Remortgage
Remortgage
- Expert Mortgage Advisers
- Fee-Free Initial Consultation
- Access to Competitive Rates From Dozens Of Lenders
Table of Contents
Speak to an expert
Steve Hendriks joins the Mortgage & Protection podcast to talk through remortgaging.
PLEASE NOTE: This podcast and transcripts were correct at the point of recording in 2021. Some of the facts/figures quoted may have since changed, however when you speak with a Mortgage Adviser, they’ll be able to provide you with the most up to date facts/figures.
What is remortgaging and how does it work?
It’s when you’ve got a current mortgage with a lender and you want to take out a new mortgage deal, for whatever reason. With remortgaging, you’ll take a mortgage with another lender, which pays off your existing lender.
When is it a good time to remortgage?
- When your fixed rate deal is about to end. If you’re on a fixed rate at the moment, you know what you’re paying every month. But when it comes to an end, if you don’t do anything about it, you go onto your lender’s Standard Variable Rate. This is a lot higher than your current rate and changes every month.So it’s always a good idea to start looking for a new deal three to six months prior to your current deal ending. You can seamlessly transfer to another lender’s fixed rate.
Interest rates have dropped a lot in the market so sometimes even paying an early repayment charge is worth doing. You could still save money, especially if your home’s gone up a lot in value and you’ve got a lot of available equity. - If you’re worried about interest rates going up. At the moment, this is what’s happening. So it’s a good time to remortgage and fix your rate for another two, three, five, seven or even 10 years.
- Because you want to overpay and your lender won’t allow this. Most mortgage providers do allow you to overpay about 10% of the outstanding balance each year without any penalty. Overpaying is a great way to pay your mortgage off quicker and reduce the interest you’re paying.
- To switch from interest only to repayment. If you’re borrowing on an interest-only basis, you might want to switch to a repayment mortgage at some point. That way you’ve got the peace of mind that you will repay the loan over time and own the property outright in the future.
- To borrow more money. Remortgaging gives you the opportunity to borrow more money as long as you’ve got plenty of equity in your home. You can remortgage and take your mortgage total up to 85% of the market value. So if your current loan is £100,000 and your property is worth £200,000, you can take the mortgage back up to £285,000.
You can use the equity you release for home improvements, as a deposit for another property or to consolidate debt – if you’ve got a lot of unsecured debts on credit cards, loans, finance agreements, for example. That gives you a lot more breathing space on a monthly basis because all the debts are included within your mortgage at two or three percent instead of, say, 15%. However, be aware that you’re securing the debt and spreading it over the term of the mortgage so you will pay a lot more interest on it in the long run.
When is remortgaging not a good idea?
On the flip side, there are downsides to remortgaging and in some situations you wouldn’t even consider it. If you’ve got a really small mortgage, for example, it won’t be worthwhile, because there are fees involved. There may be a broker fee and an arrangement or product fee. If you’re on a fixed rate there’ll be an early repayment charge, but it’s often not worth paying any of those on a small mortgage.
Another reason is where you’ve got a large early repayment charge. Let’s say you’ve fixed your mortgage for five years one year ago – your early repayment charge would be very steep, probably up to 5% of the outstanding balance which could be several thousand pounds. In that case it wouldn’t be worth remortgaging at all.
Also, your circumstances can change in a multitude of ways. For example, if you’ve accrued adverse credit over the time you’ve been with your lender – you’ve missed some payments, had a default or a CCJ. In that case you wouldn’t be in a position to remortgage because you wouldn’t pass the lender’s credit checks.
Finally, you wouldn’t be able to remortgage if your property value has dropped. If for whatever reason you’re in negative equity or you only put 5% down as a deposit and property prices have fallen, you wouldn’t be able to remortgage because you haven’t got the available equity.
It might also be that you’re already on a good rate – especially if you have a great broker! If there’s no problem, don’t switch.
Speak To An Expert
- Expert Mortgage Advisers
- Fee-free Initial Consultation
- Access to Competitive Rates
- Access to Dozens Of Lenders
What sort of remortgage options are available?
One option is a product transfer, where you stay with your existing lender but you take out a different product with them. It might be a new fixed mortgage, a new tracker or a discounted rate. You can contact your own lender, but it’s best to contact a broker because we can tell you if staying with your lender is the most suitable option. Sometimes remortgaging and starting again with a new lender, even if you have to pay an early repayment charge, can work out financially beneficial to you.
What happens if you don’t remortgage at the end of a fixed rate deal?
If you don’t do anything about it, you just fall onto the lender’s standard variable rate. That’s always higher than the rate that you’re currently fixed at. It’s also variable, meaning it changes every month, which nobody wants. So it’s always good to look at it before it comes to that point.
How do I improve my chances of getting a good remortgage?
As with any kind of mortgage, whether you’re remortgaging or purchasing a property, it’s all based on how much you earn, how much you spend and your credit score. So to improve your chances of getting the remortgage, you need to show as much earnings as possible and pay off as much debt as you can. Plus, keep your credit score high by making payments on time.
What fees should we expect when we remortgage?
When you remortgage you won’t have an estate agent’s fees because you’re not selling the property. With regards to a broker fee, with myself it’s massively discounted if I helped with your original mortgage.
You wouldn’t always have a solicitors’ fee either, because a lot of lenders include free legals – which means that solicitor costs are borne by the lender. Most lenders charge an arrangement or product fee that you can either pay upfront or add to the mortgage.
What’s the main piece of advice you have on remortgaging?
The biggest piece of advice is to use a broker. It’s a minefield out there and you do need some help and guidance. We have access to an extensive panel of lenders as opposed to just visiting one or two yourself. So always use a broker.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Why us?
- Expert Mortgage Advisers
- Fee-free Initial Consultation
- Access to Competitive Rates From Dozens Of Lenders
Steve Hendriks joins the Mortgage & Protection podcast to talk through remortgaging.
What is remortgaging and how does it work?
It’s when you’ve got a current mortgage with a lender and you want to take out a new mortgage deal, for whatever reason. With remortgaging, you’ll take a mortgage with another lender, which pays off your existing lender.
When is it a good time to remortgage?
- When your fixed rate deal is about to end. If you’re on a fixed rate at the moment, you know what you’re paying every month. But when it comes to an end, if you don’t do anything about it, you go onto your lender’s Standard Variable Rate. This is a lot higher than your current rate and changes every month.So it’s always a good idea to start looking for a new deal three to six months prior to your current deal ending. You can seamlessly transfer to another lender’s fixed rate.
Interest rates have dropped a lot in the market so sometimes even paying an early repayment charge is worth doing. You could still save money, especially if your home’s gone up a lot in value and you’ve got a lot of available equity. - If you’re worried about interest rates going up. At the moment, this is what’s happening. So it’s a good time to remortgage and fix your rate for another two, three, five, seven or even 10 years.
- Because you want to overpay and your lender won’t allow this. Most mortgage providers do allow you to overpay about 10% of the outstanding balance each year without any penalty. Overpaying is a great way to pay your mortgage off quicker and reduce the interest you’re paying.
- To switch from interest only to repayment. If you’re borrowing on an interest-only basis, you might want to switch to a repayment mortgage at some point. That way you’ve got the peace of mind that you will repay the loan over time and own the property outright in the future.
- To borrow more money. Remortgaging gives you the opportunity to borrow more money as long as you’ve got plenty of equity in your home. You can remortgage and take your mortgage total up to 85% of the market value. So if your current loan is £100,000 and your property is worth £200,000, you can take the mortgage back up to £285,000.
You can use the equity you release for home improvements, as a deposit for another property or to consolidate debt – if you’ve got a lot of unsecured debts on credit cards, loans, finance agreements, for example. That gives you a lot more breathing space on a monthly basis because all the debts are included within your mortgage at two or three percent instead of, say, 15%. However, be aware that you’re securing the debt and spreading it over the term of the mortgage so you will pay a lot more interest on it in the long run.
When is remortgaging not a good idea?
On the flip side, there are downsides to remortgaging and in some situations you wouldn’t even consider it. If you’ve got a really small mortgage, for example, it won’t be worthwhile, because there are fees involved. There may be a broker fee and an arrangement or product fee. If you’re on a fixed rate there’ll be an early repayment charge, but it’s often not worth paying any of those on a small mortgage.
Another reason is where you’ve got a large early repayment charge. Let’s say you’ve fixed your mortgage for five years one year ago – your early repayment charge would be very steep, probably up to 5% of the outstanding balance which could be several thousand pounds. In that case it wouldn’t be worth remortgaging at all.
Also, your circumstances can change in a multitude of ways. For example, if you’ve accrued adverse credit over the time you’ve been with your lender – you’ve missed some payments, had a default or a CCJ. In that case you wouldn’t be in a position to remortgage because you wouldn’t pass the lender’s credit checks.
Finally, you wouldn’t be able to remortgage if your property value has dropped. If for whatever reason you’re in negative equity or you only put 5% down as a deposit and property prices have fallen, you wouldn’t be able to remortgage because you haven’t got the available equity.
It might also be that you’re already on a good rate – especially if you have a great broker! If there’s no problem, don’t switch.
Speak To An Expert
- Expert Mortgage Advisers
- Fee-free Initial Consultation
- Access to Competitive Rates
- Access to Dozens Of Lenders
What sort of remortgage options are available?
One option is a product transfer, where you stay with your existing lender but you take out a different product with them. It might be a new fixed mortgage, a new tracker or a discounted rate. You can contact your own lender, but it’s best to contact a broker because we can tell you if staying with your lender is the most suitable option. Sometimes remortgaging and starting again with a new lender, even if you have to pay an early repayment charge, can work out financially beneficial to you.
What happens if you don’t remortgage at the end of a fixed rate deal?
If you don’t do anything about it, you just fall onto the lender’s standard variable rate. That’s always higher than the rate that you’re currently fixed at. It’s also variable, meaning it changes every month, which nobody wants. So it’s always good to look at it before it comes to that point.
How do I improve my chances of getting a good remortgage?
As with any kind of mortgage, whether you’re remortgaging or purchasing a property, it’s all based on how much you earn, how much you spend and your credit score. So to improve your chances of getting the remortgage, you need to show as much earnings as possible and pay off as much debt as you can. Plus, keep your credit score high by making payments on time.
What fees should we expect when we remortgage?
When you remortgage you won’t have an estate agent’s fees because you’re not selling the property. With regards to a broker fee, with myself it’s massively discounted if I helped with your original mortgage.
You wouldn’t always have a solicitors’ fee either, because a lot of lenders include free legals – which means that solicitor costs are borne by the lender. Most lenders charge an arrangement or product fee that you can either pay upfront or add to the mortgage.
What’s the main piece of advice you have on remortgaging?
The biggest piece of advice is to use a broker. It’s a minefield out there and you do need some help and guidance. We have access to an extensive panel of lenders as opposed to just visiting one or two yourself. So always use a broker.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Why us?
- Expert Mortgage Advisers
- Fee-free Initial Consultation
- Access to Competitive Rates From Dozens Of Lenders
