Remortgaging is the process of changing mortgage without moving house. It is a common transaction and can reduce the monthly mortgage payment. There are many reasons for wanting to remortgage and here we look at those and the process involved.
Why remortgage?
Some of the typical reasons people decide to remortgage are:
- To avoid the lenders Standard Variable rate if the current Fixed mortgage rate is near to expiry. Here a lower interest rate may be available by switching lenders, which can in turn save the borrower money
- To swap to a Fixed mortgage rate of interest so that monthly outgoings can be consistent and easier to manage. This is particularly common when a lender promotes a new generous Fixed rate and there is currently no commitment with an existing lender.
- To borrow additional funds for home improvements or just to release equity built up in a property, perhaps for further property investment.
- To borrow additional funds for debt consolidation. Mortgage rates are lower than credit cards and usually loans too, so it is common to remortgage to consolidate debts into one lower monthly payment, so long as spending doesn’t accelerate to cause future financial problems – the adviser will discuss this.
The remortgaging process
The process to remortgage is typically straight forward and isn’t too dissimilar to that of a regular mortgage application. Usually there is a little less paperwork, especially if the remortgage is with the same lender and just switching to a new mortgage product.
These 5 steps broadly apply:
Step 1 – A mortgage adviser will discuss your requirements and discuss the mortgage options available on the market including lender, rates and terms.
Step 2 – Once these have been explored and a route decided, the adviser will contact the new lender and complete an application form.
Step 3 – The lender will need to ensure that there is sufficient equity in the property, for security reasons, before they decide if they are prepared to continue with the application. A mortgage adviser will prepare the application form in the correct way for that lender based on their market knowledge and negotiate where required too.
Step 4 – If the new lender decides to proceed with the application, then the adviser will communicate with the existing lender and request a “redemption figure”. This is the amount required to clear the current mortgage, including any penalties if coming out of a Fixed Rate agreement (sometimes even with penalties a remortgage to a better rate or deal can be better long term).
Step 5 – A solicitor will be required to carry out the paperwork. This sometimes comes free as a package with a new mortgage company – aimed to entice and save the lender costs, however, it is a solicitor attached to the lender so choice usually isn’t an option.
Protecting your position
When there is the commitment of a mortgage, it is sensible and almost always advised to consider insurances to protect in the event of being unable to meet the monthly payments. Again, the adviser can discuss this during the meeting.
Is now a good time to remortgage?
Interest rates remained low in December 2014 although there is much speculation about future rises in 2015.
Find out more about possible interest rate increases here.
As there are many factors to consider when deciding whether to remortgage it is best to seek help from a professional mortgage adviser.
Call Chris to discuss your remortgage to ensure you are securing the best rate possible.
Tel: 01403 780 770