There comes a time in every homeowner’s life where remortgaging your property is something to consider. But what exactly is involved in the remortgage process and is it really as complicated as everyone makes it out to be?
The short answer is no. You just need to decide on your reason for remortgaging and be 100% sure about it. Then, you’ll need to have your home revalued- fair and square- to ensure your new mortgage is worth the switch.
If it’s come to that time and remortgaging your home is on the table, here’s what you need to know about the process…
What Exactly Does Remortgage Mean?
In a nutshell, remortgaging your home means changing or adjusting the current loan or mortgage deal you have on your property. It’s completely up to you- but you could completely change your mortgage lender to a new provider. Or, you could simply update the terms of your mortgage with your existing lender.
There may be a number of reasons for remortgaging your home. The decision could be based on finding a better mortgage interest rate, remortgaging for increased flexibility or debt consolidation.
Yes, it’s possible to adjust your mortgage, even with bad credit- you just need to find the right lender- check out 1stukmortgages.co.uk if you’re based abroad. But most commonly, homeowners choose to remortgage their homes once their introductory mortgage rate ends and they want to secure a more competitive rate.
Ultimately, this allows homeowners to save more money and even purchase another property with increased mortgage flexibility. Let’s look at when it’s a good idea to consider remortgaging your home in more detail:
1. Securing a Better Interest Rate
The first time you take out a mortgage you are offered an introductory deal which includes a low fixed interest rate or a discounted interest rate. These introductory mortgage deals usually last two-five years. Once this time has passed, you’ll then progress onto a standard variable rate, as set by your lender. However, this variable rate is generally higher than other rates or deals you can find elsewhere, with another lender.
This is why it’s worthwhile to do some research on the market and other rates offered by different lenders once your introductory mortgage deal ends. This can end up saving you money in the long run. But make sure to review your options thoroughly, before interest rates go up.
2. Increased Financial Flexibility
Remortgaging your home allows for increased financial flexibility as it could give you the opportunity to overpay on your mortgage. This means you can pay your mortgage off quicker, and incur less interest. It also gives you the chance to switch to an offset or current mortgage account. This allows you to use your savings to reduce the amount of interest you payback. You’ll then have the chance to draw your savings back at a later stage, as and when you need them.
3. Consolidating Debt
If you stuck in a black pit of debt, you can use the flexibility of your loan terms to borrow money and consolidate some of your debt. Interest rates on mortgages are generally lower than personal loans or credit cards, that’s why this option is often desirable. But it’s not always recommended as you could end up paying back far more in the long run.
How to Choose the Best Remortgage Deal
Before you dive headfirst into a new remortgage deal with a new lender, research is extremely important. You’ll need to investigate whether it’s really worth your while, especially in the long run. Don’t be fooled by deals that look and sound good in the here and now- think about your future finances.
Here’s what to consider:
- Take a look at the different types of mortgage products available from different lenders
- Consider which mortgage deal would suit you best- fixed, variable or tracker mortgage rates
- Ensure that you compare like-for-like when comparing different mortgage rates
Another good idea is to chat to your current lender about whether they can offer a better deal on your mortgage. This could actually work out in your favor as you get to skip the costs of a new valuation of your home. You could even save on legal fees, too.
If your current lender makes you a better offer, don’t jump at it right away. Do a little research on other mortgage options and whether another lender could improve on this offer. Finally, don’t forget to ask about early redemption penalties. The last thing you need is to be slapped with a bill for leaving your mortgage deal early.
How Does the Remortgaging Process Work?
In order to qualify for a remortgage, you’ll need to submit specific paperwork to your new lender, which includes:
- Your proof of income
- A record of your monthly expenses- both incoming and outgoing
- Proof of residency or citizenship i.e. your passport or driver’s license
From here, a new lender will do some research on your current and past credit history. This is standard procedure when taking out any type of loan.
In order for a homeowner to qualify for a remortgage in today’s market, the individual circumstances of a homeowner are thoroughly assessed. The criteria for remortgage lending has become far more stringent in recent years. So, you may need to consider mortgage advice in order to find the best deal possible.
Once a remortgage principle has been agreed upon, your home will then be valued by the new lender. The process of a home valuation varies- but could include a simple drive-by valuation or detailed inspection. If your home falls short of the lender’s valuation criteria, not all is lost!
You can hire the services of a chartered surveyor who will be able to provide a professional valuation to the new lender for reconsideration. In order to finalize the remortgaging process, you may also need to hire the help of a solicitor.
The entire remortgaging process can take anywhere from four-eight weeks.
What Are the Costs Involved?
Remortgaging a property does come with its fair share of overheads. This is why it’s important to assess whether the cost of remortgaging does not outweigh what you’ll be saving when switching mortgages.
Some of the common fees you can expect to incur during the process include solicitor fees, land registry fees, early redemption fees (where applicable), agreement fees with your new lender, and property valuation.
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