Remortgaging involves changing mortgage lender without moving house and there’s a few reasons why you might want to do this.
We have put together this brief guide to help you better understand the re-mortgage process.
Remortgage
What is remortgaging?
Remortgaging is the process of changing mortgage lender without moving home.
You will apply for a new mortgage with a new lender, when ready this loan is used to repay and replace your current mortgage arrangement.
For both mortgages the lender will have a first charge against your home as security. Because of this a Solicitor is needed to undertake the necessary conveyancing work.
Why would you need to remortgage?
There’s a few reasons why people remortgage. The most popular is to transfer to a better interest rate.
The process of remortgaging means you will have a new mortgage.
So this is the opportunity to make some changes such as:
- Change the mortgage term – extend or reduce
- Change the repayment method
- Borrow more money
- Maybe reduce your mortgage
- A transfer of equity remortgage changes who is on the mortgage
- Change to a more flexible arrangement
When can you remortgage?
You are able to remortgage at any point during your mortgage term. However, what might stop you is any early repayment charges that your current mortgage lender will levy for leaving earlier than planned.
Most people look to remortgage at the point their interest rate product is ending. Ideally contacting your broker 3 months before the product ends gives you both enough time to get the new deal organised and ready.
If you are already on the standard variable rate it’s time to get cracking…
Can you remortgage early?
Yes you can and as mentioned above there may be early repayment charges to pay,
If you really do need to remortgage your mortgage adviser can work out some options for you to reduce the costs.
Early Repayment Charges (ERC) can be substantial so always seek advice first.
What about Day One Remortgages?
These types of remortgage are quite uncommon and very specialist. The majority of mortgage lenders need you to have owned a property for 6-12 months before they can accept a remortgage application from you.
Our experienced brokers are able to source remortgages that are available immediately after completion of your purchase. Who would need a day one remortgage?
Read more about Day One Remortgages.
The remortgage process
Remortgaging to a new lender is fairly straightforward and unlike moving home there’s no property chain to worry about.
First you need to research your mortgage options and understand the costs involved. There will be fees to pay but most people are better off afterwards. Your mortgage broker can help with these calculations to help you.
As normal you will apply to the new lender for your mortgage, once accepted they will issue your mortgage offer.
Part of this process involves a valuation of your home. In some cases the new lender will cover the cost of this and occasionally there’s no need for anyone to physically visit your property.
We are often asked “Is a remortgage based on income?” This is a fair question when you are borrowing exactly the same amount that you have been making payments for. But the answer is yes, remortgages are based on your provable income.
Do you need payslips to remortgage? All lenders will need to see proof of your income. This will be different depending on whether you are employed, self-employed or a company director etc. Acceptable proof would be P60, payslips, accounts, SA302 forms etc.
Construction based subcontractors may be able to take advantage of a CIS mortgage to get a larger loan.
Deposits for remortgages are not required. The lender works their LTV criteria out using your homes equity.
A mortgage lender has a ‘charge’ against your property to protect themselves. A Solicitor will be needed to change this when remortgaging but many lenders will firstly allow you to use their Solicitor for this but secondly they may even pay for it!
Once the mortgage offer is ready and the Solicitor is ready then the actual mortgage swap can take place.
All of this process is administered by the lender and the solicitor.
Once completion takes place your new mortgage replaces the old one. Your future monthly mortgage payments will then be to the new lender.
Do I need a Solicitor to remortgage?
A Solicitor is needed as there is some legal work to be done. Also the first charge on your property needs to be changed in favour of the new lender.
When you move house many people will choose a recommended Solicitor or perhaps one they have used before. Because you are not moving the need for specialist legal advice is minimal.
To help you most lenders will allow you to use their recommended Solicitor or conveyancer. This certainly helps to reduce the cost and some lenders will provide ‘free legals’ to remortgage customers where they pick up the cost of conveyancing.
Can I remortgage to release equity?
Yes you can remortgage and borrow more money and many borrowers choose to do this when remortgaging.
The equity in your property is the difference between it’s value and the amount owing on your mortgage. If there is no mortgage then the property is called unencumbered but remortgage options are still available.
Here’s a very simple example:
| £300,000 | Property Value |
| £150,000 | Mortgage owing (50% loan to value LTV) |
| £150,000 | Equity Value |
Unfortunately (or fortunately) the lenders won’t allow you to borrow all of the equity value. There’s lots of mortgage choice upto 90% LTV but it is best to speak with your independent mortgage advisor first to see what’s best for you.
Does bad credit affect remortgaging?
Remortgaging can be difficult if you have bad credit.
Just like the process of securing a mortgage for the first time, there are plenty of things to take into account, and this can become increasingly complicated if your credit history isn’t great.
Do you pay stamp duty on a remortgage?
When remortgaging your home or raising money for home improvement projects, you don’t need to worry about paying Stamp Duty. That’s because tax is only applicable when purchasing a new property or land.
However, if you’re remortgaging your home and also transferring equity from one person to another (for example, adding or removing a partner’s name from the mortgage), then you may be liable for Stamp Duty.
Can I remortgage my holiday let?
There are a number of lenders that can remortgage a holiday let property. You have the same basic options as a normal remortgage, and will be able to change interest rate, borrow more money or change who is on the mortgage.
Can you remortgage to change a joint mortgage to single?
Yes you can. This is known as a Transfer of Equity mortgage. The process normally involves adding someone to the mortgage or removing someone from the mortgage while also updating who owns the property.
Can you change a standard mortgage to buy to let?
Yes this is possible. If you have decided to permanently rent out your own home then you would need a buy to let remortgage.
Can you change a standard mortgage to holiday let?
Yes this is available. If you now wish to rent out your property as a furnished holiday let then a holiday let remortgage will be needed.
How long does remortgaging take?
Remortgaging to a new lender is quite straightforward and would normally take 4-8 weeks.
As you are applying for a new mortgage with a new lender there’s the normal requirements to prove your id, prove your income and credit searches.
Why should I use Drake Mortgages?
There’s absolutely no requirement that you must use a mortgage broker and you can search for a new mortgage yourself and apply direct.
Here’s how a mortgage broker can help:
- First we do all of the work for you! After learning what you need we then search through hundreds of different re-mortgage schemes looking for those that will suit you
- When we find them we will calculate any fees and penalties to ensure the outcome is positive for you
- Not all re-mortgage plans are available online or direct. There’s lots of lenders that only accept new mortgages from brokers or provide exclusive deals to brokers
- If your circumstances are not quite straightforward then the experience of our advisors can be invaluable
- We can offer day one remortgages for recently purchased properties caught by the six month mortgage rule
- Once a new mortgage product has been decided on we will help with the forms and initial paperwork etc
- Once submitted to the lender we will monitor, chase and liaise with them to keep everything running smoothly
- If you have any questions at any stage just give us a call