There are certain times in the life of your mortgage when you might consider remortgaging your home. This may be to find a better rate, pay off a debt or fund home improvement.
In this guide, we’ll take you through the pros and cons of remortgaging to help you find out if it is the right choice for you.
If you decide remortgaging is right for you, this guide will help you through the process to make sure you get the best deal.
What is remortgaging?
Remortgaging is when you switch from one lender to another but remain in the same property.
There are three main reasons why you might choose to remortgage:
- To get a better deal
- To consolidate debts
- To raise funds
1. To get a better deal
It can be worth remortgaging to take advantage of better interest rates. Often, when an initial deal period comes to an end, your lender moves your mortgage to their Standard Variable Rate (SVR). This may not be the best deal for you. By shopping around, you can secure a better rate, reduce your monthly repayments, and reduce the amount you pay over the life of your mortgage. This is mainly why you need an adviser to guide you.
It is worth beginning to research the mortgage rate a few months before your current deal is up. This means you’ll be all ready to go at the end of your deal period and don’t pay more than you have to. Mortgage offers are often valid for up to 6 months in advance, so you don’t have to wait until your current deal ends to begin arranging a remortgage.
2. To consolidate your debts
You can sometimes use a mortgage to consolidate other debts such as car loans or credit cards and thus reduce your monthly outgoings. Please see special advice if you are consolidating debt. Your mortgage adviser can help you with this.
3. To make improvements to your home
You can remortgage to raise money for major improvements such as an extension or new kitchen. You could also raise money for other purposes, such as your child’s university costs.
Is remortgaging right for me?
Remortgaging to get a better deal is often a good decision that will save you money in the short and long term. Before you remortgage though it is worth talking to an adviser to see what is the best option for you based on your circumstances. Advisers are now available out of hours and they will track your remortgage end-to-end.
If you decide to remortgage to consolidate loans or raise money, you should seek financial advice to make sure this is the best decision. Although consolidating your loans will reduce your monthly outgoings, you may well pay more interest in the long term.
Remember that your home is at risk of repossession if you cannot keep up your mortgage payments so be sure you can afford the new amount.
How hard is it to remortgage?
Remortgaging your home is relatively simple and nowhere near as stressful as buying a home because the deeds of the house are already registered in your name. The new lender will undertake a valuation of your home to check how much the property is currently worth. You will also need a solicitor or conveyancer to complete the financial transaction. Brokers now offer an end-to-end tracking service that makes the process simpler.
What to check before you decide to remortgage
You should check your credit score before you start the process of remortgaging to make sure that rejection is unlikely. If you are rejected, this can negatively affect your credit rating. If your credit rating is as not as good as you would like, you can act now to improve it before you apply for a new mortgage.
You also need to get an accurate estimate of the value of your home. You can get an idea by looking at other houses that have sold in your area. It’s then a good idea to contact estate agents and ask them for a figure.
How do I remortgage my home?
Remortgaging is a straightforward process and will usually take between 4 and 6 weeks. This can be done quickly via a digital end-to-end remortgage application using API technology. The main steps you need to take to remortgage your home are:
- Obtain a redemption statement
- Contact your mortgage broker to find the best new deal
- Secure a decision in principle (DIP)
- Apply for the new mortgage
- Instruct your solicitor
Your Mortgage adviser can help with you with all this and take the stress away.
Obtain a redemption statement
Contact your current lender and ask for a redemption statement. This statement shows how much is outstanding on your existing mortgage on a specific day and any fees associated with repaying it.
Contact your mortgage broker to find the best new deal
Visit your mortgage broker online or call them and ask them to find you the most suitable deal. They will be able to search a database of products from a wide variety of lenders to find the most suitable mortgage for you no matter what your financial circumstances may be. They will also be able to handle the process end-to-end digitally.
Secure a decision in principle (DIP)
Once you are happy that the new deal is right for you, your mortgage adviser will secure a DIP from your new lender.
Apply for the new mortgage
Your mortgage adviser will now complete the application on your behalf. You will need to provide documents to support your application. This can be done online with Open banking and Online Identification if you choose.
The new lender will request a valuation of your property. They may visit your home or use a database to find this figure.
Instruct your solicitor
Once the new mortgage has been approved, you can arrange a completion date with your solicitor.
On the completion date, the solicitor draws the new money down from the new lender and uses it to clear the balance with your current lender.
What does remortgaging cost?
Remortgaging does not cost as much as buying a house and will often save you money in the long run. However, it may involve some fees.
Early repayment charges
If you have not come to the end of your introductory deal, there may be early repayment charges due.
You will still need a solicitor or conveyancer; however, the fees will be much lower because you already own the house, so the deeds are in your name.
Usually, lenders will do a free valuation, but you should check this.
Mortgage broker fees
You may have to pay mortgage broker fees unless you use a mortgage broker who is paid by the banks and does not charge additional fees.
Booking and arrangement fees
Some lenders charge booking and arrangement fees. Your mortgage broker will ensure that you get the most appropriate deal as sometimes it is worth paying for these deals if they mean you get a better rate.
You can compare mortgages on our website for free and use our mortgage calculator to compare your mortgage with other available deals. We monitor remortgage applications digitally end-to-end and don’t charge additional fees.
If you have any questions about whether remortgaging is right for you, call us on 0203 0111 898 for more information.