What Is Remortgaging? – MortgageLadder’s Guide to Remortgaging
What does remortgaging mean?
Mortgages are often for a fixed period of time, usually between 1-5 years. At the end of that term. At the end of that term, the lender moves you to their standard term, which in most cases means higher interest rates. It’s like being out of contract on your mobile phone. In order to get a new rate, comparable or better than the one you were, you will need to remortgage. We made a guide to remortgaging to help you through this process
A remortgage is a process of re-assessing your mortgage often towards the end of a fixed term. You can get a lower interest rate, change the term of a mortgage, or lower the monthly payments. A remortgage can also be used to raise additional finance by borrowing more for things such as home improvement, paying off debts or purchasing another property.
The remortgaging process
The remortgaging process does not differ much from the mortgage application procedure, although the process is often much quicker than a new mortgage.
It’s important to make sure you are up-to-date on the latest offers and deals because if you’re currently in a deal that is about to expire or has already been renewed, it’s worth checking out what rate will apply when your current mortgage deal expires.
For example, if your property’s value has increased or your loan has reduced as a result of your past payments, It’s possible that your LTV (loan-to-value or the amount you owe as a percentage of the value of your property) has changed and that means you have access to more competitively priced deals. As a rule of thumb, the lower your LTV, the better deals you have access to.
Should you change lender when you remortgage?
Not necessarily, but definitely consider that as an option. Staying with your existing lender means you only have access to the deals they offer you and without researching the whole market, you won’t know if you can be on a better rate or better terms.
Do you need a mortgage broker to remortgage?
Not necessarily, but advisable. A good broker like MortgageLadder will help you research the whole market. Did you know there are over 90 lenders and over 1000 mortgage deals in the market? A good mortgage broker will help you access these, saving you not only money but a lot of time.
It’s also important to know what happens when you remortgage, so here are the steps you’ll need to take
Step One: Mortgage Application
Homeowners must start by submitting an application, this will generally include personal details and details about the property. With online mortgage brokers like MortgageLadder, you can do this almost entirely online.
Step Two: Agreement in principle
The lender reviews the application and decides if it will proceed with the application. If so, they may request more information before agreeing in principle with the new mortgage offer. If not, they will reject it and tell you what needs to change.
An AIP letter includes all the details about your new mortgage offer including how much you will be borrowing when repayments will start, what they are going to be and how much they are going to cost.
Step Three: Mortgage offer
The remortgage offer is not just an offer of two existing mortgages. A remortgage represents a new mortgage, which takes over both of the original ones, and then increases your borrowing amount by an agreed percentage.
How long does a remortgage take to complete?
The remortgaging process can take anything from 1 to 8 weeks to complete, depending on the lender, your mortgage broker and how ready you are with the documentation required.
Cost of remortgaging
There are two main sets of fees you might have to pay when you remortgage.
Protection for borrowers is becoming more common, which is why some mortgages include fees when you leave before the official term.
- Exit fee
- Early repayment charge
- Deeds release fee
When it comes to setting up your new mortgage, you should consider
- Valuation fee
- Conveyancing fee
- Booking fee
- Broker fee
Remortgaging for home improvements
Life changes are inevitable, so being able to change your mortgage is good for you no matter what happens. With family life, work or even unexpected joys, it sometimes makes sense to remortgage so you can find a better deal or raise finance.
When homeowners are looking to make home improvements, they might want to remortgage which would allow them to borrow against the increased value of their home.
This will only be possible if the lender agrees that the property has enough equity in it.
It is however important to note that every new borrowing comes with its own risk. You now have a larger debt and will be paying interest on this so your overall monthly payments could be significantly higher than previously. Therefore, you must take careful advice before remortgaging for additional borrowing. If in doubt, it is advisable that you speak to a financial adviser.
Is remortgaging a good idea?
Remortgaging is a decision to make when the borrower feels they will be in a more advantageous position with a new mortgage.
The answer to whether this is a good idea is not always clear-cut. From a financial point of view, you should think about whether or not you’ll actually save money by remortgaging and what your increased monthly costs will be. You should also consider any costs that you will incur as a result of the remortgage to be sure that you’ll be better off by remortgaging.
About the Author
CMO. MortgageLadder. Using the art and science behind marketing, I strive to deliver an enhanced brand experience to our users. My background as a data scientist allows me to make data-driven marketing decisions that support business growth. I’m fond of great books, fitness and sweets!