Remortgaging can be a complex and stressful process, even for the most experienced mortgage customer. There are many factors to consider, and it’s crucial to ensure you’re making the right decision for your financial future. At Oportfolio, our goal is to help you make the most of your money by guiding you through the remortgaging process step-by-step. In this comprehensive guide, we will explain what remortgaging is, how it works, why you might choose to remortgage, and when the right time to start the process is to avoid unnecessary charges. So how does remortgaging work?
What Is Remortgaging?
Remortgaging is the process of taking out a new mortgage on a property you already own, replacing your existing mortgage. This can be done either with a new lender or with your current lender, depending on the deal they offer. As your life circumstances change, your financial needs and goals may also change, making it important to reassess your mortgage periodically to ensure you have the best deal available. Evaluating your financial situation and finding the best deal available is the financially responsible choice, and we at Oportfolio are here to help you do just that.
What Does Remortgaging Involve?
Man thinking about remortgaging
Understanding the steps involved in remortgaging can help you feel more prepared and relaxed throughout the process. Here’s a breakdown of the remortgaging process, so you have full visibility from beginning to end.
Complete an Agreement in Principle (AIP)
Most lenders will allow you to complete an online Agreement in Principle (AIP). This helps you find out whether a lender is willing to lend you the amount you want, without conducting a full credit check. You need to provide details about how much you want to borrow, your current income, and your regular spending habits. As your mortgage specialist, Oportfolio will complete this for you and ensure everything is in order.
Consider All Costs
The point of remortgaging is to make the most of your money. Therefore, before moving your mortgage to a different lender, check that they don’t charge you for the following:
- Application: The cost of setting up your new mortgage.
- Valuation Fee: To confirm the value of your property.
- Solicitors Fee : A solicitor will manage the transfer of your mortgage.
You should also ask potential lenders if there are any exit fees or early repayment charges if you choose to switch your mortgage again in the future. Your mortgage broker will check this for you and make sure that you are completely aware of any extra fees that may come with your new mortgage.
Apply for a New Mortgage
Once you have your AIP, you are ready to apply for a new mortgage. You will need to have the relevant paperwork to prove your earnings or equity, as well as any other documents detailing your current mortgage.
Completing Your Remortgage
Your new lender will carry out a credit check to confirm your current circumstances and arrange for your property to be valued. Once your mortgage is approved, you will receive an offer letter stating how much you can borrow based on credit checks, income verification, and property valuation. You will also need to pay for a solicitor who will handle the legalities of your new mortgage. This includes verifying your ID, carrying out leasehold checks, examining relevant documentation, and informing the Land Registry that a remortgage has taken place. This means they can update the legal title for your new home by registering the new mortgage.
How Do I Prepare for a Remortgage?
Remortgaging usually takes between 4-8 weeks to complete after you have submitted your application. For most applications, you will need to speak to a mortgage advisor, who will guide you on the best deals for your financial situation. At Oportfolio, we handle all of this for you, leaving the complex, time-consuming, and stressful tasks in the hands of our experts.
Key Questions to Explore
In the first stage of the remortgaging process with Oportfolio, we work with you to explore the following questions to ensure we’ve left no stone unturned and put you in the best position for securing a new mortgage:
What Will It Cost To Leave Your Existing Mortgage Provider?
Some mortgage providers include charges such as exit fees and early repayment charges if you choose to leave your current mortgage before it has ended. In some cases, this can be thousands of pounds, so make sure you check with your current provider first.
What Is Your Reason For Remortgaging?
There are many reasons why people choose to remortgage. It’s likely that your personal circumstances have changed, and your current mortgage no longer fits your needs. Perhaps something unexpected has happened, such as a change in your career or family life. You might also want more stability with your mortgage payments by switching to a fixed mortgage rate.
Do I Have A Good Credit Score?
Before accepting your application for a mortgage, your new lender will check your credit score. It’s important that all your details are correct, as even a mistake in your address history could cause a problem. A higher credit score usually means you’re a lower risk, increasing your chances of being accepted by the mortgage lender. You can check your credit score for free using services like Experian.
How Can I Improve My Credit Score?
If your credit score isn’t in great shape, there are things you can do to improve it, including building your credit history, paying your accounts on time, and registering on the electoral roll. This will make you more attractive to potential lenders, as they need to be confident that you have good financial discipline.
How Much Can I Borrow?
When working out how much you want to borrow, remember that you need to pay this money back. It’s key to borrow an amount that you can afford, as your financial circumstances could change.
Which Deals Are Available?
One of the most important aspects of remortgaging is making sure you’ve got the best deal. Once you’ve worked out how much you want to borrow, you can start shopping around for different options. By choosing to partner with Oportfolio, we do this for you. We take account of your individual needs and what you’re trying to achieve, and search for the best deals on your behalf.
Why Should I Remortgage?
The main reason people choose to remortgage is to save money, which can then be spent in other areas of your life. This includes raising money for home improvements to add value to your existing home, paying off other debts, and saving for unexpected life changes. Here are some specific reasons to consider remortgaging:
Your Current Deal Is Ending
Many of the best mortgages only last a short period of time – usually between 2 and 5 years. After this time, your lender will put you on their standard variable rate (SVR), which is usually higher than your old interest rate and higher than other deals available. To avoid this increase, you need to be ready to remortgage at a cheaper rate.
You Want a Better Rate
If you choose to move to a different mortgage but are tied into an initial deal, you might have to pay an early repayment charge. Despite these additional costs, you should still consider remortgaging as you could save thousands of pounds in the long run.
The Value of Your Home Has Increased
If your property has increased in value since you bought it, you might be in a lower loan-to-value (LTV) band and can therefore take advantage of much better rates. The lower the LTV, the better, as the more equity you have in your home, the more money potential providers are likely to lend you.
You Want to Increase Your Payments
If you’ve been promoted at work and have received a pay rise, or inherited some money which you’d like to put towards paying off your mortgage early, remortgaging can allow you to increase your monthly repayments or reduce the size of your loan and potentially enjoy a cheaper rate.
You Want to Borrow More
Life events might require you to need more money than you originally thought. If your current lender is unwilling to lend you more money or is offering unfavourable rates, remortgaging allows you to explore other mortgage providers who are willing to lend you the money you need.
You Want to Make Home Improvements
Remortgaging could save you a significant amount of money that could be spent renovating your current property. This can increase the value of your home if you wish to sell it or allow you to charge more rent if you’re a landlord. Additionally, making home improvements can make your property feel more like ‘home’ and serve you and your family for years to come.
You Want a More Flexible Mortgage
If you’re travelling, changing careers, or returning to education, you might want to take a payment holiday. Remortgaging can provide more flexible mortgage options, allowing you to miss a payment without being penalised. However, these flexibility features often come with a slightly higher interest rate, so weigh the benefits carefully.
When Should I Remortgage?
Remortgaging can be a time-consuming process, so you should start the search 3-6 months before your current mortgage comes to an end. This gives you enough time to explore other options and find a deal that best suits your needs. Most mortgages last between 2 and 5 years, and during this time, you will often be on a fixed rate. Once this offer ends, you will revert to the lender’s standard variable rate, which will be higher than what you’re used to paying. As such, it’s important to start this process early to avoid increased charges.
If the Bank of England’s interest rate (which influences the variable rate of lenders) has dropped since you took out your fixed mortgage, you might choose to stick with your current provider. However, if the Bank of England’s interest rate has risen during your fixed-rate period, you will likely want to remortgage to get another fixed-rate deal so that you’re paying back an amount you’re comfortable with.
How Do I Know How Much My Home Is Worth?
While the value of your home is important to know, it’s not the only factor to consider. Online property sites such as Rightmove and Zoopla are a good place to start, but they can often provide an estimate rather than an accurate figure. It’s important to get two or three valuations from local estate agents to give you a good idea of the price you could sell for. Additionally, keep an eye on the sold prices of similar properties in your area to understand the current market trend. This will give you an indication of how much your property is worth and will help you determine if remortgaging is a viable option.
How Much Does Remortgaging Cost?
Remortgaging isn’t free, and there are several costs to consider before deciding to move forward with the process:
Early Repayment Charges
If you are leaving your current mortgage before the term ends, you may face early repayment charges. These fees can be substantial and should be factored into your decision-making process.
Exit Fees
Some lenders charge exit fees when you leave your mortgage, even if you’re at the end of your term. Make sure to check with your current lender to understand any potential costs.
Valuation Fees
Your new lender will likely require a valuation of your property. This fee varies but typically ranges from £150 to £1,500, depending on the property’s value and location.
Legal Fees
You will need a solicitor to handle the legal aspects of remortgaging. Legal fees can vary but generally range from £500 to £1,000. Some lenders offer free legal services as part of their remortgaging deals, so it’s worth exploring these options.
Application/Booking Fees
These are fees for setting up your new mortgage. They can range from £99 to £2,000, depending on the lender and the mortgage product.
Potential Benefits Of Remortgaging
Remortgaging can offer several financial benefits, making it an attractive option for many homeowners:
Lower Monthly Payments
By securing a lower interest rate, you can reduce your monthly mortgage payments, freeing up cash for other expenses or savings.
Shorter Loan Term
If you’re financially able, you might choose to remortgage to a shorter loan term. This means you’ll pay off your mortgage quicker and save on interest payments over the life of the loan.
Flexibility and Features
Some remortgage deals offer more flexible features, such as payment holidays, overpayment options, and the ability to borrow additional funds. These features can provide greater financial flexibility and security.
Increased Property Value
If you use the equity released from remortgaging for home improvements, you can potentially increase the value of your property. This can be beneficial if you plan to sell your home in the future.
Consolidation of Debts
If you have high-interest debts, consolidating them into your mortgage can lower your overall interest payments and simplify your finances with a single monthly payment.
Risks of Remortgaging
While remortgaging offers many benefits, it’s also important to be aware of the potential risks:
Higher Interest Rates
If you don’t shop around for the best deal, you might end up with a higher interest rate than your current mortgage. Always compare multiple offers to ensure you’re getting the best rate.
Early Repayment Charges
These charges can be costly and may outweigh the benefits of remortgaging. Carefully calculate these costs before deciding to move forward.
Additional Fees
Valuation, legal, and application fees can add up. Make sure to factor these into your calculations to determine if remortgaging is financially viable.
Negative Equity
If your property’s value has decreased since you took out your original mortgage, you might find yourself in negative equity. This can make it difficult to secure a new mortgage with favorable terms.
Impact on Credit Score
Applying for multiple mortgages in a short period can impact your credit score. Be strategic in your applications to minimise this risk.
How Does Remortgaging Work And When Is The Right Time to Do It?
Remortgaging is a process that involves taking out a new mortgage on a property you already own, replacing your existing mortgage. It can be a strategic financial move that offers several benefits, including lower monthly payments, the ability to borrow more, and better mortgage terms. However, it’s important to carefully consider all the costs involved, your current financial situation, and the timing of the remortgage to ensure it’s the right decision for you.
Timing is crucial when it comes to remortgaging. Start exploring your options 3-6 months before your current mortgage term ends to avoid increased payments and secure the best possible deal. Evaluate your credit score, understand your home’s value, and consider all potential costs to make an informed decision.
At Oportfolio, our team of experts is dedicated to providing personalised advice and support throughout the remortgaging process. We understand that remortgaging is a significant financial decision, and we are committed to helping you navigate it with confidence and ease. Reach out to us today for professional guidance and make the most of your remortgaging journey.
Your property may be repossessed if you do not keep up repayments on your mortgage.
Oportfolio Limited is an appointed representative of PRIMIS Mortgage Network, a trading name of First Complete Limited which is authorised and regulated by the Financial Conduct Authority.
Oportfolio Ltd fees are payable on application. We charge a broker fee for property purchases of £495 and a remortgage/further advance fee of £395. Our product transfer fee is £295.
