Mortgage Advice Services provides Clear Answers to the most common FAQ’s on Remortgaging.
1. What happens When You Remortgage?
It’s the process you go through when you switch your existing mortgage to another lender, or remortgage with your existing mortgage provider. However your existing provider may not have the best deal for your circumstances.
2. How many People are Remortgaging in the UK?
A lot. UK Finance’s Mortgage Trends Update for October 2018 reveals there were 50,500 homeowner remortgages completed in the month. This was 23.2% more than in the same month a year earlier. The £9.2bn of remortgaging in the month was 22.7% more year-on-year.
3. Why is Remortgaging So Popular Right Now?
Remortgaging rates are at historical lows. So it makes financial sense for many people to move from their existing deal. UKfinance.org.uk says: “Remortgaging has reached its highest level in almost a decade. Homeowners are taking advantage of a competitive market and locking into attractive deals. This also reflects the large number of fixed rate mortgages coming to an end. This is expected to continue into 2019.”
4. What are the Best Remortgaging Products?
There’s no hard and fast answer to this because everyone’s needs and circumstances are different.
Firstly, you can opt for a repayment remortgage or interest-only remortgage. (The latter are much harder to get these days unless you have a proof you can pay off the loan in future).
Secondly, you can choose a fixed-rate of any term up to 10 years, a variable rate or a tracker or discount rate.
In the last year, fixed rate remortgaging deals have been the most popular in the UK. This is thought to be down to economic uncertainty surrounding Brexit and possible interest rate hikes.
In the last year, fixed rate remortgaging deals have been the most popular in the UK.
It is also due to affordability and availability of competitive deals. To illustrate this, look at the gap between the average maturing two-year fixed rate mortgage and lenders’ standard variable rates (SVR). This has now hit its highest level since February 2008, research has found.
5. When Should I Consider Remortgaging?
This will depend on your circumstances and your plans for the future. Most people choose to remortgage for these reasons:
- You’ve slipped onto your lender’s more expensive standard variable rate. This will be because your fixed rate or introductory offer has expired.
- You’d like to release equity in your home and you know its value has increased.
- You want to free up cash to fund home improvements.
- You want to borrow more money via your home’s value.
- You want to switch from interest only to repayment mortgage.
- You’ve found a better deal with a lower interest rate.
6. What’s the Best Time for Me to Remortgage?
You’re free to do this when you want but the best times likely to save money are:
- If your current fixed rate mortgage deal is approaching its end.
- If your introductory discount rate is about to expire.
- If you’ve found a better deal that will result in your monthly payments being less (factoring in arrangement and exit fees).
- If you’ve built up equity in your current property and are able to move to a better LTV (loan-to-value) band. The impact of a lower LTV can save you a huge amount of cash because you’ll get a better interest rate with 60% equity, compared to, say, 20%.
- Your current mortgage doesn’t fit you any more. Perhaps your financial circumstances have changed via a pay rise or inheritance. Or you’d like to make extra payments to your mortgage but your current deal won’t permit this.
7. What should Stop Me from Remortgaging?
Whether the time is right for you or not will depend on your circumstances. The reasons below may make you think twice about remortgaging:
- You’re already on a brilliant mortgage deal that you know is better than anything else on the market. (But stay informed, mortgage deals are constantly changing).
- You’ve locked yourself into a high early repayment charge and you know it would make more sense to wait it out.
- You only own 10% or less of the property. There are few remortgaging products available for this LTV.
- Your equity has shrunk due to a drop in house prices. In this case, you may not be an attractive option to a lender.
- You’ve got a poor credit history. You’ll find it hard to get a competitive deal in this case as lenders are now more careful about who they lend to.
8. Who should I arrange My Remortgage with?
You’ve plenty of choices. You can look at the offers from high street banks, building society or finance companies. You can also apply for a remortgage from your current lender.
You’ll have a wider range of options if you consult a mortgage advisor as some lenders’ products are ‘broker-only’. You will also not qualify for every deal as each lender has different conditions. A broker will be able to advise you on this.
9. How Big a Remortgage can I Get?
There’s no easy answer to this. It depends on your circumstances and factors such as the equity in your home, your income and your credit record.
If you consult a mortgage advisor you can find out how much you can borrow based on your current situation.
They may also be able to source you a better deal as they know the different requirements of each different lender. Some lenders are more stringent than others.
10. Why is My Credit Record Important to Remortgaging?
Your credit record is the yardstick lenders will judge you by to determine how safe you are to lend to.
11. Doesn’t the Fact I’ve already Had a Mortgage Count for Anything?
It will get taken into account but there’s a lot more detail to be checked. Since 2014, affordability tests were introduced for all lenders. They’re now obliged to ‘stress-test’ whether your mortgage is affordable if rates were to be 3+% than the starting rate. They will look into your finances with fine tooth comb.
12. How do I Know What is My Credit Rating?
There are three main credit reference agencies and you can get your results for free from them. They are: Equifax, Experian, and Callcredit. Lenders will use one, or more, of these when they carry out their checks on you.
13. How Much will it Cost Me to Remortgage?
This all depends on the deal you’re applying for but the costs you can expect may include:
- Early repayment charge or exit fee to your existing lender if you’re ending your deal early. This will not apply if your deal ends before your new mortgage begins.
- An arrangement fee to your new lender
- A home valuation fee to your new lender
- Conveyancing or administration fee to your solicitor
- Mortgage adviser fee if you choose to use one
Do you have more questions about remortgaging or would like some advice on the right product type for your situation? We are happy to help you here.