What is a remortgage?
What is a remortgage?
If you’re looking to get a better deal on your mortgage or need to raise money quickly, then remortgaging your home might be a good option for you. A remortgage can allow you to borrow money tied up in the value of your property.
How does remortgaging work?
When looking to remortgage your property, you can either switch products with your existing lender or switch to a new lender, paying off your old mortgage and allowing you to potentially access better rates or a better deal on your new one. If you stay with your current provider and remortgage, you’ll just switch to a new deal. If you switch lenders your new mortgage will provide the funds to pay off your old one. Our mortgage brokers could help you find the best remortgage product for you and guide you through the process, simplifying the transition.
- Get all your information together. Think about how much you’re currently paying per month, what your current interest rates are. Look at your credit report and make sure everything is in order. Make sure you have your financial information, such as your income and expenditures, bank statements and identification.
- Contact a mortgage broker to make sure you’re getting the best deal, rates or product for you. A mortgage broker can scour the market to help you find the best rates, giving you expert advice and guidance.
- Your mortgage broker will find out what lenders you could be eligible for and compare the best rates and products. Once you’ve found a product that’s right for you, it’s worth getting an agreement in principal, where the lender gives you a guideline on how much you could borrow, this won’t entail a full credit check but remember this isn’t a legal agreement- it’s a pre-decision guideline.
- Check if there are any fees with your remortgage, make sure you budget for them and are aware of any costs. See more here.
- Apply for your remortgage!
Why might you decide to remortgage?
People who choose to remortgage their property, do so in order to:
Remortgage to save money
- Remortgaging can help you reduce your mortgage payment, saving money by simply switching to a new product or lender. This is usually done at the end of an initial benefit period to avoid any early repayment penalties. By reviewing your mortgage, you could reduce your interest rate and monthly payment, allowing you to save the money you have left over at the end of each month.
- Many people who are on an initial fixed rate mortgage may find that their interest rate increases after the first couple of years. By remortgaging or switching product you could be able to avoid this increase and potentially reduce your payments.
Remortgage to raise money
- Remortgaging can also be used to release equity from your home. This is done by taking out a new mortgage that is larger than your existing mortgage. Remortgaging in this way is often used for consolidating debts, making home improvements or to fund something else.
- Another option for raising money against your property is by taking out a secured loan.
You want to overpay
- If your income increases, for instance through a salary rise, you may want to pay more on your mortgage. Some deals won’t allow you to overpay or might have a cap on how much you can overpay. By remortgaging, you could find a provider or product that will allow you to make larger repayments and pay off your mortgage faster.
What fees come with a remortgage?
- Early repayment fees – most lenders will charge a fee if you repay the mortgage in full whilst still in the initial benefit period. This can vary with different lenders.
- Valuation – your lender will want to check to make sure your property is suitable for them to lend on. Lenders need to be sure the property they’re lending you money for is worth the amount they’re lending you.
- Arrangement fees – this is the fee you pay for your mortgage to be set up. This applies to all new mortgages, however some deals offer reduced fees. Usually starting at X to X
- Legal fees – this is to pay for your conveyancer – solicitor that specialises in property – to take care of the legal matters involved. The price can vary and some deals can include this fee so it’s worth checking
- Broker fees – if you decide to use a mortgage broker to help you find your new mortgage, they might charge a fee for the advice they give.
You won’t always be charged remortgage fees, some offer free legal services, valuations and arrangement but it varies from lender to lender. If you want to find out what deals you could be eligible for, get in touch with one of our specialist advisors.
Fixed remortgage or tracker remortgage?
When making a remortgage application the next step is to choose between a tracker or fixed rate remortgage. This is an individual decision, not something that should be made solely by reading something you’ve found online and it’s well worth speaking with a mortgage adviser. In recent years, fixed rates have compared well against trackers and regularly turned out less expensive.
If you like to have a consistent mortgage payment amount and decide that you may be put in a difficult situation if that rate that goes, then a fixed rate may the best option for you. If you choose a fixed rate rather than a less expensive tracker and rates fall or remain the same over the initial benefit period, you will pay a higher amount on your mortgage repayments.
When should I remortgage?
Low interest rates- if you’ve had your mortgage a while and noticed deals or offers with lower interest rates than you’re currently paying, it might be the right time to look at a remortgage. If you have an early repayment fee you’ll need to take this into consideration when working out if you’ll save money.
The term of your fixed-rate has ended- once a fixed term has ended on a mortgage, the interest rate usually changes to the lenders standard variable rate. This could cost more than you have been paying during the fixed term. It’s worth looking into a remortgage to see if you could lower your monthly payments.
When you own enough equity in your property- owning more equity in your home can give you access to better remortgage deals. Equity is the difference between what you owe on your mortgage and the value of your property. If your home shoots up in value, you could find yourself with more equity. You could find better rates, deals or products with a remortgage so it’s worth speaking to a specialist advisor.
Pros
- if at end of fixed term could access lower rate
- could reduce monthly payment
- raise money by releasing equity
- could find better suited product
Cons
- could have early repayment charge
- if your home’s value has dropped remortgaging might not be the best option
- if your mortgage debt is small, remortgaging is unlikely to be viable
When remortgaging might not be the best option
Remortgaging a property might work well for some but may not be the best option for everyone, especially if:
- Your mortgage debt is small
- Your repayment charge is large
- You have little or negative equity in the property
- Your home’s value has dropped.
If you would like to find out more information, you can speak to our mortgage advisor experts today, enquire below or use the mortgage calculator comparison tool to what could be available.
Remortgage Calculator
Current mortgage details
Summary
Your current monthly payment should be (based on the information you have entered)
£{{ !isNaN(current_repayment_basis) ? current_repayment_basis : 0 | currency }}
(repayment basis)
New mortgage details
Summary
Your new estimated monthly payment could be
£{{ new_estimated_monthly_payment | currency }}
Additional cost £{{ new_estimated_monthly_payment - current_repayment_basis }}
Monthly savings £{{ current_repayment_basis - new_estimated_monthly_payment }}
Representative Example:
Mortgage amount £170,995 (including £995 lender fee), 64 payments of £748.30 at a fixed interest rate of 2.28%, followed by 236 payments of £889.60 at a variable rate of 4.24%. Over a term of 25 years, giving a total amount payable of £258,861 at an APRC of 3.6%. The contract will be secured against your property.
