Remortgaging is when you apply for a new mortgage with a different lender replacing the current mortgage. You can also use it to borrow money against your property by releasing equity.
Reasons that people want to remortgage:
- Your home’s value has gone up: therefore you may be entitled to much lower rates
- You want a better rate: initial deals can mean early repayment charges and these can be big
- You want a more flexible mortgage: as life changes, you may want your mortgage to be more flexible in terms of missing payments (but these features may come with a cost)
- Your current deal is ending: the best mortgages only are for a short time, lasting between 2-5 years, they can be a fixed-rate, tracker, or discounted
- You want to overpay: if your current mortgage does not allow this, remortgaging could allow you to reduce the size of your loan, and this could mean a cheaper rate
- Increasing interest rates will affect your mortgage payments: double-check by how much and how it will affect you
- You want to borrow more money: for a car, to pay off debts, or for home improvements, for a business
Important stages of remortgaging
Research & Costs
Before you decide on remortgaging, it is important to consider all your options and research. Considering if your current lender can offer you a good deal might be beneficial. Alternatively, if switching lenders is the only option, it is vital to consider the costs involved and whether the benefits of remortgaging outweigh the costs of remortgaging.
Costs can include:
- Early repayment charges/ exit fees (from your current lender)
- Conveyancing costs
- Property valuation costs
- Completion fees from the new lender
Your credit score
Ensuring this is in a good position is important. When you apply for a remortgage, the new lender will check your credit score. An Agreement in principle will give you a clear idea of how much you could borrow, but it’s not a guarantee.
Once you have an AiP, you can apply for your remortgage. Here you’ll have to provide all relevant information and documents:
- Proof of earnings
- Details of outgoings
Like buying a new house, the lender will carry out a credit check, your property will be valued, a solicitor will handle the transfer of your mortgage.