Should I Remortgage? – A Comprehensive Guide
- 5 reasons why you should remortgage >
- 5 tips for remortgaging your property >
- Remortgaging with poor or bad credit >
- How long will my remortgage take? >
- How Can Friends Capital help? >
What is a ‘remortgage’?
When you remortgage you are simply taking out a new mortgage on a property you already own – either to replace your existing mortgage, or to borrow money against your current property. You can remortgage by taking out a new deal with your existing lender or move to a new mortgage with a different lender. This is especially beneficial if your home has recently raised in value.
Your mortgage is probably the biggest financial commitment you will make in your lifetime. A remortgage is as important a decision as when you first got your mortgage. There are lots of different mortgage options to choose from, and many willing lenders on the market with competitive rates that change almost daily. So, it’s vital you make the right choice to ensure you don’t end up paying more in the long term.
If you think that taking out a remortgage is uncommon, don’t! Around a third of all home loans made in the UK are remortgages.
1. My current mortgage term is coming to an end
Lots of lenders will offer a fixed-rate mortgage for a set number of years – typically 2,3 or 5. After this, they’ll move you onto their Standard Variable Rate mortgage, which sometimes can be twice as expensive on average. The move to the SVR mortgage will happen automatically so be prepared to switch, or you’ll be paying more money!
2. I want to reduce my monthly mortgage payments
You may be looking for a cheaper mortgage deal to reduce your monthly out goings. Finding a better mortgage deal with better rates, even if you have to pay fees to exit your current deal, could ultimately save you money in the long run. But make sure you take financial advice from a broker.
Many people when making an initial house purchase, especially if they have adverse credit, are a first-time buyer and/or had a low income, may have taken a mortgage deal relative to their circumstances at the time. When your circumstances improve, you may be able to access to a better mortgage deal. If you improve your credit score, you will be able to access a better mortgage rate.
3. I want to increase my borrowing to free up cash for a major expense
Remortgaging might enable you to raise money with lower rates than other forms of borrowing, for example an unsecured loan.
Also, as a remortgage is secured against your property it will be easier to raise money than other forms of borrowing if you have a lower credit score.
You can remortgage to release equity in your property and receive a sum of cash. You can then use this money for other purposes; common reasons are:
- Include home improvements
- Property development
- Pay for a large event, such as a holiday or a wedding
- Gift money to family or friends
- Consolidating other debts
- Pay off a new car purchase
- Help pay for costs associated with inheritance
- Resolve payments resulting from Divorce and Separation
Borrowing more money will increase your debt and monthly repayments so check your affordability before proceeding with a remortgage.
4. My house value has increased
If the value of the property has risen rapidly since you took out your mortgage, which is common with the current house market boom, you may find you’re in a lower loan-to-value band, and therefore eligible for much lower rates.
You can check the current value of your home by using free tools such as Zoopla
5. I want to pay my mortgage off quicker
Remortgaging is an excellent way of getting your current deal to match your circumstances. If you have more disposable income then when you initially took out your mortgage, you may decide to reduce the mortgage term and pay it off quicker.
Alternatively, you may require a flexible mortgage that allows you to overpay each month. However, not all mortgages allow you to do this; lenders want you as a customer for as long as possible so blocking over payments is an efficient way of doing that. A remortgage customer is a desirable customer type, especially to a new lender, so it’s your chance to negotiate and get terms that suit you.
1. Don’t remortgage with your existing lender without researching the market
You may be tempted to accept a new deal from your existing lender. However, the mortgage market is incredibly competitive and it could be that you find a more suitable deal for you by searching through a wider selection of lenders. Furthermore, if you instruct a mortgage broker they get access to exclusive deals that are not accessible by the general public, and they will find the best deal based on your situation.
2. Seek professional advice
You can search the market and hopefully find the perfect deal yourself, but taking advice from a broker will really make all the difference. If you do instruct a mortgage broker make sure you find an independent broker who will put your needs and circumstances first, and will offer tailored advice. Whilst brokers do charge a fee, they may save you money in the long run (and not to mention do all the hard work for you). However, any broker worth working with will happily offer a free consultation and offer some advice for free with no obligation.
3. Don’t ignore the fees involved with remortgaging
When you remortgage there will likely be a number of fees involved. Don’t just look at the rate or repayments when comparing deals, look at the overall cost of the mortgage. Fees you should keep an eye out for are Early Repayment Charges, Exit Fees, Legal Fees and Valuation Fees. A decent mortgage broker will explain all of these options to you.
4. Don’t leave it too late
If you’re on a fixed term mortgage arrangement, it’s important that you secure a new mortgage deal before your existing one comes to an end. Otherwise, your current lender could move you to the standard variable rate which could cost you money.
Ideally, you should start considering your remortgage options 3-6 months before your deal comes to an end. If you secured your original mortgage through a mortgage broker, they should contact you to remind you with plenty of time to spare.
5. Consider changes in your personal circumstances
When you start to plan for your remortgage, it’s vital that you consider whether any of your personal circumstances have changed since you last secured a mortgage. For example, has the amount you get paid each month changed? Have you had a child? Have you paid off a loan? Taking all of this into consideration will help ensure you can afford to keep up with your future monthly mortgage payments.
If you do work with a mortgage broker on your remortgage, they will go through every scenario with you and look through all your personal circumstances, including your credit score, and really find a deal that perfectly reflects your current situation. They will also advise you on ways you can improve your mortgage deal in the future, for example giving you advice on improving your credit score.
While many lenders will not be forthcoming with offers for remortgaging if you have a lower-than-average credit score, it doesn’t mean you won’t be able to get the loan you need. A Bad credit history is an issue for banks as this makes you:
- Seem a higher risk to lenders
- More difficult to get loan approval
- Additional work is required for bad credit remortgage offers
Although a bad credit history does make banks cautious, some financial institutions are willing to look past this. A low credit score doesn’t always mean you can’t afford remortgage payments. Some lenders are able to consider these circumstances and still offer remortgaging services.
Independent Mortgage advisors will be able to point you in the right direction. They will know which banks specialise in remortgages for people with bad credit.
Review your paperwork – Remind yourself of your current mortgage deal. What type of mortgage are you on? What is the current interest rate? How long have you got left to pay? What are your monthly payments?
Speak to a mortgage broker – Most mortgage advisors offer a free consultation. But make sure you use an independent broker. independent brokers give you honest and tailored advice. A broker will search the whole of market for you and compare the rates for free.
Make your mortgage application – A broker will do all the hard work for you here, or you can fill in the application to your desired lender and hope for the best.
Get a conveyancing solicitor – If you remortgage with your current lender it’s considered a “product transfer” and requires no additional legal work. Otherwise, a remortgage will require you to have a solicitor or conveyancer, to help with the legal side of things. Ask for recommendations from a financial or mortgage advisor.
There is no hard and fast rule here, but we advise between 18 – 45 days from application. This may be quicker if you instruct a broker as there will be less likely to be declined or encounter issues with the application.
Sometime remortgaging isnt plain sailing. You might find issues with your application if:
- You are in negative equity
- There are issues with your credit rating, this can also affect your chances of a new mortgage. However you can improve your chances with a mortgage broker.
- You’re self-employed you may struggle to remortgage if you can’t provide adequate evidence of your income and lenders will no longer allow you to self-certify. Again, a mortgage broker can improve your chances securing a mortgage if your’re self-employed.
- Many of the bigger banks will lend into retirement but they will often have an upper age cap, with the majority asking for loans to be repaid before your 70th or 75th birthday. This means that if you’re aged 55 and over, you would have to pay the mortgage back in 20 years rather than the standard 25 years.
- Lenders also sometimes demand higher salaries relative to loans and take into account your outgoings as well as your income when deciding to offer you a mortgage.
Friends Capital are an independent and unbiased mortgage and loan specialists. We are experts in the field of financing residential property, buy-to-let mortgages, HMO’s and financing property development projects. We have access to the whole of the specialist finance market, and we also have access to exclusive deals with the leading, most established, and trusted lenders.
Contact us for a free initial consultation, which enables you to chat to a mortgage expert, get an understanding of how much you can borrow with a no obligation quote.
Two Steps to Contacting Friends Capital
One of our friendly advisors will either call you back within 24 hours (usually the same working day), or will take details from you in order to best deal with your situation.
When you speak with us, we will take a ‘fact find’. At this stage we take basic details about your situation. We will then search the whole of the market and find you the best deal available.
If you are happy with the deal that we offer, we will then contact the lender for you and get you what is called a ‘decision in principal’.
If you’re happy with the decision in principal then we will secure this deal for you and deal with the application for you on your behalf.
Join our mailing list and get access to mortgage advice, industry news, offers and promotions.SIGN UP