The Ultimate Guide To Remortgages
Applying for a remortgage can be complicated, there are so many different types of deals available right now that it can be a challenge just working out where to start!
People apply for a remortgage for a wide range of reasons, it is not a case of just finding the best remortgage product, it is a case of finding out the best remortgage product to suit your specific requirements.
In this guide, we break down the complexity of remortgaging and provide advice which will give you a better understanding of the key considerations when applying for a remortgage.
What is a remortgage?
The basic definition of a remortgage is ‘to replace a mortgage that you already have with a new mortgage.’
There are numerous reasons that someone may choose to apply for a remortgage. Ranging from trying to get a better rate, to releasing equity to spend on home improvements.
Regardless of the rationale behind the requirement for a remortgage, it is important that the applicant fully understands how to get the best product based on their personal circumstances.
What are the benefits of remortgaging?
The main benefits of remortgaging include:
- Sourcing a lower interest rate.
- Debt consolidation, which results in lower monthly outgoings.
- Raising capital for other purposes, such as home improvements.
- Adjusting the terms of your mortgage to take into consideration a change in your circumstances.
- Paying your mortgage off quicker.
What is the Remortgage Process?
There are a number of ways to apply for a remortgage, including speaking to your existing bank or mortgage provider or using a mortgage broker.
Whilst some people prefer to stay with the same bank or mortgage provider, this option rarely offers the best financial solution. Mortgage brokers will analyse over twelve thousand mortgage products and recommend the best remortgage deals to suit your circumstances.
Preparation prior to application
Before you start looking at a remortgage, there are a few tasks that will help the process. It is recommended that you prepare for the application by getting your finances into order.
You should start by checking out your credit score to see if there are any issues that may affect your application. Applying for credit in the lead up to your remortgage and using your overdraft can impact how good a deal you will be offered, so get your finances into the best possible shape in the months before applying.
It will help to have an accurate idea of the valuation of the property. You can use online tools like Zoopla to get an estimate of the value. Mortgage providers often have a different formula to valuing property for a remortgage, so be prepared for it not being valued at what you expect the current sale value to be. Having a good idea of the value of your property will enable you to find a deal based on the LTV (Loan to Value) percentage that you are likely to be eligible for.
Most mortgage providers will ask you for proof of income. You will need to obtain this through payslips, or if you are self-employed you will need to look into the documentation that lenders require to prove your income and affordability. You will need to provide information regarding any existing loans and credit that you have.
If you decide to go through a broker then much of the hard work will be done for you, in terms of checking out the best deals. If not, you may need to spend plenty of time doing your research to find the best remortgage deals by comparing the different rates on mortgage company websites.
Make sure you have a clear reason for remortgaging, whether that is to get a better rate or raise some equity. Once you have decided on your approach, you can usually submit your application online or by arranging a meeting with a mortgage advisor/broker.
The length of the application process will vary depending on a number of factors such as how quickly they can send someone to value the property and whether the valuation meets the minimum amount for the deal you have selected.
When all of the criteria has been met and you are offered the remortgage and you accept it, your new provider will settle the outstanding amount in your previous mortgage and set up your new payment schedule for the remainder of your mortgage.
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There are a variety of times that it may be very worthwhile to remortgage.
The most popular time is when you are coming to the end of your current rate and want to find the best deal in the current market.
Many people apply for fixed rate mortgages for a set number of years and when that comes to the end of the fixed rate period, the rates increase considerably. So before that happens, it is a good idea to find out if there are better deals available in the market.
Other times you might want to consider remortgaging is if you want to do some home improvements or if you want to pay your mortgage off quicker by reducing the loan term.
Alternatively, if you are struggling to make your mortgage payments you might be able to bring the monthly payments down by extending the term.
Can you remortgage early?
Most companies will allow you to remortgage early, but charges will often be applicable.
You should check whether there are any early repayment charges (ERC’s) on your current mortgage before you commit to a remortgage product.
Early repayment charges vary from one provider to another and even product to product, so review your existing mortgage agreement or call the provider to find out what you would need to pay to switch mortgages.
You will then need to calculate whether a remortgage is still beneficial once you have paid the early repayment charge.
How to find the best remortgage deals
To find the best remortgage deals, you should first outline your key priorities.
If reducing your monthly payments, or paying your mortgage off quicker is your main objective, your search should be focused on finding a deal to achieve that.
If you are looking for cheap remortgage deals then using a remortgage calculator will help you to define the best option.
There are many different factors that you need to look at, even if the monthly payments look good, you should check other details like early payment penalties, the interest rates before and after any fixed period and arrangement fees. Often the lowest headline rates are not the most competitive.
How much does it cost to remortgage a house?
This can vary greatly depending on the provider, your circumstances and the amount you are looking to borrow, as well as your financial history and affordability.
Typically, you could be looking at the following costs:
- Application Fee.
- Product Fee.
- Valuation Fee.
- Other Fees.
Costs vary massively from lender to lender and product. Many lenders will offer free
When remortgaging it’s important to remember that, getting it right can potentially save thousands of pounds.
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