Remortgaging, or refinancing, is a financial strategy that involves replacing your existing mortgage with a new one. This can be done for a variety of reasons, and the process typically involves several steps. Here's a general overview of the remortgaging procedure and key considerations:
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1%, but a typical fee is £495.
Remortgaging Procedure:
Assess your reasons for remortgaging
Better Interest Rate: One common reason is to secure a lower interest rate, which can result in lower monthly payments and potentially save you money over the life of the loan.
Accessing Equity: If the value of your property has increased, remortgaging allows you to access the equity (the difference between your home's value and your remaining mortgage balance) for other purposes, such as home improvements or debt consolidation.
Changing Terms: You might want to change the terms of your mortgage, such as moving from a variable to a fixed-rate mortgage or extending or shortening the loan term.
Assess your financial situation
Assess your current financial situation, including your credit score, income, and any changes in your circumstances since you took out the original mortgage.
Research mortgage options
Explore mortgage offers from various lenders to find the right deal for your needs. This includes comparing interest rates, fees, and terms.
Consult with a mortgage adviser
Seek advice from a mortgage advisor or broker who can provide personalised guidance based on your financial situation and goals.
Get pre-approved for a new mortgage to understand the amount you qualify for.
Submit a mortgage application
Once you've chosen a lender and mortgage product, you'll need to complete a new mortgage application. The process involves providing financial documentation and undergoing a credit check.
Valuation and the legal process
The new lender may conduct a property valuation to assess its current market value.
There will be a legal process involved, including a solicitor or conveyancer handling the paperwork, ensuring all legal aspects are in order, and facilitating the transfer of the mortgage.
Completion and transfer
Once the legal process is complete, the new mortgage is used to pay off the existing mortgage, and you officially transfer to the new terms.
Consider costs
Be aware of any fees associated with remortgaging, such as arrangement fees, valuation fees, legal fees, and early repayment charges on your existing mortgage.
After remortgaging, reassess your budget to ensure that the new terms align with your financial goals.
It's essential to carefully consider the costs and benefits of remortgaging and seek professional advice if needed. Additionally, be aware of any potential penalties for early repayment on your existing mortgage and factor those into your decision-making process.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Ideal time to remortgage?
End of Fixed-Term Period: If you're on a fixed-rate mortgage, it's a common practice to consider remortgaging near the end of the fixed term. This allows you to secure a new interest rate, potentially avoiding a switch to a higher standard variable rate (SVR) offered by your current lender.
Changes in Interest Rates: Monitoring changes in interest rates is crucial. If market interest rates have decreased significantly since you took out your mortgage, it might be an opportune time to remortgage and secure a lower rate. Even a small reduction in the interest rate can lead to substantial savings over the life of the loan.
Improved credit score and financial situation: If your credit score has improved since you initially secured your mortgage, you may now qualify for more favourable terms. Lenders often reward borrowers with higher credit scores by offering lower interest rates.
Considerations
Improve Financial Situation: positive changes in your financial situation, such as an increase in income or reduction in debt, could make you eligible for better mortgage terms. This might include a lower interest rate or the ability to borrow a larger amount.
Early Repayment Charges: If your current mortgage has early repayment charges, consider remortgaging when these charges no longer apply. This is typically after the initial fixed or discounted period.
Equity Release: If the value of your property has increased significantly, you might consider remortgaging to release equity. This can provide funds for home improvements, debt consolidation, or other financial goals.
Market conditions : Keep an eye on broader economic and housing market conditions. In a competitive mortgage market, lenders may offer attractive deals or promotions to attract new customers. It's a good practice to review your mortgage regularly, even if there haven't been significant changes in your circumstances. This ensures that you are aware of any better deals in the market and can take advantage of them.
It's important to note that while these are general guidelines, the ideal time to remortgage can vary based on individual circumstances and the overall economic climate. It's advisable to seek advice from financial professionals and mortgage advisors to determine the most suitable time based on your specific situation.