If your current mortgage deal is close to expiration, you will likely be considering remortgaging in order to avoid increasing your repayments when you end up on the standard variable rate (SVR). Whether you want to find a new deal with your current mortgage provider, need a cash injection to carry out improvements on your home or simply want to find a better deal with a new mortgage lender, we’ve put together a guide to help you better understand the remortgaging process and what it involves.
Remortgage Meaning – What Does Remortgage Mean?
Remortgaging involves switching your existing mortgage to a different deal, which can either be with your current lender or a different mortgage provider. When you remortgage, you will not be moving house and the new mortgage will be secured against your existing property.
Why Consider the Remortgage Process?
There is a wide range of reasons that you might have for considering switching to a new mortgage. It is an increasingly popular process that homeowners use for a variety of reasons including to reduce the interest rate on your existing mortgage payments, to fix monthly payments and avoid possible future rate rises, to raise money to renovate or improve your home, to consolidate other debts, and much more.
Can I Remortgage My House?
Almost any homeowner in any situation can remortgage, providing that they are eligible for the new mortgage deal. If you have no outstanding mortgage on your home and currently own it outright, you are in the strongest position to remortgage for any reason. People who own their home outright often consider remortgaging in order to free up cash to consolidate existing debts or to carry out expensive repair and renovation work on the property.
There are certain situations where it may be more difficult to remortgage a property compared to others. For example, if you are over the age of 60 or are currently retired, it might be more difficult to find a lender willing to consider your application. Some lenders are happy to provide mortgages that borrowers will still be repaying after retirement, but many are not. Similarly, you may find it more difficult to remortgage if you are self-employed or work as a freelancer. The main problem here will be proving that you earn enough money to cover mortgage repayments. It is usually easier for self-employed people to remortgage if they have been self-employed with a consistent income for several years and have regular audited accounts to prove their income.
Can You Remortgage a Property With Negative Equity?
Negative equity occurs when your home is currently worth less than the size of your mortgage, often due to a fall in property prices since the time that you took out the original mortgage. In some cases, your lender may be able to offer you a retention product that is designed to help you save money. You can also reduce the negative equity by making mortgage overpayments.
What Does Remortgage Mean in Shared Ownership?
If you currently own a shared ownership property, you may be wondering whether or not you are eligible to remortgage. The remortgage could be used to get a better deal on the loan for your shared ownership property or to access more funds to purchase a further percentage of the property. However, getting a remortgage for a shared ownership home is not as straightforward as it would be for somebody who owns their home entirely or owns a property outright. And although it is likely to be possible, it is a specialised form of lending and you will need to approach a lender that offers shared ownership mortgages rather than a general lender.
How Does Remortgaging Work?
If you’re currently on an introductory or limited-time deal with your mortgage, the following steps will apply:
1. Your Current Lender Will Get in Touch:
If you are on an introductory deal such as a five-year fixed rate, you can expect your lender to be in contact with you in advance of the expiry date so that you are well aware of when you are due to go back to the SVR. Typically, the SVR will be higher than the rate of interest offered on the deal you’re currently on, so it’s a good idea to use this time to determine whether or not remortgaging can save you money.
2. Ask for a Closing Balance:
The next step is to request a redemption statement from your lender. This will provide you with information on the amount that is needed to repay the remaining mortgage balance including any fees, and will be the amount that you will need to borrow should you decide to remortgage your property.
3. Find a Mortgage Broker:
A mortgage broker is often the best way to ensure that you get the best deal with remortgaging. Working with an independent broker means that they can search the entire market to find the best deal for your situation. Mortgage brokers will often also have access to deals that are not available to individuals on the open market.
4. Consider the Type of Mortgage You Want:
Similar to when you first mortgaged your property, you will need to decide whether you want an interest-only or a repayment mortgage. Interest-only mortgages typically have lower monthly repayments, however, at the end of the mortgage term, you will need to be able to repay the loan capital.
5. Consider the Legal Side:
If you have decided to switch to a different mortgage lender, you will need to appoint a solicitor or conveyancer once again. They will be in charge of any paperwork that is necessary during the process, such as drawing up and signing the mortgage deed.
6. Applying for the New Mortgage:
In most cases, if you are applying to remortgage with a new lender you will need to go through the mortgage application again. To speed up the remortgage process, it’s a wise idea to have any necessary documents ready, such as your credit card statements, address details for the past three years, three months of bank statements, payslips or self-employed accounts, your P60, and identification.
Getting Remortgage Quotes:
Ideally, you should start the remortgaging process as soon as possible in order to give yourself plenty of time to find the best quotes and determine the right lender for you. This is especially important if you want to remortgage your property because you are coming to the end of a fixed term and are going to be reverted back to the SVR on a certain date. There are various ways in which you can get remortgaging quotes, whether you decide to stick with your current lender, do your own research to find a new lender, or work with a mortgage broker.
How Long Does a Remortgage Take?
How long you can expect your remortgage process to take will depend on a number of factors. If you own your home outright, for example, you can usually expect a quicker remortgage process with more options compared to if you still have an outstanding mortgage on your home. A remortgage can, in some cases, be dealt with within a month and in some circumstances may take even less time. Making sure that you are easily able to provide all the necessary documents to prove any information that is key to your remortgage application is crucial to ensure a smooth and efficient process that avoids hold-ups from start to finish.
How Long Does it Take to Remortgage If You Have an Existing Mortgage?
Typically, the remortgage process may still be quite quick if you have an existing mortgage, as long as you provide the necessary documents and get started in good time. There are several factors that might have an impact on the speed of your remortgaging process.
As mentioned earlier, it may take longer for you to remortgage your home if you are over the age of 60, retired, a freelancer, or self-employed.
Bear in mind that there are other factors which might have changed since you first bought your home with a mortgage that can affect your ability to remortgage. For example, if your credit rate has suffered in the meantime or if you have changed jobs, recently become self-employed and do not have a lot of income history to show, if you are currently on maternity leave, are earning less than you were when you initially bought your home, if you are a temporary or agency worker, if you are currently on a fixed-term contract with your mortgage, or if you have missed payments on your current mortgage.
What is Remortgage Mean?
While it may still be possible to remortgage your property in any of these circumstances, there is a high chance that it will take longer and might be more difficult to find a lender that is willing to accept your application. Bear in mind that most applications are considered on a case-by-case basis so it’s important to do your research beforehand to improve your chances of acceptance regardless of your circumstances.
The good news is that you can also remortgage your current property to free up funds to buy another; check out the London properties that we have available if this is your plan.