Remortgaging involves moving your mortgage on an existing property from one lender to another. This process replaces your old mortgage with a new one, potentially offering better terms or additional funds.
Why Do People Remortgage?
Homeowners often remortgage to avoid moving onto their lender’s standard variable rate (SVR), which typically has higher interest rates than their current deal. Other reasons include:
– Seeking a deal that better suits changing financial needs:
If you have welcomed a new child into your family, changed your working status or many other reasons, you may want to look into a new mortgage deal to take better control of your finances.
– Borrowing additional funds against the property:
Whether you want to free up funds for that dream kitchen expansion, loft conversion or a new car, a remortgage may be a good way to do that!
How Does Remortgaging Work?
-
Do Your Research:
Compare mortgage deals from various lenders, including your current one, to find the best rates. Professional advice can help you determine if it’s the right time to remortgage.
-
Consider Remortgaging Costs:
Evaluate potential costs such as booking fees, conveyancing fees, property valuation fees, and early repayment charges (ERCs) to ensure remortgaging is financially beneficial.
ERCs are fees that lenders impose if you pay off your mortgage or switch to a new deal before the end of your current mortgage term.
These charges are typically calculated as a percentage of your outstanding loan and can be substantial, depending on how early in the term you decide to remortgage.
ERCs are designed to compensate lenders for the interest they lose when a borrower exits a deal early. It’s essential to factor these charges into your remortgaging decision to ensure it is financially beneficial.
-
Get a Decision in Principle:
A Decision in Principle (DIP) provides an estimate of how much you could borrow. It involves a soft credit check, which won’t affect your credit score.
-
Apply for Your Remortgage:
After reviewing the DIP, proceed with the mortgage application, which requires a hard credit check and supporting documents.
-
Complete the Legal Work:
Legal work is necessary even if you’re not purchasing a new property. A solicitor or conveyancer will handle the paperwork and fund transfers.
-
Review Your Offer:
Your new lender will conduct a property valuation. Once approved, you’ll receive an offer to review and accept.
-
Completion:
The remortgage is completed when your new mortgage starts, and your old one is repaid. Your lender will confirm the details of your first payment under the new terms.
When Should You Remortgage?
Remortgaging is most beneficial near the end of your current mortgage deal to avoid early repayment charges and the risk of moving onto a higher SVR. When your deal is 6 months from expiring, it’s definitely time to start looking!
Tips for a Seamless Remortgage:
– Review Your Credit Score: A good credit score can secure better rates.
– Plan Ahead: Start the process 3-6 months before your current deal ends.
– Seek Professional Advice: Mortgage advisors can help you navigate the process.
Remortgaging can be a strategic move to improve your financial situation.
OneDome’s mortgage arm CMME is on hand to help you get the best possible deal regardless of your individual circumstances. For tailored guidance, click here and book in for a no obligation chat with the team.