Paul Holland sits down and explains everything Remortgaging.
What is Remortgaging?
Remortgaging is changing your existing mortgage to a new lender and a new deal.
When is a good time to Remortgage?
The most common time to Remortgage is when your Fixed-rate with your current lender expires. Most people have a Fixed-rate deal with their current lender, as they tend to be more competitive for a two-five year period, or sometimes even longer. As that period approaches expiry, people discuss their follow up option, whether that is choosing to keep the deal the same, or go with a new lender that is offering a better rate.
When is Remortgaging not a good idea?
Remortgaging is not a good idea if it makes you worse off than not doing it. There’s lots of different reasons you might want to change mortgages, for example, if you have had a big renovation. Generally that tends to add a lot of value to the property, so by Remortgaging to a new lender, you could potentially obtain a better rate. It could also help raise some capital to go towards the property’s renovation cost.
What Remortgage options are available?
Remortgaging options are very similar to purchase options. Lenders have lots of different rates, depending on who you go to, and why you’re looking to Remortgage. People might be looking to Remortgage to consolidate debt, it could be beneficial to consolidate unsecured debt through your mortgage, to improve your overall financial position.
This won’t be the case for everybody, so speak to a broker, who will assess your whole situation and give you examples of how remortgaging could benefit you.
Why Remortgage at the end of a Fixed-rate deal and what would happen if you didn’t?
At the end of your Fixed-rate, you’ll go onto a Standard Variable Rate. This is set by the individual lender, and will be a certain percentage over the base rate set by the Bank of England.
This rate is a fair amount higher than the average Fixed-rate, so most people would experience much higher mortgage repayments by remaining on the Standard Variable Rate.
How do I improve my chances of getting a good Remortgage?
From a Remortgage application perspective, things that are going to impact your borrowing outcome are similar to a standard mortgage application. For example, affordability, credit status and the property value itself. It’s very similar to a mortgage application from an underwriting perspective. It’s a good idea to stay inside the parameters of any debtors, and make sure that your income scenario is favourable.
What fees are associated with a Remortgage?
The difference between a Remortgage and a purchase is generally that there are less fees. You don’t have to employ an estate agent, you won’t pay stamp duty. The only fees that you might incur throughout a Remortgage process could potentially be a valuation fee, which is charged by the lender, although you can often secure a deal with the incentive of a free valuation.
You might pay a broker fee, which again, tends to be a bit less than for a purchase. You could potentially have to pay solicitor fees for the land registry update and other various checks that only a legal representative can carry out for you, but again, a lot of Remortgage deals include this cost as an incentive.
How can a mortgage broker help people looking to Remortgage?
Leaving it right until the last minute if you’re due to expire the following month is going to make it pretty difficult to secure a new deal before you fall onto the Standard Variable Rate. It’s best to approach a broker, like ourselves, somewhere between six and eight weeks prior to the expiry of your Fixed-rate deal.
Your property may be repossessed if you do not keep up with your mortgage repayments.