What is a Remortgage?
Remortgaging is the process of applying for a new mortgage on a property you already own. It offers a great opportunity to save money on your repayments each month, but there are several other benefits and reasons for remortgaging too.
Remortgaging can be beneficial if your home has increased in value or you’ve paid off a lump sum of your mortgage, as this results in a lower loan-to-value figure and means you could be eligible for a better deal.
How Does a Remortgage Work?
So, you’ve made the decision to switch to a different mortgage deal, having taken into account your broader financial situation. But how does remortgaging work? Understanding how to remortgage is important before you start the process, as there are several steps you’ll need to take.
The first step is to complete an Agreement in Principle, which most lenders will enable you to get online. An Agreement in Principle will allow you to find out if a lender is willing to lend you the amount you need, without carrying out a full credit check. However, it’s worth noting that this is not a guaranteed approval of your remortgage – it’s just to help you work out what your options are.
Once you have an idea what a lender will let you borrow, you need to check whether remortgaging leaves you in a better financial situation. This means checking whether the lender you’re considering switching your mortgage to charges for:
- Application fees to set up your new mortgage (this also might be referred to as an arrangement, product or booking fee).
- Valuation fees to confirm the value of your property.
- Solicitor’s fees, as they will need to manage the transfer of your mortgage.
- You may also have to pay an exit fee with your current lender, or an early repayment fee.
If you’ve decided that a remortgage would leave you better off, you can apply. You’ll need to provide personal and financial information, including details of your current mortgage, in the application. Ensure that you have the relevant documents for this, such as payslips and documents to prove your earnings and any information about loans or other credit commitments you might have.
The lender will carry out a credit check to confirm your circumstances and your affordability, as well as make arrangements for your property to be valued. The process is then similar to buying a new property, with a solicitor handling the transfer of the mortgage.
The Benefits of Remortgaging
There are many remortgaging benefits, but one of the primary reasons people choose to remortgage is that it offers them the opportunity to switch to a cheaper rate which can make your monthly repayments smaller. Remortgaging can save the average homeowner thousands per year, compared to staying with the SVR.
In addition to borrowing at a lower interest rate, remortgaging can also enable you to utilise your home’s equity for extra cash and it may offer you the chance to switch to a product that is better suited to your financial circumstances. For some people, remortgaging is a way of consolidating your debts into an easier to manage monthly payment.
When’s the Best Time to Remortgage?
The best time to remortgage can vary from person to person and it depends on your financial circumstances, but if the following apply to you, it could be worth considering:
- If your fixed rate mortgage deal is finishing.
- If interest rates are lower now than when you took out your mortgage.
- If you’ve built up a significant amount of equity in your home, either through repayments or if the value of the property has increased considerably.
- If you want to overpay but your lender won’t allow you to.
- If any of the above reasons apply, you could find yourself in a good position to apply to remortgage your property and improve your financial situation.
What does the remortgaging process look like?
The first step to remortgaging is to check the paperwork for your current mortgage deal – you need to know what your mortgage rate is, the type of mortgage you have and how long you have left to pay. You also need to be clear on what your current monthly payments are.
You can then speak to a mortgage broker who can talk to you about your circumstances and determine if remortgaging is the right choice for you.
The next step is to apply for the mortgage product – Town & Country Mortgage Services can manage your application every step of the way for you and keep you updated on its progress from the initial application through to an offer of acceptance. Our team of advisors have extensive experience in applying for mortgage products for many customers with different circumstances, so we can make sure the process is as smooth and efficient as possible.
Call our team today on 0800 32 88 680 and speak to one of our remortgage specialists.