How to Remortgage

Are you thinking about switching your mortgage? Whether you want to switch before your current mortgage rate ends or just find a better rate, knowing how to remortgage will help you decide if remortgaging is right for you.

When you remortgage, you switch to another mortgage with your current mortgage lender or take out a new mortgage with another provider.  If you do it right, a new remortgage deal could lower your monthly repayments, help you pay your mortgage off quicker, or free up some money to fund home improvements or consolidate debt.

There are several reasons why you may remortgage your home, for example:

• Your current mortgage deal is due to end - when your current mortgage deal ends, your lender may put you on their standard variable rate mortgage, which is usually higher. Remortgaging may help to move to a mortgage with a lower interest rate
• You’re on a high interest rate - if your mortgage is on a variable rate, your mortgage payments could increase with a rise in the Bank of England Base Rate. Remortgaging may help you find a more competitive mortgage deal
• You want to release equity - remortgaging to release equity from your home can help you pay off debts or for home improvements
• You want to reduce your monthly mortgage repayments - by shopping around, you could find a remortgage deal with lower monthly payments than what you’re currently paying
• You want to fix your monthly mortgage payments - remortgaging can let you swap from a variable rate mortgage to one with a fixed rate to give you more stable monthly payments
• You want the opportunity to make mortgage overpayments - remortgaging can help you find a lender that offers more flexible terms, enabling you to overpay on your mortgage without incurring penalties
• You would like to consolidate debts - mortgage interest rates are typically lower than what you may have on loans and credit cards. Combining your debts into your mortgage will reduce how much interest you pay and the number of payments you make. However, increasing the length of your mortgage could cost you more in the long term
• You want to remortgage to buy another property - if you want to purchase a second home or a buy to let property, remortgaging can help you raise the money you need for the deposit. This could, however, increase your monthly payments while reducing how much equity you have in the property
• You need to adapt to changes in your circumstances - if you’re splitting from your partner, have had a pay rise or need more money for a particular reason, remortgaging can help you find a better option that better suits your new financial situation

While the timescale for remortgaging will vary depending on the lender, it typically takes up to 2 months, though it can sometimes take longer if there are issues with your application that cause delays. If you want to remortgage before the end of your current deal, make sure you get the timing right to allow enough time to avoid moving to your lender’s more expensive SVR (standard variable rate). You can start to arrange a remortgage up to 6 months before the end of your existing deal.

The remortgage timeframe will depend on how complicated your mortgage application is. Lenders treat remortgages as a new mortgage application. This means you’ll have to go through the standard hoops of applying for a mortgage, such as a mortgage interview, property valuation, credit checks and review of your income and expenses. Mortgage lenders are now stricter on income and affordability assessments and whether borrowers can still afford the mortgage should the rate increase. If your income or expenditure has changed significantly since you last applied for a mortgage, you may find it harder to get a remortgage.

If there are any queries or issues with the property valuation - for example, “down valuations”, where your lender values your property lower than expected - this may delay the remortgage process. The lender may be more cautious about lending above a certain LTV threshold. If the value of your property has dropped below the outstanding balance on your existing mortgage, this could cause further delays, and you may need to either wait for the value to recover or cover the shortfall yourself.

The legal and conveyancing aspect of the remortgage can also delay the process while waiting for the Land Registry, property, and financial information to be completed. Remortgaging with your current lender may be faster as it can be treated as a product transfer and avoid the extra legal work. 

Keeping up with your mortgage payments is vital to ensure you don’t risk losing your home. Your mortgage is likely to be one of the biggest loans you’ll ever have, so you may wish to consider taking out mortgage protection insurance. This can help ensure that, even if there’s an unexpected change in your circumstances - such as losing your job or becoming seriously ill - your mortgage payments are still covered. 

Mortgage protection policies are often taken out alongside a new mortgage. There are 3 main types of mortgage protection insurance you may wish to consider:

• Life insurance - life insurance pays out to your nominated person, such as a close family member, if you die
• Income protection - income protection covers part or all your regular income if you become too ill to work
• Critical illness cover - this will also pay out if you become very ill and unable to work

If you need advice on how to remortgage and what options are available to you, speak to one of our experienced advisers at John Charcol. We’ll discuss your requirements with you to help you find a remortgage solution that's right for you. Give us a call on 0330 433 2927 on enquire online today.