Remortgages
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Remortgages
What is a remortgage and how does the process work in the UK?
A remortgage is essentially the process of paying off your existing mortgage and replacing it with a new one.
It’s beneficial for various reasons – Hopefully you will obtain a lower interest rate, reducing your monthly payments, or you might want to access equity in the home or change the mortgage term to best suit your current situation.
The process tends to be as follows: Initially, we assess the current mortgage for you and determine your goals. We check your credit score and move on to an Agreement in Principle (AIP). You then apply for the mortgage, which normally involves obtaining a property valuation, and then there’s the legal work, known as conveyancing.
Then you hopefully get an offer and then complete. If you decide to stay with your current lender, however, the process is simpler and the stages from AIP to the legal work don’t apply.
How long does it take to remortgage?
We recommend clients allow up to eight weeks for the remortgage process if they’re switching lenders. If they’re staying with the same lender, not amending the term or the repayment method of the mortgage, the process can take considerably less time, because there isn’t any underwriting, valuation or conveyancing involved.
How often can I remortgage?
You can remortgage as often as you like, but you must take into account the fees to switch the mortgage – and the potential effects on your credit profile if you do it too regularly. There may also be early repayment charges on the existing mortgage.
Can I switch lenders when remortgaging?
Yes, you can. This is the primary benefit when you remortgage – you aren’t restricted to the current lender for mortgage options.
If you use a mortgage broker, they’ll have access to a comprehensive range of lenders in the market, including specialist lenders only available through brokers.
We will also check your existing lender’s loyalty deals to ensure you get full advice that suits you.
What are the main reasons why people choose to remortgage?
The main one is to lower the interest rate. Obviously current interest rates are a little higher for clients that took mortgages out more than three years ago, but ordinarily we would be looking to secure a lower interest rate [podcast recorded in July 2024].
It will hopefully be much lower than reverting to the standard variable rate, which reduces the monthly payments and overall cost of the mortgage.
The next reason is that people may want to switch to a fixed rate mortgage to provide stability and predictability of payments. Or, they might wish to release equity from the property to fund home improvements, debt consolidation or other financial needs.
The last reason is flexibility. When you’re coming up to reviewing your mortgage you can change the terms of your mortgage to align with your goals. You might want to shorten the term and pay off the mortgage sooner.
What happens to my existing mortgage when I remortgage?
What happens if I don’t remortgage after my deal expires?
If you stay with the current lender, they’ll switch you internally to a new deal and you just make the new mortgage payment once the new deal starts. It’s very straightforward.
If you switch to a new lender, the conveyancer or solicitor will pay off the existing mortgage using funds from the new lender. Then the existing mortgage lender will close down your mortgage account, cancel direct debits and confirm this in writing to you.
If you don’t remortgage after a deal expires, you’ll revert to the lender’s standard variable rate, which is normally the most expensive mortgage rate they offer. Fortunately, there aren’t any early repayment charges at that stage, so you can switch to a new deal whenever you like. Obviously we would recommend doing that as soon as possible.
What factors should I consider when deciding whether to remortgage?
There are four things I’d ask clients to think about. The first is cost and fees, to ensure the benefits of the remortgage outweigh the costs involved.
The next one is credit impact. Doing multiple credit checks can affect your credit score, so it’s important to manage applications carefully.
Then there’s the impact of market changes. Interest rates and mortgage deals can change, so timely action is important to secure favourable terms.
The final one is to seek advice from a mortgage broker, especially if you’ve got complex financial circumstances, or you’re looking for more bespoke or specialised products.
Can I remortgage if I have bad credit? Can I remortgage to consolidate my debts?
It really depends on the type of adverse credit, the amounts involved and when it happened. But an experienced mortgage broker can help you navigate this complex area of the market.
We understand lenders’ underwriting criteria.
In terms of consolidating debts, you certainly can, subject to lenders’ criteria around credit score, affordability and maximum Loan to Value.
We do encourage clients to consider the impact of securing an unsecured debt on their property. Obviously if you don’t pay off your loan or your credit cards you’re not going to lose your home, but if you secure them on the house as part of debt consolidation, your property could be repossessed if you don’t maintain those payments.
There’s also the consideration of the additional interest over the term of a mortgage, compared to maintaining the existing repayment schedule. And, of course, if you have a 0% credit card or 0% finance, it’s not a good idea to consolidate that because the mortgage rate will always be higher.
Will I have to pay any fees or penalties when remortgaging?
It’s important to be aware of the costs associated with remortgaging, which include early repayment charges on your existing mortgage, arrangement fees for the new mortgage, valuation fees, legal fees and any applicable broker fees. So yes, there will be costs and fees involved.
Speak To an Expert
We support clients through a daunting process, looking at your circumstances and taking time to understand your priorities. We then research the market for the most appropriate options based on those needs.
How much could I potentially save by remortgaging?
It depends on the rate you’re currently on and the fees associated with switching. A mortgage broker has to do a thorough analysis and it has to be audited before we present the most appropriate options.
Sometimes our advice to a client is to stay with the existing lender. There are plenty of options and it’s important to look at all of them.
What documentation will I need to provide when remortgaging?
It falls into certain categories like ID and proof of address, income documentation, a copy of your credit file and expenditure documents, such as bank statements.
We complete a financial review, which we call a fact find, which highlights other key things like details of your existing mortgage.
Will I need a new valuation or survey when remortgaging?
It depends on the lender. Your existing lender would normally use an internal index based on the previous valuation you completed. They mix that with the latest market data, so if you choose to stay with them, they won’t normally need a new valuation or survey.
If you go with a new lender, they don’t have that data so they will require a new valuation. But this might not be a physical survey – lenders are increasingly using ‘automated valuation models’ or desktop surveys, which rely on market data about comparable properties rather than a physical visit.
If there isn’t enough data about that type of property, or maybe the last property on your road was sold 25 years ago, they can still insist on a drive by or an internal inspection.
Is it harder to remortgage if I’m self-employed or a contractor?
I wouldn’t say it’s harder, but it normally involves more documents than for an employed individual. It’s worth speaking to a mortgage broker because not all the high street lenders are very good with these clients. They often calculate income in different ways.
What happens if my property value has decreased since I initially obtained my mortgage?
This may affect the mortgage options available, because mortgage rates are based on Loan to Value (LTV) – the mortgage size as a percentage of the property value.
The lower the LTV, the lower the risk to the lender that in the event of a repossession, they won’t get their money back. Hence, they charge lower interest rates. Interest rates typically decrease as the LTV decreases, normally in 5% increments.
Clients can always reduce their mortgage as part of the remortgage process to access those lower LTV rates.
What are the advantages and disadvantages of fixed rate versus variable rate remortgages?
With fixed rate mortgages, the pros are predictable and fixed monthly payments, and protection against interest rate rises during that fixed rate period.
The cons are that you might have higher initial rates compared to variable rates, and there’s normally an early repayment charge if you exit the deal early.
With variable rate mortgages, there are potentially lower rates than fixed rate mortgages initially, and there’s no early repayment charges with the majority of variable rate mortgages. That gives you flexibility if you want to switch rates or sell a property.
The cons tend to be that monthly repayments can fluctuate, making budgeting more challenging. Rates can increase with the base rate or at the lender’s discretion.
Can I remortgage if I’m nearing retirement age?
You can remortgage if you’re nearing retirement age in the UK, but lenders will have specific criteria and requirements for older borrowers that are different from the normal working population.
Equity release mortgage products can serve this demographic, and only mortgage brokers with advanced qualifications and additional licences can operate in this area, as sometimes these can be vulnerable clients. These mortgages also come with higher interest rates compared to traditional products.
So do carefully consider the options and work with one of these experienced professionals. They can successfully help you navigate the process of remortgaging as you approach retirement.
How can a mortgage broker help?
I’ve been working in this area for over 25 years. A mortgage broker can help with remortgaging in six different areas.
The first one is expert advice and guidance. We will take time to understand your needs and navigate the options – which includes deals that aren’t available directly to consumers.
We can offer exclusive deals, and a lot of the private banks only work through brokers and are not open to the general market. We can also tailor the mortgage for your specific requirements. There might be differences for high net worth individuals or those nearing retirement, for example.
The third area is about simplifying the process. We’re there to provide administrative help and save the client time and legwork in comparing mortgage deals and liaising with lenders.
Next is specialist knowledge. Clients can come to us with complex situations including multiple income streams, investments or poor credit and we will advise how best to progress.
We’re also constantly keeping on top of regulatory requirements, which is something that clients won’t necessarily be up to date with.
We also conduct comprehensive market analysis – because we have access to a wide range of lenders, which is much simpler than going to your local branches of high street banks. We can also obviously factor in future planning as part of our conversation.
The final point is that throughout the process, you’ll need support. We coordinate with the solicitors and conveyancers to ensure a smooth legal process, and we’ll also manage the evaluation process to align with the lender’s requirements.
So in summary, by leveraging the expertise and our resources as a mortgage broker, you can navigate the remortgage process more efficiently – and hopefully secure terms that align with your long-term goals.
Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
There may be a fee for mortgage advice. The precise amount will depend upon your circumstances, but we estimate it will be £499.
Chirag Patel trading as CKN Mortgages is an Appointed Representative of HL Partnership Limited which is authorised and regulated by the Financial Conduct Authority.
