Your current mortgage deal might be close to running out, but before you put it on the “laterbase” and consider tackling it nearer its expiry, it might in fact pay to set the wheels in motion much sooner. Once your current deal expires, you’ll be moved to the lender’s SVR (Standard Variable Rate), and this can be significantly more expensive than your existing mortgage.
Remortgaging can be an easy process. It starts when your current lender informs you that your deal is ending. You can then shop around for a deal, apply for the new mortgage, and, if successful, carry on as you were, hopefully with a better rate and lower monthly payments.
Before you get ahead of yourself though, it’s important to understand the difference between a remortgage and a product transfer. Once we have clarified that, we’ll explain how you remortgage, the cost implications and how you find the best deals.
What is remortgaging?
Remortgaging is when you take a new mortgage product with a new lender upon the expiry of your current deal. You remain in your home and keep paying for it on new terms with a new lender. This is different from a product transfer. A product transfer is when you take out a new mortgage product with your existing lender. It can be difficult to say which option is best for you. Sometimes, your current lender may have a more favourable deal than any other lender; other times, a new lender may eclipse anything offered by your existing lender.
How do you remortgage?
Remortgaging can be completed in a few simple steps, and it’s best to start taking them as soon as possible. We’ll run you through the process and then answer the common questions you may have.
Find out how long is left on your current deal
You might be on an introductory deal with a fixed rate. As it reaches its end, your lender will inform you of its pending expiry. Once this deal ends, you’ll move to their SVR, which, in most cases, is more expensive than the rate you are currently on. You want to remortgage before this date.
Get a redemption statement
Ask your lender for a redemption statement. This tells you the remaining mortgage balance. The total will include any applicable fees, and it is this amount you’ll need to borrow to remortgage.
Shop for deals or speak to a mortgage broker
Plenty of lenders will be tempting you with new mortgage deals. The problem is, it can be a bit of a minefield, so doing it alone isn’t advisable. Instead, speak to a mortgage broker. Their impartial advice and access to the market will help find you a host of deals, including many you wouldn’t have been aware of.
Browse the options and find a mortgage that suits your needs
You’ll have a wide range of options to choose from, but do it with an eye on the future as well as the present. An interest-only mortgage can be tempting due to the lower monthly payments, but you’ll need to find a way to clear the capital debt at the end of the mortgage term. Fixed rate can be a good option, as you know exactly what you are paying for the duration and avoid any rate rises, but you will miss out when rates drop. The variable rate can also be tempting; you can catch rates when they are low and get good value, but if they rise, you pay more.
Once you have found a product that is affordable and aligns with your aims, you can start to push forward.
Prepare documents for eligibility and affordability checks
At this stage, it would be wise to appoint a solicitor. That way, you both work together without anything being rushed. Whilst they are doing their bit, you should collect:
- ID
- Three months’ worth of bank statements
- Three months’ worth of utility bills
- Any credit card statements or loan statements
- Proof of address (normally for the last three years)
- P60
Obtain a mortgage in principle
Give these documents to the new lender. They will then make an assessment and give you a mortgage in principle. Basically, an idea of how much they could lend if you were to apply. As you are borrowing money from a new lender, they will also want to know whether the amount you wish to borrow is a fair reflection of the property value.
Apply for the mortgage
You can now officially apply for the mortgage. All the information you have provided will be taken into account, but the lender will also want to dive a little deeper and may want to know more about regular monthly payments or the amount of time remaining on a loan or credit card balance. Just remember what you needed to do for your initial mortgage, and do it again!
Get your mortgage offer
The lender will send you a mortgage offer if they approve your application. The offer normally lasts up to six months and should be checked carefully to ensure it’s offering the correct amount at the agreed rate.
Old mortgage paid off
Once you are ready to move from the old mortgage to the new, inform your solicitor. They will then request the funds from your new lender and pay your previous mortgage lender the outstanding balance. They will then register your new mortgage with the Land Registry.
How does a remortgage take?
The process of remortgaging can take just a couple of days, but it tends to range from 4 to 8 weeks. Switching to a new lender takes considerably longer than if you take a product transfer with your existing lender. This is because your current lender already has most of your information and won’t have to work through as many processes as a new lender.
How much does it cost to remortgage?
The costs for remortgaging vary depending on a host of factors. If you leave your existing deal before the term is up, you’ll pay early repayment charges (ERCs), and these can exceed thousands of pounds. You’ll also have to pay for your solicitor, mortgage broker and pay arrangement fees to the new lender. This means the total cost for remortgaging, excluding the loan itself, can easily be £2,000 or more.
When should I start the remortgage process?
Consider looking into remortgaging approximately 6 months before your current deal ends. Your existing lender should inform you of when your current deal is ending, giving you plenty of time to research new options. This amount of time gives you ample opportunity to shop around for the best deals. Remember, a mortgage offer can remain valid for 6 months, so if rates are favourable and your deal expires in 5 to 6 months, it could be worth starting the process now and locking in a great offer.
Remortgaging can be a great way to help you save money by reducing monthly payments. These savings can then go towards home improvements, paying off other debts, or simply give yourself a little more financial freedom.
At Cairds, we have our own independent mortgage advisor who can help you with all aspects of remortgaging. We also have a variety of houses for sale in Epsom and the surrounding areas, should a new or second home be on the agenda. As independent Epsom estate agents, we use our in-depth knowledge of the area and industry to ensure both buyers and sellers benefit from local expertise, helping expedite a quick sale or purchase. Contact us today to find out more.