How do I remortgage my property?
Remortgaging is the process of replacing your existing mortgage on a property you own, with a new mortgage. This process is normally done for one of few reasons… including, to get a better mortgage deal, to increase the borrowing amount against the value of your property or to pay money into the house and organize a smaller mortgage to reduce overall loan size
There are many reasons why some people choose to change their mortgage and we will look at some of them in this article, as changing mortgage may not always be the right choice for you.
We will also outline the process of remortgaging below, so that when the time comes for you to make the switch, you can be ‘in the know’ about what you need to do and it will seem a little less scary and complicated.
Why would I change mortgage?
Your mortgage deal may be coming to an end so you may wish to trade your current mortgage in to get better rates or more favourable paying options and flexibility. Before you do this, you should always speak to a mortgage adviser or a financial adviser who can help you to make the right decision for you, your property and your situation. Here is a round-up of some of the reasons you may look into remortgaging your property:
• You want to get another mortgage deal when your initial deal ends such as fixed rate payments
• Better rates are available and you are looking to save on your payments• The value of your home has increased meaning that your ‘loan-to-value’ band has changed• You want to switch to a different type of mortgage
• Your circumstances have changed and you wish to pay more each month but your current lender may not allow this
• You want to borrow extra funds against the value of your property, this may be to add an extension for example
• You only have a small sum left to pay on your property. Some high street lenders will lend below £10,000 and can ‘product transfer’ with your existing lender. Always worth getting best rate available.
Why would it not be a good idea to remortgage?
There are also some reasons that you should probably not try to remortgage, as it may not always be the best choice for you depending on your circumstances and the limitations of having or applying for a new mortgage. You should get some professional advice from a specialist mortgage advisor or financial adviser before you make any big decisions. Some of these reasons could include:
• Your circumstances have changed, but you are earning less than before or have had credit difficulty since you took out your mortgage – this may make it hard for you get another mortgage as most lenders want to see evidence of income. You may be better off sticking with your current mortgage for now but some product transfers will be available and a broker can advise on options if you really want to change. You never want to go onto a higher Standard variable rate if it can be avoided.
• Your home’s value has dropped – this is called negative equity, when your debt is higher than the value of your property. This is very unfortunate but changing your mortgage will not help you in this situation.
• Your early repayment charge is big, which means you could end up paying over the odds to get out of your current mortgage early to get a new one. You should consider this before jumping ship.
If you’re worried about interest rates, or you may already be on a great rate – there is also no need to make any immediate changes. It might be that your rate is already pretty good compared to other mortgages. And if you have concerns about the Bank of England base rate changing and are worried about how it may affect your payments, speak to an adviser before you make any decisions to change mortgage provider.
The Process of Remortgaging
Remortgaging is slightly different from the process when you first buy your home.
1. The Application and Offer – Once your mortgage application has been submitted to the lender, there will be some processing time but your mortgage will normally be offered in 2-4 weeks.
2. The Legal Steps – If the mortgage lender and your deal includes a legal service, you will be contacted by a solicitor that has been instructed by the lender. This can happen at any point during the application.
3. The Questionnaire – the solicitor will send you a list of questions to answer. You should speak to your mortgage adviser for help completing these and your adviser will also liaise with the solicitor on your behalf to make sure that all necessary points have been covered.
4. The Redemption Statement – A week or so before your new mortgage completes, the solicitors will contact your existing lender for a ‘redemption statement’ to determine how much you owe. The solicitors will then take the new funds and redeem your current mortgage. If there are extra funds, these will be sent to you by the relevant solicitor. This is also the time that if your new mortgage falls short of the old mortgage, you need to pay the difference.
5. The Completion – Once the mortgage has been confirmed, you should cancel your existing direct debit for your old mortgage. The process is finished!
If you need any advice on remortgaging, you can speak to Graham & Co’s in-house mortgage advisor Tristan, who can help you to make the right mortgage decisions for you based on your circumstances and the type of property your own. Give us a call on 01264 356500.