Remortgage

What is a remortgage? How does the process of remortgaging work in the UK?

Let’s assume that somebody bought a property. Fast forward a couple of years and their existing deal is coming to an end – that’s typically when remortgaging will take place.

There are other circumstances where it could happen a little bit sooner, but generally speaking, when your deal’s ending you’ve got two options. You either tie into a new deal with the same lender, which is known as a product transfer, or you look at a brand new deal with a new lender, which is remortgaging.

It will depend on your individual circumstances, but typically when you remortgage and move to a new lender, you hopefully secure a rate that’s a little bit more favourable than a product transfer.

Remortgaging is simply moving your current mortgage to a new lender. We’ll look at the most appropriate rates across the market, whether that’s on a new two-year product or a new five-year product. We look at the options available for each client.

It’s not as simple as just switching the rate. Typically, you need initial acceptance to check that the new lender will provide the lending figure you require. We secure the interest rate with that new lender and when the application goes in, they will want to value the property to make sure it’s suitable security.

Once everything’s signed with the lender, there’s some legal work involved in moving the current charge to the new lender. We typically try and line it up so that when your current deal ends, the new deal will start.

Sometimes people change a mortgage from sole name into joint names, if they’ve moved in with somebody in the interim. Or they might look at raising capital for home improvements or to consolidate existing commitments. They might want to repay the Bank of Mum and Dad for helping them get their foot on the property ladder. That’s something we could look at as part of the process.

How long does it take to remortgage? How often can I remortgage my property?

Typically it takes six to eight weeks for the remortgage process, because you’ve got the mortgage application, mortgage approval and the legal part of the transaction.

The majority of lenders will allow you to switch products six months ahead. So if your mortgage deal was to end on January 1, we would review that mortgage at the start of July, to assess the options available via the existing lender and through new lenders. That allows you plenty of time – so when your current mortgage deal ends you avoid going onto the higher variable rate and your new product could start.

If you are looking at raising capital, you could do that whilst you’re tied into a product with what we call a Further Advance. You could remortgage as often as you like, but it does typically align to whenever your mortgage product comes to an end.

A significant number of people in the UK will have fixed rate mortgages, which are usually two or five year deals. We normally look at remortgaging six months before those deals come to an end.

Can I switch lenders when remortgaging?

Remortgaging typically is moving to a new lender. However people will often call a product transfer a remortgage as well, as they see remortgaging to mean renewing their deal.

I myself am a good example. My fixed rate was coming to an end this month and I had two options – my existing lender and the open market. We always compare those options for a client.

If we go with the existing lender, it’s done very quickly with a few touches of a button – and it will take effect whenever you like. We’ll compare that with moving to a new lender on a new rate. There’s an application process involved with that, and slightly longer timescales.

As I always say, is the juice worth the squeeze? Could it save you enough money to make it worth going through a credit assessment and supplying bank statements and pay slips?

It’s not right for everybody to move based on their circumstances. Sometimes staying with the existing lender is the right path to go down. But speak to a broker as early as you possibly could when your deal’s coming to an end – we could explore the options for you.

What are the main reasons why people choose to remortgage?

Usually it’s because they want a better deal than their existing lender could offer them. Some people also look at raising capital for various reasons – home improvements, to buy a second property or debt consolidation, if that’s right for their circumstances.

If there have been rate changes, people could also look at reducing or extending the term of the mortgage.

What happens if I don’t remortgage after my deal expires?

If you let your product finish, it will automatically revert to the lender’s variable rate, which is usually much higher than your fixed rate product.

Your interest rate will go up and your payments will go up as a result. So if you are choosing to just let your current deal expire, be clear about why. It might be that you are planning on moving in the near future, or perhaps you feel that interest rates are likely to come down.

The last thing we want any client to have is payment shock, where they expect that payments will only increase a marginal amount – but in reality, they will increase quite significantly.

Keep an eye on when your deal’s due to end and have a conversation with us, or any broker. If you don’t choose to remortgage, find out what your payments will look like – we could tell from the lender’s standard variable rate what that will be.

What happens to my existing mortgage when I remortgage?

If you moved to a brand new lender, your previous mortgage will be paid off by your new lender. They replace the funds that you had and the previous mortgage is paid off.

What factors should I consider when deciding whether to remortgage?

First, what existing products are available through your current lender? What’s the likely valuation of the property? Valuation is part of the remortgage process and impacts on the products available.

You also need to consider the time until your current product comes to an end. If it’s ending soon and it normally takes six to eight weeks to remortgage, it may be beneficial to switch your deal with your existing lender to avoid a higher rate. It will be quicker than going through the full process of a remortgage.

Those are the factors to think about. But the earlier you look at your circumstances, the better. You’ll get the right outcome if you give yourself time. Don’t leave it to the last minute.

Can I remortgage to consolidate my debts?

Yes, but speak to a broker and get the right advice – in some circumstances it’s the right thing to do, and in others it’s not.

A lot of people are struggling with the cost of living, and we do see this more than ever. People have existing credit commitments and sometimes those payments aren’t affordable.

You could remortgage to consolidate those commitments. It’s important to get advice around the cost of the overall debt if it were to stay where it was, versus the cost of consolidating it into a mortgage – which is typically over a longer term.

Taking unsecured lending and securing it against your home could have consequences if you fail to keep up to date with the payment.

Can I remortgage if I have bad credit?

Yes – don’t let it be a barrier. There’s nothing worse than thinking you’re trapped in a situation where, maybe due to circumstances out of your control, you’ve missed payments or had defaults. Pick up the phone, have a chat, get honest and clear advice from somebody who knows what they’re talking about. We’ll guide you on your situation.

A host of lenders offer products for people with adverse credit. So find out what your options are and make an informed decision from there.