How to remortgage in the UK: a step by step process
A guide to the ins and outs of remortgaging, including the steps involved, timings and costs.
7 min read
You might know about the benefits of remortgaging, like potentially saving money on your monthly mortgage payments and releasing equity to fund home improvements, but do you know how to remortgage?
For many homeowners, if you’ve never remortgaged before, the process can feel like a bit of a mystery. That's why we've put this guide together to explain everything you need to know, including the steps involved, timings, and how to find the right deal.
In a nutshell, remortgaging is when you move from one mortgage deal to another, either staying with the same lender (also known as a 'product transfer') or moving to a new one.
How to remortgage in the UK
1. Ask your lender for a closing balance
You'll need to request a redemption statement from your lender; this will show exactly how much you’ll need to pay off the remaining mortgage. And this is the amount you’ll need to borrow when you remortgage.
2. Speak to a mortgage broker or adviser
When you’re remortgaging you’ll want to shop around for the best deals. So it's a good idea to speak to a mortgage broker or adviser. This is because they’re experts in mortgages and will help you choose the right mortgage for you. Plus they can save you a lot of time.
3. Consider all the costs
When you're looking at how to remortgage you'll want to consider all the costs. As well as an early repayment charge that you may need to pay, there are other costs that you may need to pay too. These include:
Arrangement (product) fee
An arrangement fee is what you pay the lender to set up your mortgage. However, some products don’t always charge for this.
Booking/ Application fee
A booking fee – also called an application fee - is sometimes charged when you apply for a mortgage. Beware, this isn’t usually refundable if you don't take the mortgage out.
Valuation fee
When you apply to remortgage the new lender will carry out a valuation on your home. Some do this free of charge, while others will charge a fee for the service.
The next step when it comes to remortgaging is to complete an agreement in principle (also called a ‘mortgage in principle’ or ‘decision in principle’).
This is a way to find out if a lender is prepared to lend you the amount you need without carrying out a full credit check. However, bear in mind an agreement in principle isn't a guarantee your remortgage will be approved.
5. Apply for your new mortgage
The next step is to apply for your remortgage. As part of this process, you’ll need to provide information about your personal and financial circumstances. Plus you’ll also need the details of your current mortgage. There are also documents you’ll need to supply like proof of earnings, as well as paperwork for any loans or other credit agreements.
6. Your lender will run a credit check
The lender will carry out a full credit check after it receives your application. As a hard check, this will affect your credit score, so make sure you're sure before undertaking this step and that your finances are in order.
7. Your property will be valued
And following your application, the lender will arrange a valuation to check the property is worth what you’re planning to pay for it.
8. The new lender will send you the mortgage offer letter
If the lender approves your application, they’ll send you a mortgage offer letter that will outline how much you can borrow. Once you have your mortgage offer, it’s usually valid for three the six months.
9. Review the offer
And once you’ve received your offer read it carefully and ensure all the details are correct. Let the lender know if anything is incorrect or if your circumstances have changed. If you’re happy with the offer the next step is to accept it.
10. A solicitor or conveyancer will manage the transfer of your mortgage
This involves your solicitor requesting the money from the new lender and using it to pay off your old mortgage. Next, your solicitor will register the new mortgage at the Land Registry. Once the title is registered, your solicitor will send you a copy and send the original document to your lender.
FAQs about remortgaging
1. How long does the remortgage process take?
If you're asking how to remortgage you'll probably also be wondering how long does it take?
The remortgage process typically takes from 4 to 8 weeks after you apply. However, it can take longer so it’s a good idea to factor in extra time.
2. How much can you borrow?
To find out how much you’ll be able to borrow when you remortgage it’s a good idea to speak to a mortgage broker. They’ll run through your personal circumstances and explain the different options to you.
There’s no yes or no answer to this because it will depend on your circumstances.
You’ll need to consider why you want to remortgage and factor in any fees you'll need to pay. For example, if you want to leave your current mortgage deal before it ends you may need to pay an early repayment charge - and these can be significant. This is another reason why it's a good idea to speak to a broker; they'll explain your remortgage options to you and crunch the numbers for you.
Talking to a mortgage advisor is one of the best ways to explore the market and understand your options.
4. Why should I remortgage?
As well as looking at how to remortgage, you'll also want to consider the reasons why you want to remortgage. So, what do you want to achieve from remortgaging? There are many reasons why people remortgage, these include wanting to:
Lower your monthly payments
A major reason why you may want to remortgage is to save money on your mortgage payments by switching onto a better deal. This is because if you remortgage onto a better rate than you’re currently on, you’ll pay less on your mortgage each month. However, if you want to leave your current mortgage deal before it finishes, you may need to pay fees such as an early repayment charge. This is why it’s a good idea to get expert advice from a mortgage broker at the start.
Pay off your mortgage sooner
If your plan is to pay off your mortgage sooner, when you remortgage you can choose to shorten your mortgage term. Alternatively, you can pay off your mortgage sooner by making overpayments on your mortgage. If you’re planning to do this when you’re remortgaging, think about how much you'll want to overpay by and make sure the deals you’re considering will allow this.
Avoid SVR if your current mortgage term is coming to an end
Once your mortgage’s initial period ends, you will be automatically rolled onto your lender’s standard variable rate (SVR). This is your lender’s ‘default’ rate and you might find it’s significantly higher than the rate in your initial period. If this happens your mortgage payments could shoot up, however, you can avoid this happening by remortgaging onto a new deal.
Kitchen extensions and renovations are common reasons for remortgaging.
5. Can I get a cheaper mortgage if my property has increased in value?
With mortgages, you’ll see the term LTV - loan to value ratio - thrown around a lot. This measures the amount of money you’re borrowing compared to the total value of the property, and it will be expressed as a percentage.
If you have been paying a repayment mortgage - and as long as your home’s value has risen or stayed the same since you took out your last mortgage - your LTV will now be lower. One benefit of this is that by having a lower LTV you may get access to a larger range of mortgages and potentially better rates too.
6. Should I worry about my credit score?
When you apply to remortgage, the lender will look at your credit rating and use it as a factor when deciding on whether to lend to you. So make sure you check your credit reports before you start the process of remortgaging!
You can use credit reference agencies, such as Experian, Equifax and TransUnion, as each will hold a credit report on you. Check each of them; you can do this online for free. Make sure you request that any inaccuracies in your reports are corrected and also do everything you can to boost your credit score, like never missing payments and getting on the electoral roll.
To sum it up
Whether you want to get a better deal or release equity from your home, a remortgage could be just the answer. However, before making your final decision it is best to think about all the pros and cons!
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