Remortgages

What is a remortgage?

A remortgage is when you change the current mortgage on your property to a new mortgage with another lender. This is different from switching to a new deal with your current lender, which is called a product transfer.

A remortgage can allow you to secure a new rate when your current deal is about to end. This saves you from automatically being switched to your lender’s standard variable rate (SVR), which is usually expensive. It can also allow you to borrow more if you’ve built up equity in your property. Or you may wish to benefit from better terms, such as having more flexibility when it comes to making overpayments. If your property’s value has increased, you may be able to benefit from a lower loan-to-value (LTV) ratio and have access to more deals with better rates.

How does remortgaging work?

When you remortgage, your original mortgage is repaid by the new mortgage deal and the debt transfers to the new lender. There are various costs to consider for this process, such as a possible early repayment charge (ERC) by your current lender, a valuation fee and an arrangement fee by your new lender as well as the legal fees. We’ll explain the costs in more detail later on but our mortgage brokers will check the costs of remortgaging against the new deals available to ensure that you’re making the right decision. The remortgage process usually takes about 4 to 8 weeks to complete, depending on your remortgage requirements and circumstances.

Why should you remortgage?

There are numerous reasons to consider remortgaging. Your current mortgage deal may be about to end so you want to shop around for a better deal or you may want more flexibility with your mortgage terms. You may be struggling financially and want to consolidate some debts. Or you’re possibly looking to borrow more, such as to pay for home improvements, buy a car or use as a deposit to help a family member get onto the property ladder. Some of the main reasons for remortgaging are:

• Your existing mortgage deal is about to end
• You want the security of a fixed rate
• You want to save money with a better rate
• You prefer to have more flexibility with different mortgage terms
• You want to release some funds

We’ve explained these in more detail below.

Your existing mortgage deal is about to end

It’s recommended to review your mortgage options up to 6 months before your existing mortgage deal comes to an end. Whilst the deal you agreed to may have been a good one at the time, it’s better to search for a new one with better rates. This means that you can benefit from lower monthly repayments. If you don’t change to a new deal, the original mortgage will revert to the lender’s SVR. The SVR is likely to be higher than you’re paying now as well as being higher than alternative mortgage products.

You might be tempted to stay with your lender as an easy option but we can help you with every aspect of a remortgage. Contact us at least a few months before your current deal comes to an end. That gives us time to check the new deal your current lender has offered you, review your financial circumstances and search for competitive mortgage products from other lenders that may be better for you.

You want the security of a fixed rate

If you currently have a variable rate mortgage, you may want the security of remortgaging to a fixed-rate deal. A fixed rate protects you against future interest rate increases during that term, such as 2, 3 or 5 years. This provides you with stability and peace of mind. You may already have a fixed rate mortgage but want to remortgage to a longer term. For example, your current fixed-rate deal may be for 2 years but you want to remortgage to a 5-year fixed term.

Alternatively, you may have a long fixed term and want to shorten it or perhaps you’ve decided it’s time to remortgage to a variable rate. Whatever your preferences, we can check and compare your options to ensure that you choose the best one for your needs.

You want to save money with a better rate

If interest rates have dropped since you took out your original mortgage deal, you can shop around for a better rate. This will not only reduce your monthly payments but also lower the overall amount charged across your mortgage term. Likewise, if your property has increased in value since you took out your mortgage, you may be able to benefit from a lower LTV. More deals will open up for you and you can take advantage of a better rate.

Our mortgage brokers have access to exclusive deals, many of which aren’t offered to the public by lenders. They can compare the new rates offered against any fees charged by both your current and new lenders. This will give you a clear idea of the savings you stand to make if you remortgage.

You prefer to have more flexibility with different mortgage terms

Your circumstances may have changed since you took out your current mortgage deal and the terms are no longer suitable. You might want to make lower monthly repayments and are happy to make these over a longer term. On the other hand, you may have benefitted from increased earnings and want to overpay to reduce the amount you owe but your current lender has refused. Or you may want the flexibility of a mortgage that takes your savings into account or one that lets you miss a payment when you need to.

Our mortgage brokers, based throughout Kent, Edinburgh and London, are available to help you with this. They can search for mortgage deals with longer terms, ones that offer payment holidays and those that allow for higher overpayments to be made so that you’re not penalised with an ERC. If you want to utilise your savings, they can look at offset mortgage deals for you.

You want to release some funds

If you have equity in your property, you may want to release some of it to make use of a lump sum of money. This can be to carry out home improvements, for example, or to pay for a big event, such as a wedding or holiday. You may want to help a family member get onto the property ladder with a deposit or perhaps to consolidate some debts.

Just bear in mind that by borrowing more, you’ll be charged interest on the extra amount for the rest of the mortgage term. As such, remortgaging is not necessarily the cheapest option when you want to borrow money. Our professional mortgage brokers will give you impartial advice on this and the alternative options available so that you can make an informed decision.

Get expert help with your remortgage needs

Whatever your reason for remortgaging, we can help save you time and potentially a lot of money. With mortgage brokers located throughout Kent, London and Edinburgh, we are on hand to scour the market to find the best value deals with competitive rates. Just give us a call on 01322 907 000 to discuss your requirements.

At Trinity Finance, we make the remortgaging process quick and easy for you. Our mortgage brokers will check your current deal, taking into account any fees you may be liable for, and compare it with the new deals available. Whether you’re looking for a better rate, more flexible terms or to borrow more, they are experts at finding the best remortgage options to suit your needs. If you’re not available to contact us by phone, just email us at info@trinityfinance.co.uk or send us an enquiry via our contact form. One of our mortgage consultants will reply to you as quickly as possible with more information on remortgaging.

When should you remortgage?

You can remortgage whenever you need to — this isn’t set in stone. The reasons for wanting to remortgage differ from person to person and the best time to remortgage depends on your circumstances.

However, if your current deal is coming to an end, it’s best to let us know 4 to 6 months beforehand. That gives us ample time to shop around on your behalf to make sure you get the best deal. Try not to leave it any later than a few months before your current deal ends. As well as finding the right remortgage deal and preparing all of the necessary documentation, you need to allow time for the new lender to process your application. If it’s left too late, you risk your current deal automatically switching over to the current lender’s SVR. This is likely to be a lot more expensive than the rate you’re already paying and, therefore, can potentially cost you a lot more for future repayments.

There’s nothing to stop you from remortgaging at any other time during your current deal. However, be sure to check your lender’s terms regarding an early repayment charge. This can be expensive so you’ll need to weigh up the cost of the ERC combined with the other remortgaging costs against any savings you’re hoping to make.

When shouldn’t you remortgage?

There are various reasons why remortgaging may not be the best option for you. These include:

• A change in your circumstances
• Having to pay a large early repayment charge
• Having a small outstanding mortgage loan

A change in your circumstances

If your financial situation has declined since you took out your current deal, you may find it difficult to remortgage due to the strict affordability criteria. For example, your household income may have reduced or your outstanding debts may have increased. Another example is that you’re employment status has changed from employed to self-employed. Whilst you can remortgage when you’re self-employed, the criteria tend to be stricter. Having said that, our mortgage brokers work with specific lenders offering more flexibility for self-employed borrowers. In this case, they will approach the most suitable lenders on your behalf.

You may also find it difficult to be approved for a remortgage if your credit score has lowered since you took out your current deal. Lenders need to see that you have a good repayment history and can manage your finances well. A lower credit score will make them wary and reluctant to offer you a remortgage deal. In this case, work on improving your credit score again before applying for a remortgage.

Another issue that can prove difficult is if your property’s value has decreased in that time. The best thing to do in this situation is to wait until property prices start to increase again. In the meantime, try to make overpayments if you’re in a financial position to do so. Make sure that you do this within your lender’s guidelines so that you’re not penalised with an early repayment charge.

A large early repayment charge

Whilst you can remortgage before your current deal is due to end, you may be liable for an early repayment charge. ERCs can be hefty so think carefully about whether remortgaging is really worth it for your needs if an ERC applies. If the cost far outweighs any benefit, then it’s simply not worth remortgaging at this time. Either wait until the lender’s tie-in period has ended or leave it as long as you can because the ERC usually reduces over time.

A small outstanding mortgage loan

If your outstanding loan amount is small, it’s usually not worth it financially to remortgage. Some lenders have a minimum remortgage requirement, such as £25,000. As well as that, the fees can be high, negating any savings you’re hoping to make.

How much can you borrow with a remortgage?

You have a couple of options when it comes to how much you can borrow with a remortgage. If you’re looking to secure a better deal than the one you have now, you can simply remortgage to the amount that’s outstanding on your current mortgage.

However, you may want to raise some extra funds to pay for home improvements or a holiday, for example. A remortgage is a good opportunity to borrow more and the amount you can borrow depends on various factors. These include the value of your property, the amount you owe for your current mortgage, your credit rating, the reason for wanting to borrow more and your affordability for the higher amount.

The costs involved when remortgaging

As well as the interest rate payable, there are various costs to take into account when remortgaging. These can include an arrangement fee and valuation fee from the new lender and legal fees from your solicitor. If you end your current deal too early, you may be liable for an early repayment charge from your existing lender. This can be very expensive so it’s important to check your lender’s terms before proceeding with a remortgage. Your current lender may also charge you an exit fee.

How to remortgage

The application process for a remortgage is similar to the one for your original mortgage. The new lender will need to check your personal details, creditworthiness and affordability for the new mortgage. They will also need details of your current mortgage and to have a valuation carried out on your property. You’ll usually need to provide the following documentation:

• Proof of ID
• Proof of the property address
• Your last 3 months’ payslips
• Your bank statements for the last 3 months
• The latest P60 tax form
• The last 3 years of accounts if you’re self-employed

The new lender will carry out a credit check on you so be sure to check your credit report beforehand. Check its accuracy and, if any changes need to be made, contact the credit reference agencies to deal with these. If your credit score has decreased since you took out your original mortgage, take steps to try and increase it again before you apply for a remortgage. For example, make sure you’re registered on the electoral roll, pay your bills on time, refrain from applying for any new credit and close any unused accounts. Our mortgage brokers can advise you on ways to improve your credit rating if needed.

The advantages of remortgaging

There are lots of reasons why remortgaging can be advantageous, as detailed below.

Secure a new deal when your current one is about to end

When your current deal is nearing the end of its term, remortgaging ensures that your rate won’t automatically switch over to the lender’s standard variable rate (SVR). SVRs tend to be higher than other rates, meaning that you’ll end up paying more each month.

Get a better interest rate

If you’re currently paying a high interest rate, you may want to shop around and remortgage to a deal with a better rate. For example, you may have a variable rate mortgage and your monthly payments increase each time the Bank of England base rate does. You may decide to remortgage to a variable rate mortgage with a capped rate or you may prefer the security of having a fixed rate.

Borrow at a lower LTV

If your property’s value has increased since you took out the original mortgage, you may be able to benefit from a lower loan-to-value (LTV) ratio. The lower the LTV you need, the more deals will become available and the better rates you’ll be offered.

Pay off your mortgage earlier

You may want a deal offering more flexibility to make overpayments without being penalised. Or you may be in a better financial position than you were when you took out your original mortgage so you wish to increase your monthly repayments and shorten the mortgage term.

Extend your mortgage term

If you need to reduce your monthly outgoings, you can remortgage to a deal that has a longer term, enabling you to make smaller monthly repayments.

Borrow more money

If you’ve built up some equity in your property, you can remortgage to borrow more. This provides you with the funds needed to carry out home improvements, help a family member get onto the property ladder, consolidate your debts or cover a big expense, such as a car, a holiday, a wedding or your child’s education.

Offset your savings

You may have built up some savings since you took out your original mortgage or perhaps you’ve inherited some money. You can utilise these savings to lower the interest payable on your mortgage by remortgaging to an offset mortgage.

Change to a different mortgage provider

It may just be that you’re not happy with the service provided by your current lender. In this case, a remortgage enables you to deal with a new lender instead.

The disadvantages of remortgaging

There are also some disadvantages to think about before remortgaging:

• You may be penalised with an early repayment charge (ERC) by your current lender if you end your deal too early, such as while you’re still in the introductory period.
• There are costs to budget for when remortgaging, such as a valuation fee, arrangement fee and legal costs.
• Remortgaging takes longer than a product transfer, which is when you switch to a new deal with your current lender.
• If you’re happy with your current lender, you might not want to remortgage and have to deal with a different lender.
• You may not be able to remortgage when you want to. For example, if your financial situation has changed since you took out your original mortgage, whether that’s having a lower income or you’ve changed from being employed to self-employed, you may struggle to pass the affordability checks for a remortgage. Likewise, if your credit score has decreased, this can impact your chances of successfully securing a remortgage. In this case, the only option is to wait and remortgage at a later date.

Considerations before remortgaging

Remortgaging is a common process but there are a few things to consider before going ahead.

Is it worth it financially?

Whilst a new deal can offer a better initial interest rate than you’re paying now, you need to calculate the total interest payable over the mortgage term. This is especially important if you’re remortgaging to a deal that has compound interest or one with a longer term.

You also need to factor in the costs to remortgage, such as an arrangement fee, a valuation fee and legal costs. You may also be liable for an early repayment charge (ERC) and exit fee with your current lender. These costs can add up quickly so you need to work out exactly what savings you stand to make with a remortgage once you’ve accounted for the fees.

If you’re planning to move in the near future, look for a remortgage deal offering a low early repayment charge. Otherwise, if you change your deal again within the introductory or tie-in period, you’ll have yet another hefty ERC to pay for.

Lenders check your credit score

Your credit score tells lenders how well you manage your finances. They use this, along with their normal affordability checks, to decide whether or not they’re prepared to lend to you. Therefore, it’s important to check your credit report before applying for a remortgage.

If your credit score has decreased since you took out your original mortgage, there are ways that you can improve it. For example, make sure you’re registered on the electoral roll, reduce your debts as much as possible, pay all of your bills on time, refrain from applying for more credit and check the accuracy of your credit report, applying to the credit reference agencies to make any corrections where necessary. Our mortgage brokers can guide you on the different ways to increase your credit rating so that have a better chance of being approved for a remortgage.

Your situation

If you’re remortgaging to borrow more, make sure that you can cover the higher monthly payments should your situation change in the future. For example, if you’ve opted for a variable rate, can you still live comfortably if it increases? If your work situation changes, such as having to accept a pay cut or deciding to become self-employed instead of employed, what measures do you have in place to tide you over with the mortgage repayments? If you’re thinking about starting a family, which will considerably increase your outgoings, is it the right time to borrow more? Whatever plans you have for the future or possibilities that may occur, be sure that you’re not putting your property at risk if you suddenly find yourself unable to afford the higher payments.

Is remortgaging right for you?

Whether or not remortgaging is right for you depends on your circumstances. If you’re approaching the end of your current deal or have already moved over to your lender’s SVR, then remortgaging can help you get a better rate so that you don’t pay more than you need to. Likewise, if the value of your property has increased, you may be able to remortgage to a lower LTV. This will give you access to more deals, allowing you to choose between more flexible terms and competitive rates.

There are times when remortgaging may be a necessity for you. Your lifestyle may have had a drastic change, such as having a big shift in your income or starting a family. Remortgaging allows you to find a deal that’s better suited to your new situation or borrow more if you need to.

It’s a good idea to keep an eye on the latest deals offered by lenders throughout your mortgage term. However, you need to consider the fees for remortgaging as well as a possible ERC, not just the interest rate. You need to ensure that you’re making the savings you want to and, if you’re borrowing more or paying higher amounts over a shorter term, that you can afford the higher repayments both now and in the future.

What to do if remortgaging isn’t a possibility

If your financial situation has declined since you took out your original mortgage, you may find it hard to pass the affordability checks for a remortgage. If you’re struggling with your current mortgage payments and are having difficulty being accepted for a remortgage, short-term help is available via the Mortgage Charter. For example, you can temporarily reduce your monthly payments by switching to an interest-only option for 6 months or extending your term for 6 months. Our mortgage brokers can discuss the different options with you to help you make the best decision for your current situation.

If your credit score has decreased, this may affect your ability to secure a remortgage. Check your credit score before applying and, if necessary, take steps to improve it first. Our mortgage brokers can guide you on how to do this.

Should remortgaging not be the best solution for you, speak with your current lender about switching to a new deal with them. This is called a product transfer. The process is usually quicker than a remortgage as the lender already has all of your information and a new valuation isn’t usually required unless you want to borrow more. They also don’t usually need to check your affordability or credit score again unless you’re borrowing more or increasing your mortgage term.

Let us help you find the right remortgage deal

Our highly experienced mortgage brokers in Kent, London and Edinburgh have helped many satisfied customers with their remortgaging needs. Simply get in touch with us on 01322 907 000 to discuss your requirements. Our mortgage advisers can then assess your circumstances and compare the remortgage products available to find the best financial solution for you, whether you’re looking for a better rate, more flexible terms or to borrow more.

At Trinity Finance, we provide you with straightforward, impartial advice and streamline the process, ensuring it runs smoothly from start to finish for a stress-free remortgaging experience. If you’re unable to contact us by phone, just email us at info@trinityfinance.co.uk or send an enquiry via our contact form. One of our expert brokers will reply to you as quickly as possible with more information about the remortgaging options available.