If you’re wondering what happens when you remortgage your house, and you would like some advice on when you should start the process, then this article is perfect for you. We will try to guide you and provide clarification on any fees you should expect to pay when you remortgage too.
You could choose to remortgage your house for various reasons, and it’s important to be aware of what will happen before you start the process. The more knowledgeable you are about what happens when you remortgage your house, the better prepared you will be and the less stressful the experience will be.
What does it mean to remortgage your house?
When you remortgage, you might either transfer your mortgage to another lender or choose a new deal with your current lender. Sometimes homeowners choose to remortgage with their current lender because they don’t have the time to deal with a new lender (and mortgage application) or they believe that their current lender will give them the best deal when their existing fixed rate or other rate is ending. It is important to consider all options when your scheme is due to end and this should include your current lender as well as the rest of the market too. A competent Independent mortgage adviser should be able to guide you through the process, considering both options, and save you time and money in the process.
It might be you are looking for a new scheme (instead of reverting to the lender’s higher variable rate) or changing some other aspect of the mortgage for instance the term, repayment method or you may be looking to borrow more funds for home improvements.
Alternatively, you may want to remortgage your house simply to reduce your overall monthly payments, instigate a plan to pay off your mortgage sooner or consolidate more expensive short-term debts you owe.
When you remortgage your house to a new lender, the debt you owe your current lender will be paid off using the mortgage from your new lender. Solicitors acting will transfer any surplus funds to you if you had applied for extra too.
It is important to assess what the administration fees might be when you transfer to a new lender, and why these are in conjunction with what the initial mortgage payment might be to assess the overall cost effectiveness of the deal. This is why we recommend consulting a mortgage advisor to determine whether remortgaging will save you money, or whether you’ll be better to stay with your existing lender and renegotiate with them instead.
As Independent Mortgage Brokers we can deal with both aspects and would recommend after a full assessment of your needs which way is best to proceed, and help with the application.
When should you remortgage?
The answer to the question ‘when should you remortgage?’ depends on your financial circumstances and the things you want from your lender. You may remortgage due to changes in your fixed or other rate, which may result in higher monthly payments. Fixed rates tend to end within two to five years of your initial application. When fixed rates end, the lender’s standard variable rate replaces it, which tends to be a lot more expensive. So this is when most homeowners tend to remortgage. This is also true if the existing scheme is a tracker or a discounted one, again it is important to shop around and consider options to try and make sure you save as much money as possible.
So, when should you remortgage? If you pay attention to the trends of the market you can strategically plan when you should remortgage. For example, if the interest rate of a new deal with another lender is far lower than what you’re currently paying, it might be advantageous to remortgage. You would need to consider any early repayment charge under your current scheme if these still apply though, also any new set up costs too. If interest rates are projected to increase, you might remortgage and choose the best currently offered rate before they do. This might allow time for the rates to decrease again before you next need to review the rate again.
Releasing equity or paying other debts are also reasons some people choose to remortgage.
When shouldn’t you remortgage?
You can choose to remortgage your house whenever you want, but certain factors should be considered before you do so. For example, if your income has fallen, your credit score has dropped, or the value of your home is less than it was when you applied for your current mortgage, then you may struggle to find cheap remortgages.
If you’re planning to move soon and intend to remortgage to be able to save a little more cash, you should ensure your mortgage can move with you. Reasons for this include the fact that not all mortgages can be ported to another property and therefore early repayment charges might apply.
Planning when you remortgage your house is vital to avoid early repayment charges. Early repayment charges are essentially early exit fees that are calculated as a percentage of your remaining debt.. Remortgaging before your current deal ends with a new or existing lender can lead to thousands of pounds of fees that are often easily avoidable. So ensure you strategise when you intend to remortgage.
So, what happens when you remortgage your house?
The first thing you should do when planning to remortgage your house is conduct market research. This will determine which remortgage deals you’re eligible for, how affordable your loan will be, and which lender will offer you the best interest rate. An effective way to evaluate your equity and discover how much your remortgage cost will be is by using mortgage calculators and comparison sites but far better than this a qualified independent mortgage adviser will be able to do this more quickly and easily for you as they can shop around and know all the lenders criteria. They will research and help you decide which lender would best suit you before unnecessary applications are made.
Comparing lenders and finding the best deal is a time-consuming process, but a mortgage broker will know exactly how to find you the best deal in a much shorter amount of time and have access to products you may not have as a consumer. They can make the process easier and potentially mortgage cheaper too!
Once you have determined the lender you’d like to remortgage your house with, you will need to collect important financial documents and information to prove your income. This includes payslips from the previous three months, P60, tax returns if you’re self-employed, possibly bank statements and ID documents.
Remortgaging your home can take time so it is prudent to allow at least two months. Conducting your research and applying three to six months before your current deal expires is the best way to ensure everything will be ready to go once your current deal ends.
If you remortgage your house with your current lender and simply change your deal as opposed to signing up with a new company, the process of remortgaging will be far smoother and quicker, and won’t require as much administration. However it is still important to consider all other options instead of just signing up for a new deal with your current provider.
Are there fees?
As with any mortgage application, fees can apply when you remortgage your house. This can be the case whether you are switching lender or staying with your current provider. It is quite common for arrangement fees for different schemes to be up to £999 in both instances.
In providing you independent advice we will weigh up the options for you and try to minimise any costs that might be payable whilst shopping around to find you the lowest rate.
How can Stuart Brown help?
Here at Stuart Brown Mortgage Services, we offer expert mortgage broker advice to help those applying for their first mortgage, repaying a current mortgage, or finding a new deal so the process goes as smoothly as possible. We can also help with buy to let mortgages and give advice on insurance & protection.
We can help you to accurately calculate your monthly mortgage costs, navigate legal costs and help you understand how home valuations work when you’re trying to remortgage. With a combined 64 years of experience, there’s nothing we haven’t seen before and can’t help you with.
Please don’t hesitate to contact us if you have any enquiries about our services, or just need some advice!
Telephone 01525 877650 or 01442 252040
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up the repayments on your mortgage.