Most homeowners know that remortgaging means switching a mortgage from an existing lender over to a new deal.
However, the process isn't always obvious. If you're on a fixed-rate deal, you'll want to get ahead of the end of the term to avoid being shuffled onto a higher standard variable rate where your interest costs will undoubtedly soar!
In today's guide, Revolution Brokers runs through all the essential details about applying for a remortgage - and some advice to help streamline the process.
Please get in touch on 0330 304 3040 or at [email protected] for more advice about your remortgage buy to let property.
Remortgaging: How it Works
Remortgaging can seem like a high stakes deal, given that our homes are the most expensive asset most of us will buy in a lifetime.
You don't need to get into more debt through a remortgage. While using the application to release equity is possible, you can also save a considerable amount on your monthly mortgage brokers costs.
It's well worth shopping around or working with an independent broker such as Revolution to ensure you're getting a great remortgage offer!
The process is far more straightforward than you might imagine.
It can take time to process all the paperwork, so if you're worried about your fixed-rate deal coming to an end, we'd recommend starting the process about six months in advance.
Choosing Whether to Remortgage
Sticking with the situation where you're looking at remortgaging to coincide with the end of a fixed-rate period - you'll first need to work out whether you want to stay with your current lender or move elsewhere.
If the former, you transfer from one deal to another, and it's usually a simple task.
The lender already knows everything they need to know about your property and income, so there isn't generally an extra cost or legal work.
However, some mortgage lenders might want to schedule a new valuation if the property value is likely to have changed.
Moving to a different lender can be a bit more complex, but it's also an opportunity to potentially save thousands of pounds in interest charges!
The complication is that a new lender will need to run through all the usual mortgage assessments, looking at affordability, proof of earnings and other debts.
New remortgage lenders also need to run credit reports and arrange a valuation, so there are extra expenses to budget for.
May remortgage products come with a pre-packaged deal, including valuations and legal work. Revolution can recommend these options if you're keen to find a cheaper interest rate but don't want to deal with any upfront remortgage costs.
Good Reasons to Apply for a Remortgage
The primary reason to remortgage is that you know there are better interest rates elsewhere, but other potential factors include:
- Changing from interest-only to a repayment mortgage to ensure you are paying back a proportion of the capital balance each month.
- Looking for more flexible deals so you can overpay without any penalties.
- Releasing equity in your property to use the cash for other investments, expenses or purchases.
Most properties have equity, whereby you've already paid back a chunk of the mortgage and so own a proportion of your home outright.
Equity is the balance you own after deducting the amount still repayable against your mortgage.
Therefore, a remortgage for a higher value than your existing mortgage unlocks the equity.
You will then have a higher mortgage to repay, and your monthly costs might go up - but it's often the cheapest way to access cash to use for repaying other debts or covering the cost of home improvements.
Factors Impacting Your Remortgage Application
In some situations, Revolution might not recommend a remortgage, depending on your financial position and your reasons for applying.
For example, if you're on a fixed-term deal and would incur steep early repayment charges, it could be better to wait to remortgage until you're nearing the end of the period.
Other considerations include:
- Your credit score: if your credit score has changed dramatically, or you know you have a low credit rating, remortgaging might not be as straightforward.
- Employment status: borrowers that have changed from employed to self-employed need to declare this information and might need to wait until they have at least two to three years of accounts to apply for a new remortgage.
- Exit penalties: as we've mentioned, some mortgage providers have exit fees and early repayment charges that might cost more than you stand to save.
Ultimately, the decision to remortgage is yours, and the best way to proceed is with advice from an independent, whole-of-market broker who can run through the process with you and recommend the right way forward.
Please contact the experienced remortgaging team at Revolution Brokers on 0330 304 3040 or at [email protected] for more information about your ideal remortgaging solution.
