Why do I need to remortgage?
Rather than moving house, you might want to remortgage and release some cash that you’ve built up in your home to fund an extension or a renovation project. In many cases, remortgaging can be a cost-effective way to borrow the additional money you need.
Learn more: How you can use the equity in your home to fund your project
However, if you don’t want to raise any more money and would prefer to arrange a ‘like for like’ amount of borrowing on a new mortgage, then you potentially have two options: remortgaging or a product transfer.
Advantages of remortgaging
You could find a competitive mortgage that’s right for your needs and could mean you save money too, should the interest rate be lower than what you’re currently paying.
If you’re currently sat on your lender’s Standard Variable Rate (SVR), there’s every chance that by remortgaging, you’ll be able to reduce your monthly payment.
You may be able to use some of the capital in your home to fund a renovation project, for example, which may be a more cost-effective way to borrow a significant amount of money as the interest rate is likely to be cheaper than that of a personal loan from a bank.
Things to consider
You, and whoever else is named on the mortgage, will need to go through the full application process. This means full disclosure of your income, monthly committed expenditure, and any outstanding debts, the same way you’d apply for a mortgage if you were moving home.
The property you’re borrowing against will need to be valued for mortgage purposes (this is called a mortgage valuation) and is undertaken by a chartered surveyor. Some lenders charge for this, although some include it in the cost of the product, so it’s worth checking to see if you have to pay if you’re moving to a new lender. Expect a mortgage valuation to cost upwards of £150, depending on the value of the property you’d like to borrow against and how much you’re borrowing.
You’ll need a solicitor or licenced conveyancer to act on your behalf to ensure that the legal side of the remortgage process is taken care of correctly. Some lenders include either the full cost or a contribution towards the legalities in their products, but others don’t, so again it’s best to check upfront so you can budget for any fees you may have to find. It’s also worth checking to see if the lender has a ‘panel’ (or list) of approved solicitors or licensed conveyancers that you must use in order to take out a mortgage with them.
Some lenders charge a fee for specific mortgage products, for example, if you’re taking out a five-year fixed rate, you may find that there’s a product fee for this. Again, you need to check upfront if this is the case, and if so, what the amount is. If there is a fee, you may find that your lender will allow you to add the costs of fees, for example, legal fees, mortgage valuation and product fees to the total cost of the mortgage, rather than having to find the money upfront. That’s okay, but just remember, that’s an additional amount that you’ll be paying interest on over a number of years, so you need to factor that into your calculations to ensure that you’ve got a full understanding of the total costs of the mortgage and associated costs, not just what your monthly payment will be.
So, what’s a product transfer?
Many people are familiar with the term ‘remortgage’ but haven’t heard of a ‘product transfer’ before… so don’t worry if you’re unsure, you’re not alone!
If you’re happy to stay with the same lender and don’t want to borrow any more money, also known as looking for a ‘like for like’ mortgage but on a new rate, then you may be eligible for a product transfer.
This is a much quicker process as you’re just choosing from the products that your lender offers, then applying your current mortgage balance onto a new deal with them.
Advantages of a product transfer
You don’t have to go through the same application process as you would with a remortgage. It’s usually a much quicker process and can often be done over the phone. Most product transfers can be done within ten working days, or even less.
You don’t have to provide the same amount of paperwork to support your application, so this can speed up the process.
You won’t need a mortgage valuation or have to enlist a solicitor or licensed conveyancer to deal with the paperwork.
Things to consider
You won’t be able to raise any additional capital. Taking a product transfer means you’ll only be able to swap your current outstanding mortgage balance onto a new product, not borrow any more.
You’ll have to stay with the same lender, which means that you may not have access to the most competitive product available for your circumstances; you’ll only be able to select from the rates that your current lender can offer you.
If you want to add a partner to your mortgage, for example, if they’ve moved in with you, or if you want to take someone off the mortgage (perhaps you’ve split up with a partner) then you won’t be able to do this on a product transfer. You’ll have to remortgage and go through the appropriate legal process.
To speak to a qualified mortgage adviser about remortgaging or product transfers, please feel free to get in touch with us today.
Please note: you may have to pay an early repayment charge to your existing lender if you remortgage.