Your current mortgage deal may well have been the best option when you initially purchased your property. However, there are likely to have been subsequent changes to the mortgage market, with new and sometimes better deals being offered. With potentially significant savings to be made, it pays to be prepared. Learn about the whole remortgaging process, along with things to consider when remortgaging, in this guide.
Remortgaging typically involves the cancellation of your existing mortgage and the arrangement of a new one. There are several reasons for this needing to happen; you can read more about that below.
While not always the case, remortgaging might involve switching to a different mortgage company, with the new provider paying off your existing mortgage and the debt being transferred. There might be an initial admin expense, but this could lead to longer-term savings, so it’s best to take everything into consideration.
Homeowners commonly look for a new mortgage deal when their payments go up following the initial period or when their existing mortgage term comes to an end.
An increase in property value may also result in a change of the loan-to-value ratio, meaning that you have a wider choice of mortgage deals.
Other common reasons for remortgaging include:
As a homeowner, you have a few different avenues to explore when it comes to remortgaging:
If you’ve spotted a better rate from a different lender, switching to them may make more financial sense in the long-term. While the process is by no means instant (or free of cost), the ongoing savings you could make may outweigh the initial work needed.
The process is quite similar to acquiring your initial mortgage. You’ll need to have hard credit checks done against you, prove your identity, and provide proof of income to satisfy the lender’s requirements.
If your current mortgage deal is coming to an end, it’s worth checking with your lender to see if there’s a better rate or products available. Although technically not classified as a remortgage, this may be an option without having to apply to a new provider.
This not only could help with your affordability, but it may not require as many checks to be carried out to verify your eligibility.
With remortgaging, there is also the ability to borrow more money on top of your existing mortgage, depending on how much equity you hold in your property. The extra money you get from this could allow you to fund things like home renovations .
Some lenders treat these kinds of remortgages as an additional loan, rather than a supplement to your existing one. This means you can expect to undergo much the same checks as you would with a new mortgage.
When paying off your mortgage, you’ll not only pay off the interest on the loan you’ve taken out, you’ll also build up equity in the property. This money isn’t accessible in full, as the value is placed against the house itself. But, there may be a way of releasing some of this equity so that the money can be used as you wish.
On one hand, you lose the overall equity you’ve built up on your home, but on the other, equity release can give you either a recurring monthly amount of cash, or a big lump sum in one fell swoop.
The process of remortgaging will be quite similar to that of applying for a new mortgage. You’ll be expected to complete a number of financial checks, with the provider having to see evidence of your income and expenses. Your property must be revalued and a hard credit check carried out.
If the prospective lender is happy with your financial standing, then they’ll likely offer a mortgage in principle (MIP), or Decision in Principle (DIP). Although these won’t be binding offers, they should give you an idea of how much you can borrow. You may then make an application, and your solicitor will arrange for the funds to transfer to your new lender to pay off the old mortgage.
It’s quite possible to remortgage for additional borrowing purposes, as a means of funding the purchase of another property. This may enable you to free up a significant amount of equity for your next investment. However, any such offer will be based on the kind of property that you’re looking to remortgage and your motivations for buying another home.
These remortgaging applications are typically made for reasons such as:
You should be confident of passing the financial checks which will be carried out before any such offer is made. Higher payments may also be expected over a more extended term. So this may not be the best choice if you’re planning on retiring soon or expecting big income fluctuations.
The process will be quite similar to arranging a remortgage for a single property. However, you must be confident of securing the funds needed to cover the deposit and continue your monthly repayments.
When remortgaging, there are two factors to consider:
Although offering as much as 4 times your annual income, lenders are likely to expect full repayment by the time of retirement. So your age will have a direct bearing on the acceptance of the mortgage term.
It’s also worth considering the amount of equity that may be released in the arrangement of a new mortgage deal. As an example, you might have initially arranged a mortgage of £150,000 for the purchase of a property valued at £200,000. If you’ve subsequently repaid £75,000 of the mortgage then you’ll have property ownership of £125,000. You could release some of this equity in arranging a new mortgage to cover the remaining £75,000.
Other important considerations include:
With Aldermore, you can count on us for a stress-free switch. With no hidden fees and the option of switching 17 weeks before the end of your current rate or Early Repayment charges end, now could be the ideal time to look for a new deal. Go ahead and switch online or give us a call on 0333 3211000 for a chat about your remortgaging options.
Subject to status. Your mortgage is secured on your property. Your property may be repossessed if you do not keep up repayments.