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Anthony McQuilliam tells us all we need to know about remortgaging.
What is remortgaging and how does it work?
Remortgaging is changing your current mortgage deal to a different one. It could be with the same provider or potentially with a new lender.
A lot of people look at remortgaging because they want to, for example, take money out of the house to do work on their property. At the end of an initial mortgage term such as a fixed rate deal, if you don’t remortgage you will be moved to the Standard Variable Rate – and interest rates tend to jump up quite a bit.
There’s also something known as a product transfer, which is where you take a new product with your existing lender. A product transfer ultimately involves the lender pressing a few buttons to switch you over to a suitable product at that point in time.
When is a good time to remortgage?
There are points in your mortgage life where you may need to remortgage. The main and most common one is when your current mortgage deal is about to end.
For example, you took out a five year fixed rate mortgage and it’s expiring soon, which means potentially you will go on the standard variable rate. If you don’t do anything, your payments will jump up quite a lot.
Or, you may be nearing the end of your current deal and find that your property price has gone up substantially. You might decide to remortgage and take extra money out of the property and use that to fund some home improvements, a Buy to Let investment or potentially debt consolidation.
Another example is where you may have taken out a mortgage five years ago. Perhaps your career has advanced, your income’s gone up and your commitments have gone down. At the outset you could only afford a 35 year mortgage term, but now you can potentially reduce the term of your mortgage. That will save you tens of thousands and interest in the long run, because it’s paid off in a much shorter term.
When is it not a good idea to remortgage?
You may be in a situation that’s the opposite of your pay going up. Let’s say, for example, you had a mortgage agreed five years ago and in the meantime, you’ve lost your job and now have a lower income. Alternatively, you may have started up a business and don’t have four years’ worth of accounts yet.
At that point it may not be worth going down the remortgage route because lenders will assess your income as if you’re applying for a new mortgage. But with a product transfer, the lender won’t check your income as such. They will just transfer the mortgage from whatever deal you’re on now to a new deal.
Another situation where it might not be worth remortgaging is if you have a hefty early repayment charge. That’s very common if you’re in a fixed rate mortgage. Ending your deal early will force you to pay anything from 1% to potentially 5% of the balance left on your mortgage. It can be quite expensive to remortgage when you’re still within the fixed rate.
You do have another option, though, known as a Further Advance. Here, we can just speak directly to the existing lender and potentially get a top up mortgage alongside your existing product.
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Our highly experienced Advisers are ready to help you with either buying or remortgaging a home, protecting your property and lifestyle along with saving you time and effort, ensuring you have a competitive deal right for you.
What remortgage options are available?
The remortgage options that are available to you will greatly depend on what your plans are. That’s why it’s always worth speaking to an advisor. We can give you the most suitable advice as to the way forward.
Generally, there are three different ways you can remortgage. The first is a standard remortgage – you’re coming to the end of your fixed rate and just change to a new lender that will accept you. You have a lot more flexibility with that and plenty of options.
The second option is a product transfer where you stay with the same lender for whatever reason. Finally, If you’re within a fixed rate term with early repayment charges, you have the option of doing a further advance, which is like a top-up mortgage alongside your existing loan.
Why remortgage at the end of a fixed-rate deal?
When you spoke to your mortgage broker initially and set your current mortgage up, we will have gone through the monthly repayments and interest rates for your two, three or five year mortgage. That’s all great – you’ve got an attractive interest rate and your payments are fixed.
After that expires, if you don’t do anything your interest rates can jump up quite dramatically, which means your payments jump up as well. To avoid that, we advise people to start looking into a remortgage six months before your current mortgage expires.
That gives you two benefits. The first is that you can book in a rate six months in advance of your deal ending. If interest rates continue to increase, you benefit from that lower rate. Then, on the other hand, if interest rates go down before the remortgage completes, your mortgage advisor can go back and negotiate cheaper deals for you. It’s a win-win situation.
On top of that, it can take potentially up to three months for a remortgage to be agreed and accepted. So looking into it nice and early gives you peace of mind that you’re not going to miss the deadline and have to pay more on the Standard Variable Rate. Your fixed-rate mortgage will be locked in as part of the remortgage process.
How do I improve my chances of getting a good remortgage?
It’s exactly the same as buying a home. The first one is your credit score. Make sure that you’ve got everything set up in direct debits so you never miss any payments.
Next, keep on top of your credit score*. If you can see any lapses or things that shouldn’t be there, it’s worth querying them and getting them taken off. Otherwise that could put a few hurdles in the way when you’re looking at different products at the end of your term.
As we just mentioned it’s always worth starting the process six months in advance. It avoids you leaving things too late and scrambling around to find extra money until you can get your payments fixed back in again.
*You are now leaving the Bolt Mortgages website. We give no endorsement and accept no responsibility for the accuracy or content of any sites linked to this site. The service promoted here is not part of the Openwork offering and are offered in our own right. Openwork Limited accept no responsibility for this aspect of our business.
What fees are associated with a remortgage?
With a product transfer, there’s no solicitor involved and no additional valuation fees. There could be product fees and mortgage broker fees involved.
With a standard remortgage, some of the fees involved are your broker fees and your product fees. Because you’re transferring the mortgage over from one lender to another you will need a solicitor to make sure everything’s done legitimately and properly throughout the process.
A lot of lenders will offer you free mortgage valuations, free solicitors and conveyancers for the process – or if not, a lot of them will give you cash back to pay for your solicitor. The cost is not the £1,500 to £2,000 that you’d pay if you’re buying a property. It is usually in the region of about £250 to £400 dependent on the lender and solicitor.
How can a mortgage broker help?
As with a standard mortgage process, if you’re looking at going to your usual bank for a remortgage, you’re only ever going to get access to one particular set of rates and criteria.
A lot of people decide to stick with their existing mortgage. But just because that lender was the best for you when you first took your fixed rate mortgage out, that doesn’t mean they will be the best lender now.
A conversation with a broker will show you what other options are available. You could potentially save yourself tens of thousands of pounds in interest over the long term. We might find you a significantly cheaper rate compared to one available with your current mortgage lender.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Think carefully before securing other debts against your home.
Some buy to let mortgages are not regulated by the Financial Conduct Authority
Approved by the Openwork Partnership on 25/01/2023
Your home may be repossessed if you do not keep up with your mortgage repayments.