Remortgaging can be a stressful process to even the most experienced mortgage customer as there are lots of things to consider. You need to be sure that you’re making the right decision for you and have weighed up the different costs involved.
One of the most important parts of remortgaging is always understanding how it works so you can make sure you’re prepared and have all of the information you need.
At Oportfolio, we want to help you make the most of your money by guiding you through remortgaging step-by-step. So in this blog post we’ll identify what remortgaging is, how it works, why you should choose to remortgage, and when is the right time to start the process to ensure you don’t incur any unnecessary charges.
What Is Remortgaging?
Remortgaging is taking out a new mortgage on a property you own, replacing your existing mortgage.
You can either move over to a new lender or stick with your existing lender, depending on the type of deal they offer you.
As you move through life your circumstances can change, meaning you shouldn’t stay on the same mortgage forever. Just like when you took out your first mortgage, evaluating your financial situation and getting the best deal available is the financially responsible choice and we will help you do this.
What Does Remortgaging Involve?
Before remortgaging, it’s important you know exactly what is involved, as this can drastically affect your decision. It also helps you to feel more prepared and relaxed as you understand the different stages.
We understand that a lot of people can be confused by remortgaging, and often feel overwhelmed.
At Oportfolio, we want to take away as much of the very natural stress you’ll be feeling throughout this process. Our team of experts have more than 20 years in mortgage service management, and ensure a smooth, hassle free experience every time.
We’re here to break down the different steps into an easy-to-understand format so that you have full visibility of the process from beginning to end:
Complete an agreement in principle
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 tell them 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 that everything is in order.
Consider all of the 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/ booking fee – This is the price of setting up your new mortgage
- Valuation fee – This is 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 is an exit fee or early repayment charges if you choose to switch your mortgage again in the future.
Apply for a new mortgage
Once you have your AIP, you are now ready to apply for a new mortgage. You will need to make sure you have the relevant paperwork to prove your earnings or equity, as well as any other documents which detail your current mortgage.
Completing your remortgage
Your new lender will carry out a credit check to confirm your current circumstances and then arrange for your property to be valued. Once your mortgage has been approved you will receive an offer letter which will state 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 the lender’s mortgage advisor who will guide you on the best deals for your financial situation.
At Oportfolio, we handle all of this for you.
We handle everything for you, leaving the complex, time consuming and stressful tasks in the hands of our experts.
In the first stage of the remortgaging process with Oportfolio, we work with you to explore the following questions. This ensures we’ve left no stone unturned and puts you in the best position for securing a new mortgage.
What will it cost to leave your existing mortgage provider?
This can be something which people overlook. You need to be careful as 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 a whole host of reasons why people choose to remortgage. It’s mostly likely that your personal circumstances have changed and your current mortgage is no longer fitting. Perhaps something unexpected has happened such as a change in your career or your family life.
You might also want more stability with your mortgage so that you’re paying the same amount every month. This is where a fixed mortgage rate would be most suitable, but we’ll cover this in more detail below.
Do you have a good credit score?
Before accepting your application for a mortgage, your new lender will check your credit score. It’s important all of your details are correct, as even a mistake in your address history could cause a problem.
Although there isn’t a specific credit score to obtain a mortgage, usually, a higher score means you’re lower risk. The more points you score, the more chance you have of being accepted by the mortgage lender. You can check your credit score for free by using 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. Your credit score gives them an insight into your affordability and lets them see how you have managed your finances in the past.
How much can you borrow?
When working out how much you want to borrow, you need to remember that you are paying this money back. It’s key you 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. This lets you concentrate on other important things in your life without the burden of sifting through the internet.
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.
Your current deal is ending
Many of the best mortgages only last a short period of time – usually between 2 and 5 years. It’s important to be aware of when your mortgage is coming to an end, as after this time, your lender will put you on their standard variable rate (SVR).
This will usually be higher than your old interest rate and higher than other deals available. As a result, you need to be ready to remortgage at a cheaper rate to avoid this increase.
You want a better rate
If you choose to move to a different mortgage, but you’re tied into an initial deal, then you might have to pay an early repayment charge. This can be significant so it’s important to take this cost into account before you switch. There is also a small exit fee to pay, also known as an admin fee which is what your lender charges when your mortgage is cleared.
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, then you might be in a lower loan-to-value band and can therefore take advantage of much better rates.
Essentially, loan-to-value means how much money you have in a property compared to how much money you have borrowed.
If your house is worth £500,000 and you have a £100,000 deposit, then you have borrowed £400,000 to be able to afford the property. That means your deposit makes up 20% of your home’s total value.
Therefore, your LTV ratio is 80%.
However, the value of your home might have increased since you bought it, so instead of being worth £500,000 it is now worth £550,000.
As a result, your LTV is now 73%. This is calculated by dividing the amount you borrowed by how much your home is now worth, multiplied by 100.
So in this scenario:
400,000 divided by 550,000 = 0.727272
0.72 x 100 = 72.72
This means you now have more equity in your home than you initially did and can remortgage to enjoy even 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. There are things you can do to improve your LTV ratio such as saving more money for a deposit and making home improvements to add value to your home.
You want to increase your payments
Perhaps you’ve been promoted at work and have received a pay rise. Perhaps you’ve inherited some money which you’d like to put towards paying off your mortgage early.
However, your current lender might not allow you to increase your monthly repayments or will only let you increase them by a small amount. By remortgaging, you can reduce the size of your loan and potentially enjoy a cheaper rate.
Again, check for early repayment charges and exit fees when leaving your current provider to make sure you’re saving more money than you’ll be spending.
You want to borrow more
Things happen in life and you might need more money than you originally thought. However, your current lender might be unwilling to lend you more money, or they could be offering unfavourable rates.
As a result, remortgaging allows you to explore other mortgage providers who are willing to lend you the money you need. However, be prepared to answer questions about why you want the extra money and where it is going to be spent. Some mortgage lenders will also ask you to provide evidence such as building quotes if you’re paying for a home refurbishment.
You want to make home improvements
This is a huge reason for remortgaging and something we have touched on throughout this post.
By remortgaging you could save a huge amount of money which could be spent renovating your current property. There are numerous advantages to this including increasing the value of your home if you wish to sell it, and being able to charge more rent if you’re a landlord.
However, carrying out a renovation can also make your property feel more like ‘home’. Think about the amount of time you spend in the house and what this really means to you.
A house is a lot more than just bricks and mortar.
It’s where you enjoy precious moments and make lasting memories. By carrying out a refurbishment, you can make sure it is your dream home and that it serves you and your family for years to come.
You want a more flexible mortgage
If you’re travelling, changing careers, or returning to education, then you might want to take a payment holiday.
This allows you to miss a payment without being penalised. However, it’s important to note that these flexibility features will usually come with a slightly higher interest rate. Therefore, make sure you weigh up what you really need from a mortgage before paying for these added extras.
When Should I Remortgage?
Remortgaging can be a time consuming process as you need to find the right deal for you. Therefore, you should start the search 3-6 months before your current mortgage comes to an end.
This gives you a comfortable amount of time to explore other options and find a deal which best suits your needs. As we’ve discussed, there’s a lot to consider before choosing a new deal so it’s important you don’t rush it.
Most mortgages last between 2 and 5 years and during this time, you will often be on a fixed rate. However, 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 at least 3 months early so that you’re not surprised by 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, then 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, then you will likely want to remortgage to get another fixed rate deal so that you’re paying back an amount you’re comfortable with.
It’s important to note that bank rates are unpredictable and can go up and down.
You need to be sure that you’re saving money by moving to a new deal by taking different costs (such as early repayment fees and exit fees) into account.
Conclusion: How Does Remortgaging Work and When Is The Right Time to Do It?
Remortgaging can take time but by understanding how it works and how you can prepare for it, you will feel a lot more confident that this is the right decision for you.
Regardless of why you’re choosing to remortgage, timing is key. Don’t leave it until the last minute as you will incur fees which can be avoided by doing your research early.
The process of remortgaging can seem overwhelming, but it doesn’t need to be.
By choosing a professional mortgage broker that you can trust and rely on, it leaves you to get on with more important things in life.
At Oportfolio, our team of experts provide you with dedicated advice from start to finish.
We know remortgaging is a big decision, so we sit with you to work out exactly what you’re trying to achieve. This helps us identify the best way to get you there, not only in the short term, but also for the years ahead.
Clients are at the heart of what we do, and we’re committed to providing the best possible service each and every time. If you need help with any aspect of remortgaging, then reach out to a member of our team.
Your property may be repossessed if you do not keep up repayments on your mortgage. Neither Oportfolio Ltd nor PRIMIS Mortgage Network is responsible for the accuracy of the information contained within the linked site.
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.