How To Remortgage (In 6 Simple Steps)
4th January 2017
To remortgage, you first need to check the terms of your existing mortgage, then decide what type of mortgage you want and find a good deal. The lender will then perform affordability and credit checks before valuing your property. If the mortgage is approved, the money will be transferred to your existing lender. The process usually takes around 3-4 weeks.
Deciding to remortgage
There are several reasons you may decide to remortgage, including to free up more money or to gain more flexibility. But one of the most common reasons for remortgaging is to get a better rate once your initial mortgage period has ended.
It’s sensible to start thinking about remortgaging about three months before your initial deal ends. Read more in our article, When To Remortgage (And When Not To).
It’s now easier than ever to remortgage, thanks to new hassle-free services like Trussle that help you switch quickly online.
Here’s how the remortgaging process works.
Step 1: Checking your current mortgage arrangement
First, dig out the paperwork for your current mortgage and make sure you understand the key details, including when the initial term ends and the rate that you’ll start paying if you haven’t moved your mortgage by this date (this is called the Standard Variable Rate).
Step 2: Understanding any fees
If you’re remortgaging before your initial term ends, check the Early Repayment Charge. This fee tends to be a percentage of your outstanding loan (3% for example), so it can be expensive.
If you’re remortgaging at the end of your initial term, fees don’t usually apply.
Step 3: Finding a new mortgage
Remortgaging is just getting a new mortgage; there’s no specific ‘remortgage’ product, so you have a full range of mortgage deals to choose from. Read our article, Where To Remortgage (Saving Time And Money) for help with finding the right mortgage for you.
When you’re comparing mortgages, consider the upfront fees, the interest rates, and the rules and restrictions (whether overpayments are allowed, for example).
You’ll also need to make certain decisions about what kind of mortgage you want. This will be based on a number of factors including any expected changes in your circumstances. We recommend speaking with a mortgage adviser before deciding on your preference, but here are a few things to consider:
Fixed, tracker or variable
You’ll need to decide whether you want a fixed rate, a tracker, or a variable mortgage.
A fixed rate mortgage guarantees your interest rate stays the same for a certain period
A tracker mortgage’s interest rate moves up or down according to the Bank of England’s base rate
A variable rate also moves up or down, but is based on a benchmark set by the lender
If you pick a fixed rate, your repayments are predictable. With a tracker or variable mortgage, your repayments could change at any time. You’ll benefit from low payments when interest rates are low, but you need to make sure you could still afford your repayments if interest rates increased.
Interest-only or repayment
With an interest-only mortgage you just pay off the interest each month, rather than the actual loan. At the end of the mortgage term you’ll still have the full loan amount to repay, so you’ll need to ensure you have the money available (this could be done by cashing in an investment, using a pension, or selling your home).
With a repayment mortgage you’re paying off the whole debt including interest, so the outstanding amount gets smaller over time. At the end of the mortgage term, your home will be fully yours.
The mortgage term
Also consider the term of the mortgage, which is the lifetime of the loan. A longer term can mean lower monthly repayments, but having the loan over a longer period of time will mean paying more interest overall.
Trussle mortgage adviser Deeksha Shah says: “Lenders are offering 5 and 10-year fixed-rate mortgages at historically low rates at a time when the future is looking increasingly uncertain. Taking advantage of these longer term fixed rates will help you budget more easily and could be beneficial if you’re not planning to move within the next few years.”
Step 4: Applying for the mortgage
Whether you use a broker or go to a lender directly, you’ll be asked to provide proof of identity and proof of income. The lender will perform various checks including a credit check.
Step 5: The valuation
Next, your new lender will send a surveyor to your property to make sure it’s been priced correctly and they’re happy to lend you money against it. The surveyor will provide a report with their valuation of the property.
The lender may require you to pay a fee for the valuation, which can range between £150-£700 depending on the value of the home.
Step 6: Completion
If the lender is satisfied with the valuation report, they will then carry out any final checks and write to you and your solicitor with the mortgage offer. Many lenders appoint their own solicitor for clients who are remortgaging, but in some cases you’ll need to appoint your own.
Once everyone’s happy and all the fees have been paid, your new provider will transfer the money you’ve borrowed over to your existing provider to pay off your old mortgage. You’ve now remortgaged, and you will start making payments to your new provider.