra or extending the mortgage term. You can often select from a range of options and there's no need for re-underwriting.
However, not all lenders prioritise their existing customers. If your current provider isn’t offering a competitive rate, it may be beneficial to explore options with other lenders. This process typically involves underwriting and solicitor fees. It's important to weigh up the potential savings against the additional costs and time involved.
To help you make an informed decision, I recommend discussing your options approximately six months before your current deal ends. We can then assess both product transfers and remortgaging to determine the best course of action for your circumstances.
What happens if the rates change after I’ve applied for a remortgage?
To provide you with maximum peace of mind, we can often secure a mortgage rate in advance of your current deal ending. If interest rates decrease before your mortgage term finishes, we can review your options and potentially secure a new, lower rate. While lenders won’t proactively inform you of rate drops, you can rest assured that I'll keep a close eye on market movements. Feel free to contact me at any time if you'd like a rate check. Conversely, if interest rates rise, you'll benefit from the security of having locked in a lower rate.
How does a remortgage differ to when I bought my home?
Remortgaging can be a straightforward process. If you're switching lenders, it's similar to buying a home, requiring affordability checks and documentation such as payslips, bank statements, and tax returns. A property valuation is also essential, though a desktop survey may suffice. You'll need solicitors to handle the legal aspects, and we're happy to recommend one if needed.
However, if you're staying with the same lender, the process is often much simpler. There's no need for re-underwriting, so you can select a new mortgage deal to start when your current one ends. Property valuations are usually on file, and solicitors aren't required.
What happens if I’ve renovated my home and the value has increased?
If you’re switching lenders, a valuation will be required to determine your property's current worth. It's essential to highlight any improvements made to your home, such as extensions, kitchen or bathroom renovations, or replacement of roof, doors, or windows. These enhancements can positively impact the valuation.
For those staying with their current lender, a valuation fee might apply. However, it’s worth noting that some lenders, including NatWest, waive this fee.
How can I get the best remortgage?
Just as you carefully prepared for your home purchase, it’s essential to position yourself favourably for a successful remortgage. Maintaining a strong financial profile is key. This includes minimising outgoings and ensuring a clean credit history. Avoiding missed payments, defaults, and county court judgments will significantly enhance your chances of securing competitive mortgage terms.
It’s important to keep your spending in check wherever possible. I’m currently completing an application with HSBC and they’re even questioning additional childcare costs during the summer holidays!
Loan-to-value brackets are assessed in 5% increments. This means if your mortgage is £150,000 on a £200,000 property, your loan-to-value is 75%. By increasing your property value or reducing your mortgage to 70%, 65%, or 60%, you could qualify for a lower interest rate. I’ll guide you through this process, so please don’t make any changes without speaking to me first.
To ensure you secure the best possible mortgage deal, please contact me at least six months before your current mortgage ends.
What happens if my situation has changed when I remortgage?
A lot can change in two, three, or five years. You might welcome a new addition to the family, your children could start school, or your career might take an unexpected turn. Perhaps you've invested in home improvements or taken out a loan.
That's why it's crucial to speak to me six months before your mortgage ends. We can review your financial situation and explore your options. If your circumstances have improved, we might consider increasing your monthly payments to shorten the mortgage term and save on interest. However, if you've recently become self-employed or faced other challenges, we can discuss staying with your current lender.
Rest assured, if nothing has changed and you're happy with your current mortgage, there's no need to worry.
Can I borrow more as part of my remortgage?
Absolutely! If you've been dreaming of home improvements or eyeing a new car, remortgaging could provide the funds you need. We can explore your options and find a solution that works for you.
Just remember, borrowing more money means paying interest on that amount over the entire mortgage term (20, 25, or 30 years+). It's important to consider the long-term financial implications.
Can I change the term of my mortgage when I remortgage?
Remortgaging offers flexibility to adapt to changing circumstances.
We’ve already said that if you have had a promotion and a pay rise that you can reduce the term, but similarly, if you’ve had another child and nursery fees are hitting you hard, then you might want to extend the term to bring down the monthly payment. The longer the term, the more interest you’ll pay, but cashflow might be more of a priority than the total cost over the term of the mortgage.
Most mortgages will allow you to overpay by 10% per annum too, so if you do have some extra money, you can contribute this to the mortgage to pay it off sooner. When you come to review the mortgage again in 2, 3 or 5 years time, you might be back in a position where you reduce the term to bring it back to where it was before.
Will I have to pay for solicitors and valuers when I remortgage?
The costs associated with remortgaging can vary. Often, the lender covers the valuation fee, but some may charge a small amount. Legal fees are another consideration. While some lenders offer free legal packages, these often involve large law firms with slower service. Opting for an independent solicitor may be preferable, even if it means additional costs. To offset these expenses, I'll look for lenders offering cashback deals. By working together and planning ahead, we can navigate the remortgage process efficiently and potentially save you money.
Can I swap to interest only when I remortgage?
Switching to an interest-only mortgage requires careful consideration. Lenders typically demand a valid reason and a clear repayment strategy. Often, this involves selling the property, but you'll generally need significant equity—usually more than £150,000—to qualify. Additionally, some lenders impose high-income thresholds, often exceeding £75,000 or even £100,000.
While these restrictions can be challenging, there might be alternative options, such as combining interest-only and repayment elements.
It's essential to discuss your situation with me early in the process to explore your options and determine the best approach.
Can I pay off my debts when I remortgage?
Consolidating debt through a remortgage isn't always the best solution. It's essential to have a clear reason for doing so. Moving high-interest debt to a lower-interest mortgage can be beneficial, but transferring low-interest debt to a mortgage might not be.
The primary goal is often to reduce monthly payments. However, careful consideration is necessary, especially if you've consolidated debt before. A pattern of debt consolidation might indicate underlying financial issues.
If you're experiencing financial difficulties, it's advisable to contact your current lender first.
We can certainly explore debt consolidation as an option, but it's important to weigh the pros and cons carefully.
If your mortgage is nearing renewal, don't hesitate to get in touch. Even if it's more than six months away, we can start planning your options. If it's too early, I'll keep a note and follow up closer to your renewal date.
Start preparing by gathering your financial information. Complete the form below, and I'll guide you through the process. Let's secure the best possible mortgage deal for you.