A Guide to Remortgaging a Property
Remortgaging refers to the process of getting a new mortgage on a property that you are already the owner of. There are several reasons why homeowners might consider doing this, including the fact that it is a massive opportunity to save thousands of pounds per year on mortgage repayments. Remortgaging is usually something that a homeowner will do when they come to the end of a mortgage deal, however, there are other beneficial reasons to consider switching. If your property has increased in value, you are concerned about rising mortgage rates, or you have paid off more of your mortgage, remortgaging can be a step that gives you peace of mind and helps you save more money.
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Reasons to Consider Getting a Remortgage Valuation
There are various reasons why you may consider remortgaging your property, which include:
Your Mortgage Deal is Ending
Many of the best mortgage deals that you can get when buying a property will only be available for a limited time. For example, you may have applied for a mortgage that tracks the Bank of England’s base rate for three years or fixed your interest rate for five years. However, you will move onto your lender’s standard variable rate when that discounted period ends. This is set by the lender, can be increased at any time, and will usually be much higher compared to what you were paying before, meaning that you will have increased monthly payments. However, remortgaging gives you the opportunity to move to a new tracker rate or fixed rate mortgage, either with your existing lender or a new lender. This can help you save money by securing a lower interest rate on your mortgage.
Lower Loan to Value for Remortgage When You Own More Equity
As you make repayments on your mortgage, you increase the level of equity that you own in the property. This is important when remortgaging since you will then be able to borrow at a lower loan-to-value. For example, if you put down a 10% deposit when you first bought the house, you would have needed a 90% LTV mortgage, but if you now own 30% of the property due to mortgage repayments, you’ll only need 70% LTV. This can help you secure a lower interest rate since mortgage lenders will view the loan as a lower risk.
You Want to Borrow More
Remortgaging your property can be an ideal option for releasing some of the cash that you have built up in your property over time. It’s often a popular choice for people who want to make some renovations to the property.
Get a Different Deal
When you get a mortgage, you want it to meet your needs for the period of time that the deal is set for. However, this is not always the case – maybe you’ve found a cheaper deal elsewhere or are looking for a deal with more flexibility, for example. Remortgaging in this case could be an ideal option for you, allowing you to switch to a better deal.
How to Get a House Valuation for Remortgage
Before applying to remortgage your property, you should do your own research. Your property is likely to be worth more than you paid for it, especially if house prices have risen since then in the local area, or if you have made improvements. It is a good idea to speak to an estate agent who can value your property and research the recent sale prices of properties that are similar to yours in the local area.
The Remortgage Valuation Process – What Does a Surveyor Do When Remortgaging?
Once you have determined how much you should apply for when remortgaging your property, your mortgage lender will instruct a surveyor to carry out a mortgage valuation survey on the property. Most of the time, this is done online using information from the Land Registry and other databases that are available on the property, the local area, and similar properties in the area that have recently been sold. The surveyor may also drive by your property to check the exterior and make sure that everything is as expected. However, in most cases, they will not need to enter the property. This is only likely to happen in some instances, for example, if your lender is not familiar with the area, if there isn’t enough online information about your property available for them to use, or if you have a property that has been constructed with non-standard materials.
How Much Does Remortgaging and a Remortgage Survey Cost?
There are some fees to be aware of when remortgaging your home. Most lenders now offer free valuation surveys, however, if you need to pay, this can be between £150 and £1500 depending on how much you are applying for. You may also need to pay exit fees if you are looking to switch to a new mortgage during the initial fixed interest or tracker period. This can be quite a significant charge and is calculated as a percentage of the outstanding debt. You may also have to pay an arrangement fee for the mortgage, which is typically around £1000 and can usually be added to your mortgage balance. There may also be additional legal fees to pay, such as conveyancing.
Is It a Good Idea to Get a Remortgage Valuation Survey From the Same Lender?
Remortgaging involves taking out a new loan on your existing property. Unless you are remortgaging to get access to additional funds and are willing to increase how much you are borrowing, you will usually use this to pay the balance that is remaining on your mortgage. Remortgaging with your existing lender involves switching from one mortgage product to another and is known as a product transfer. There are several benefits to staying with your existing lender, as you have an established relationship with them and they already have your information, which can speed up the process. However, it can be worth shopping around as you may be able to find a better mortgage deal with a different lender.
No matter whether you decide to stick with your current lender or apply with a new one, you are going to be making a credit application, so you will need to be able to show that you can afford the new loan with evidence of your income and outgoings. Since your circumstances may have changed since you initially took the mortgage out, your lender will require these checks to be carried out to make sure that you will still be able to afford mortgage repayments, even if the balance is now lower or remortgaging will lead to lower repayments.
Remortgage Valuation Tips to Keep in Mind
If you have decided that you want to remortgage your property, there are some tips to keep in mind during the process.
Get Legal Advice
You will need to hire a solicitor for remortgaging your home as there is some legal and conveyancing work required. A solicitor is needed to carry out ID checks, carry out any further required property searches, and check the terms in your mortgage. They will also collect funds from your new lender and repay your existing mortgage on your behalf.
Get a Professional Valuation
It is important to have a clear understanding of how much your property is worth before you apply to remortgage it. If you apply for an amount that is higher than the mortgage lender deems your property is worth when they carry out a valuation, this can lead to a down valuation, where you will be offered less. While you can challenge this by gathering robust evidence that your property is worth more, the best thing to do is to avoid it altogether by having a professional valuation survey carried out by an RICS surveyor before applying.
Keep Track of Your Mortgage
If you are not ready to remortgage just yet but want to know more about the process for the future, it is a good idea to keep a note of when your initial tracker or fixed rate will be coming to an end. Ideally, you should start looking around for different mortgage products to see what kind of rates are available around six months before the fixed period ends. Usually, you will get a letter from your mortgage lender a few months before you move onto the standard variable rate.
Apply in Good Time
Bear in mind that the process of remortgaging a property can take between four and eight weeks, so you will want to avoid leaving it too late. The earlier you start planning and get your application for a remortgage in, the less time you will spend repaying the mortgage on the standard rate, and the sooner you can start making savings.
There are many reasons to consider remortgaging your property, and if your fixed or tracker interest rate is coming to an end, it can be one of the best ways to save money on your mortgage.
