Want to understand the remortgage process to avoid paying the higher interest rate after your current deal expires?
Or maybe you are wondering how much I can remortgage my house to buy another property or make the home improvements.
The remortgage process can be overwhelming when you are looking to move house or borrow more. It is vital to take remortgage advice from an experienced mortgage broker who can reduce your stress and often save you money.
Let’s get started to explore how the complete remortgage process works.
1. What is a remortgage?
Remortgaging works the same way as your mobile phone contract. Your mobile phone provider offers you a 12 to 36 months contract for a certain monthly charge.
- You get a cheaper rate for the 12-36 months commitment
- If you want to end the contract early, you have to pay the charges
- After the initial contract period, you can get another deal with the same provider or move to any new provider that offers you the best deal
Remortgage works almost the same way as well.
Although most mortgage terms are 25 years or more, lenders offer far cheaper rates if you can fix your mortgage for 2 to 10 years. The most popular fixed rates are two to five years because that suits most borrowers’ circumstances.
For example, at the time of writing this, one high street lender’s standard variable rate is 3.59%. However, one of their remortgage rates for two years fixed is 1.07% up to 75% loan to value with £1499 lender arrangement fees. The overall cost for comparison is 3.27%.
However, if you’ll pay back the mortgage for whatever reason within two years, you could have to pay 2% of the loan amount as early repayment charges.
In short, lenders offer you cheaper rates when you commit to staying with them for a certain period.
If you have a mortgage, remortgaging is a regular part of the mortgage management to save money or release equity for your needs subject to affordability.
2. Why remortgage advice is important?
You usually have to choose between two options when your current mortgage deal comes to an end.
- Change the product with the current lender
- Move to another lender who offers a better deal
Change the product with the current lender
If you are not looking to borrow more on your remortgage, usually this is the fastest and most straightforward way to avoid paying the standard variable rate of your existing mortgage lender.
The pros of changing a mortgage product with the current lender are:
- It’s quick
- No underwriting, far less paperwork
- No valuation if you are happy with the index valuation
- No legal work
Cons of changing the product with an existing lender:
The existing lender’s product rates are generally higher than what you can get by remortgaging to another lender.
If you change the product yourself with the lender, you don’t get the mortgage advice or only the advice limited to the lender’s own products.
Move to another lender who offers a better deal
Moving to another lender could give you a better mortgage product than what your existing lender offers.
However, remortgaging with other lenders includes full underwriting, property valuation and legal work, which can take up your time.
I offer free whole of the market remortgage advice to help you choose the best option for you. Feel free to message me if you are looking to simplify your remortgage process.
3. How does remortgaging work?
The remortgage application process works the same way as any other mortgage application.
The only difference between purchase and remortgage applications is that you don’t have to deal with a property seller or estate agent, which helps speed up the completion substantially.
4. How much can I remortgage my house for?
How much you can borrow by remortgaging your house depends on the following factors on top of the lender’s standard lending criteria:
Value of your house
Most high street lenders have remortgage products up to 90% of your property value. Some may have 95% LTV products.
How much you can afford
The property’s value does not give you a free pass to borrow up to 90% or more. You can get access to extra borrowing subject to your affordability.
For example, you can have a house value of £1,00,0000 and maximum borrowing of £300K only if this is what you can afford based on the following:
- Your income
- Expenditures
- Your financial dependents
- Credit/other regular commitments
Reason for a remortgage
How much you can remortgage your house for also depends on your borrowing reason as well.
For example, most lenders don’t lend if you are borrowing for business purposes and some limit up to 75% LTV if you are releasing equity for debt consolidation.
5. How does remortgaging work to buy another property?
Releasing equity by doing remortgage is usually straightforward to buy another property to let out if you tick all the boxes of lending criteria.
However, it gets a little complicated if you are letting out your current property and buying a new residential property.
In a let to buy scenario:
- Not all lenders lend for let to buys
- All let to buy lenders require you to complete both mortgages simultaneously
- Most lenders require same solicitor to act for both mortgages
In some cases, lenders ask for a purchase offer before issuing a let-to-buy offer.
6. How long does it take to remortgage?
The process of remortgage with the same lender, called product transfer, can be done within two weeks, depending on the lender once the application is submitted.
Some lenders process the product transfer requests within a few days. However, some take a week or two to complete the product transfer request.
The remortgage process where you are switching to another lender can take 6 to 8 weeks to complete in most cases. It is because switching to another lender requires full underwriting, property valuation and legal work.
7. When to start the remortgage process?
Most residential remortgage offers have the validity of at least four months and some offers are valid for up to six months.
You can start exploring your remortgage options six months prior to your current mortgage deal end period. This will give you plenty of time to review the best options and decide without any pressure.
You’ll also have sufficient time to deal with the legal process and set the completion date after your current deal expiry date to avoid paying the early repayment charges.
However, if you leave it until the last minute (less than two months of your current deal expiry date), it can be stressful to complete on time. Delay could cost you in terms of paying a higher interest rate to your current lender.
8. Can I remortgage early?
You can certainly remortgage early.
In fact, you should start a remortgage process at least three to four months early to give you sufficient time to complete the legal process. However, you must inform your solicitor that they should not complete until the expiry of your current deal period.
Failure to do so can result in paying the early repayment charges on your current mortgage product.
9. Do I need a solicitor to remortgage?
Yes, if you are switching to another lender. However, the good news is that the remortgage conveyancing process is usually straightforward and most lenders offer free legal with their remortgage mortgage products.
10. Remortgage costs
The most common remortgage costs are as follows:
- Lender arrangement fees. As with any other mortgage, lenders have products with or without lender’s arrangement fees. You should check with your mortgage broker whether you’ll save money by paying the arrangement fee or choosing a fee-free mortgage deal.
- Valuation fees. Most lenders on residential remortgages offer free valuation products.
- Legals. Similar to valuation fees, most lenders on residential remortgages give you the option to pick their solicitor for free or get a cashback if you want to use your own solicitor.
Conclusion
A remortgage process can be confusing. However, an experienced mortgage broker can help you simplify the process and save you money on your remortgage.
If you have found these answers helpful, please consider sharing these with family and friends. Sharing can help me spread the word out, and someone save money on the remortgage.
