Remortgaging. Whether you’re remortgaging to release equity from your property, or switching to a better deal, remortgaging can be a brilliant financial decision. So how does remortgaging work?
By remortgaging, you are essentially switching from one mortgage to another on a home you already own. Although this might sound simple in theory, there are a lot of things to take into consideration to make sure you are making the most of your money.
As we’ve already covered, one of the biggest reasons people undergo this process is to release some extra cash which can be spent elsewhere. However, with so many different deals available and associated costs, it can be difficult to know which option is best for you.
At Oportfolio, we want to keep things nice and simple.
We want your experience to be as stress-free as possible when going through this process, and we’re here to take that pressure off your shoulders. We understand that remortgaging can be overwhelming, so our aim is to provide you with information that is clear and concise. This will help keep you informed at every stage throughout the remortgaging process.
Understanding the do’s and don’ts of remortgaging helps you make better informed decisions moving forward.
Should I Remortgage?
Remortgaging has a lot of potential and can truly benefit your personal finances if you need to free up some cash. Perhaps the value of your home has increased and you would like to release some equity, or maybe you just want a better rate on your monthly repayments.
Whatever the reason, it’s important you understand the do’s and don’ts of remortgaging so that you can avoid any expensive mistakes.
Give yourself time to research
Research is key when you’re considering switching to a new lender. You need to understand the current market and how this will affect interest rates. You should start your research around 6 months in advance of when you want to remortgage your property.
Starting this early means you aren’t rushed and have given yourself enough time to explore the mortgage climate. If interest rates are rising, then you need to make sure you obtain a competitive rate and are not automatically switched onto the lender’s standard variable rate once your fixed term has ended.
The purpose of remortgaging is to make the most of your money, regardless of which area of your life you choose to invest this in. Understanding different types of mortgages, and the core differences between things like fixed rates and variable rates, will help you choose which is best for you. We’ve covered this in more detail further in the blog to allow you to decide which option is most suitable for your financial situation.
Get your paperwork ready
Before moving to a different mortgage provider, you need to have all of your documentation in place. The quicker you can get your paperwork ready the quicker the remortgaging process will be, as it allows your new lender to carry out their checks.
Required documents will include your ID, proof of address, proof of income, and bank statements so providers can validate how much you can afford to pay back. You will also undergo the same affordability checks as you did when you originally applied for your mortgage.
To make the application process as smooth as possible, you should keep all of your documents in an accessible place.
At Oportfolio, we want to make remortgaging as easy as possible for you.
Our first step in the mortgaging/remortgaging process is to sit down with you to gather all of the key information we need. The beauty of doing this before we start the process is that when the time comes for you to move your mortgage again, we already have your basic details. This saves you from having to supply us with your documents all over again, provided the documents haven’t expired in the interim. We continuously strive to keep the application process hassle free and straightforward for our clients.
Shop around for the best options
By exploring different deals, you will be able to find one that best suits your needs. It all depends on what you want from your remortgage and your reason for switching over. The best mortgage might not necessarily be the one that provides lower monthly repayments, but rather lets you pay off your mortgage early. If you have the money to increase your mortgage payments then this can be a big driving factor behind your decision to move to a new lender.
Your current lender may offer you an attractive product to retain your custom such as a more favourable rate, but you should still shop around to see what else is available.
Also, by starting the search early (6 months before your current deal ends) you can find and reserve the most competitive rate. And, if time progresses and an even better rate becomes available, then you can explore that rate instead. However, you need to be careful as you could lose some upfront fees by ditching one lender for another. The best solution is not to dump one lender until you have had a formal mortgage offer from your preferred lender.
Correctly time your remortgage application
Understanding when to remortgage is critical to avoid incurring any additional charges.
If your fixed term mortgage is coming to an end, you should start looking at other deals at least 3-6 months beforehand to ensure you’re not switched onto your lender’s standard variable rate (SVR). This will usually be a lot higher than what you have been paying and can fluctuate depending on base interest rates. The higher the Bank of England’s interest rate, the higher your mortgage repayments will be.
You should also never underestimate the time taken to complete a mortgage application. By starting early, you can be confident that you have everything in place and are ready to switch over to your new lender when the time comes.
Use a professional mortgage broker
With so much to think about, remortgaging can cause a lot of stress and confusion. But, you don’t have to struggle through the process on your own.
The best solution is to sit down with a professional mortgage broker and discuss your different options. These people are experts in their field and will be able to give you comprehensive guidance about the process from start to finish.
When you partner with Oportfolio, our dedicated team provides you with professional advice on your next steps, so that you can decide which route you want to take. We work with you one-to-one to understand exactly what you’re trying to achieve, and develop ways to get you there. We are a trusted and knowledgeable mortgage broker, and we have helped various clients through their remortgaging journeys.
Whilst we can’t change the way lenders do things, we can control the impact this has on our clients. That’s why we take the burden of the application process for you, leaving you to enjoy important things in your life.
Guess the value of your property
Whilst you might think you know your property very well and understand how much it’s worth, you should never guess it’s total value. In order to know how much you can spend or save when remortgaging, you need an accurate valuation of your home.
Your property might have increased in value since you first bought it, which means your loan-to-value ratio (LTV) will be lower. This means you now own more of your home than you originally did when you put down your deposit.
As such, you have more equity in the house, which can be released by remortgaging. In addition, by having a lower LTV you are more attractive to new lenders meaning you can enjoy lower interest rates.
Forget about different mortgage fees
Whilst remortgaging is a good way of freeing up extra cash, you should never overlook the different fees involved.
Before focusing on securing your new mortgage, you need to be aware of the different conditions when leaving your current provider. If you’re still within your fixed-term contract but would like to leave early, then some lenders will charge you. This is usually a percentage of what time is left on your current contract.
You may also incur an exit fee which covers admin costs involved when moving your mortgage from one lender to another. You should also be aware that your new mortgage provider will charge set-up fees which are the same as when taking out a new mortgage.
There is legal work involved when remortgaging your property, so some lenders offer free legal advice as part of their service. In some cases, lenders offer a cash-back service where the lender pays the borrower a sum of money to hire their own solicitor. This can help make the process much more efficient.
Stick with the same lender because it’s easier
You should never stick with your current lender purely out of convenience. If you’re not reevaluating your financial situation and exploring other deals on the market, you could be missing out on a huge opportunity to save money.
Your current mortgage might have been fitting when you initially took it out, but since then, your lifestyle might have changed. For example, you might have a new job with a higher income so you are now in a position to increase your borrowing power. As a result, your existing mortgage might no longer serve your needs which is why it’s sensible to look at other options.
Remortgaging has many benefits and by switching to a different deal, you could reduce your monthly repayments. The reality is your current provider might not be the cheapest. You need to shop around to be sure you’ve got the most competitive rate.
And what’s more, remortgaging doesn’t have to be inconvenient. There’s no need for it to be a long-winded, stressful process that takes up your time and energy. By partnering with a professional mortgage broker such as Oportfolio, we take care of the entire process for you.
Hide anything from the mortgage lender
Mortgage lenders need to make sure that you can afford to pay back the money they are borrowing you. Therefore, any new provider will carry out various checks to confirm your affordability and will need proof of your income and expenditure.
Make sure you’re truthful with your new lender and declare all of your regular expenditure at the beginning of the application process. If you try to conceal anything, then they might find this out at a later date which will affect their decision to approve the loan.
They will also check your credit score by using a credit reference agency such as Experian, Equifax, or TransUnion. This enables them to see your repayment history such as credit cards, overdrafts, loans, and utility bills to make sure you have got the financial discipline required to pay back a mortgage. You should check your own credit score before the lender to ensure there’s nothing which would hinder your eligibility for a mortgage loan. This also helps you to plan better and manage your own expectations.
Forget to update your insurance
If you’re remortgaging to borrow more money then it’s important to increase your insurance. If you are changing the terms of your mortgage then it’s important to review what level of protection you have.
This ensures your mortgage loan and your family are covered if the worst were to happen. Your home and your family are very important to you, and having insurance gives you total peace of mind. It makes good financial sense to update your insurance policies as you can feel reassured that your family has one less thing to worry about should anything happen.
At Oportfolio, we offer a whole range of protection packages. This includes life cover, critical illness cover, income protection, and property protection. No one likes to think about dying or getting ill, but it’s important you address the subject and have your finances in place. If the worst were to happen, then your family could be left with a huge financial burden and they may be unable to keep up with the mortgage repayments.
None of us know what life has in store for us so it’s best to be prepared. With our personal, customer-focussed service, you can be sure your finances are taken care of.
Should I Choose a Fixed Rate Mortgage or a Variable Rate Mortgage?
Remortgaging gives you the opportunity to rethink how much money you want to spend each month on your mortgage payments. One of the biggest decisions you will need to make is choosing between a fixed rate mortgage or a variable rate mortgage.
A fixed mortgage means your interest rate is essentially ‘fixed’ for a set period of time. This means it will never go up or down during the set period, so your monthly repayments will remain the same. When this fixed term expires, you will be automatically switched to the lender’s variable rate. A benefit of this mortgage type is that it provides a sense of stability and security as you know what you’re paying each month. However, the downside is that you could actually be paying more if interest rates go down.
In contrast, a variable rate mortgage is the complete opposite. With this type of mortgage, the interest rate and your monthly mortgage repayments can fluctuate at any point during the term of your mortgage. An advantage of this option is the possibility that you’ll end up with a lower interest rate and as such, lower monthly repayments. However, you should be aware that interest rates can rise dramatically, which could cause your monthly repayments to become very expensive.
The most important thing is to weigh up your own personal circumstances and to evaluate what you can afford. If you want the stability of knowing what you’re paying each month then a fixed rate is the best option. However, if you’re prepared to take more of a risk for the potential of being able to pay less, then a variable rate could be a suitable option. The important thing is to make sure you have a suitable budget for whichever option you go for.
Conclusion: How to Remortgage to Make the Most of Your Money
Remortgaging has lots of benefits and can help you to save thousands of pounds. By understanding the process and what to look out for, you can be sure you’re getting the most competitive rate.
There’s a lot to think about when it comes to this process so it’s important you’re equipped with all of the knowledge you need. This helps you feel more prepared and also ensures you avoid any financial mistakes along the way.
The best way to make sure the process runs as smoothly as possible is to hire a professional mortgage broker. Our team at Oportfolio are here to help you with all of your remortgaging needs. We put you at the heart of everything we do and are committed to finding you the very best deal to help you achieve your goals. Regardless of where you want to be, you can rely on our team of experts to get you there.
For more information or to find out more about our services, speak to a member of our friendly team today.