Important information – Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up with repayments on your mortgage. Please note that the Financial Conduct Authority (FCA) does not regulate most buy to let mortgages.

If you already have a mortgage in place for your home or investment property, it may be worth looking to see if you can remortgage to get a better deal. When remortgaging, you are simply replacing your existing mortgage with a new one either with the same or a different lender. This can be done for the same amount of your current mortgage, or a different amount (either higher or lower) subject to certain criteria being met.

There are numerous reasons as to why you might consider remortgaging, and finding a good deal could provide real benefits. If you are currently on a lender’s standard variable rate (SVR), you could potentially save thousands by moving on to a cheaper interest rate.

When you take out a remortgage deal, you start a new secured loan agreement with the new lender, and they in turn pay off the original mortgage. Doing this can benefit you in multiple ways potentially and lenders are satisfied in offering this service as it allows them to bring on board new long-lasting customers.

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Guide to Remortgaging

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Mortgage key features

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These mortgage products are suitable for existing homeowners looking to change their mortgage product or provider, for reasons which include:

  • To move towards a more competitive rate after building up equity in the property;
  • Have experienced a sudden increase in wealth and wish to overpay on the mortgage without penalty;
  • You have come to the end of a fixed-rate deal and wish to avoid moving onto the lender’s standard variable rate (SVR)

You may consider remortgaging if:

You want to save money

You want to save money

Switching to a cheaper interest rate allows you to move away from the standard variable rate (SVR) which are often uncompetitive when compared with the plethora of new deals available nowadays.

Your circumstances have changed

Your circumstances have changed

Flexibility is a key benefit to any homeowner. If you wish to take future payment holidays, overpay without penalty or offset the mortgage with other savings you have, remortgaging can help you achieve this.

You want to switch repayment method

You want to switch repayment method

Interest only was previously mainstream through the use of endowment mortgages. However affordability issues means many more people are switching to repayment products to benefit long-term.

You want to borrow more

You want to borrow more

Known as a further advance, borrowing more money with your existing lender may not be an option, or may involve paying interest rates that are higher than elsewhere.

You want to consolidate debts

You want to consolidate debts

This should be looked at with absolute care as it involves paying more in interest over the long-term if no over-payments made. However, it is an option for those who feel overwhelmed with mounting debts.

You want to switch repayment method

You want to switch repayment method

Interest only was previously mainstream through the use of endowment mortgages. However affordability issues means many more people are switching to repayment products to benefit long-term.

How lenders assess your application

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Calculating equity in the property

To understand how much you will be able to borrow, it is worth discovering how much equity you have in the property. Equity represents the net amount of money you will receive if you sold your property and paid off any secured loans outstanding.

Therefore in order to calculate this value, subtract your mortgage value from the sale price and add any capital growth you have benefited from since you initially purchased the property.

Mortgage calculators

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Benefits of our mortgage advice service

Whole of market

Our panel of lenders include both high street institutions and specialist companies that can offer bespoke mortgage products specific to your circumstances.

Looking ahead

We take a long-term view to organising your mortgage, taking into account your future goals to find a solution that works both now and going forward.

Save you time

By understanding the general criteria of different lenders, we work to focus our search on products that offer the best opportunities for acceptance and are cost-effective.

Independent

As a company, we are privately owned and therefore are not tied to any insurance company. We work for you rather than someone else to find you the best deal.

Aftercare support

We know that a mortgage is a large commitment and continue to remain in contact with you to ensure your selected product remains suitable over the term of the loan.

Save you money

Some of our lenders only accept applications from advised clients, but can offer market leading rates. This can result in a considerable saving over the term of the loan.

Some key things to consider

Credit score

Managing your credit score takes time and should be done months in advance. Not being proactive could lead to you missing out on the best deals. With lenders receiving so many mortgage applications, it is becoming ever more important to ensure a strong score is recorded, and missed payments are not a common occurrence.

Equity available

You will need to borrow less than 80% of your property’s value in order to obtain a decent remortgage deal. The lower the loan to value (LTV), the less risk that is taken by the lender and therefore the better the interest rate that is charged. Market leading remortgage deals currently require borrowers to have a deposit of 40%.

Affordability

New affordability checks are necessary to be conducted by the lender as this is still categorised as a new mortgage application. These additional checks came into force in April 2014, meaning your current situation will be stress tested against an interest rate rise of 3% on top of the current rate the deal is offering.

Size of mortgage

The arrangement fee for a new remortgage deal is a fixed cost irrespective of the size of the loan being applied for. Therefore switching may not be suitable if you only have a relatively small mortgage left outstanding, as the fixed cost is disproportionate to any savings or benefits that may be had. If you have a mortgage of £50,000 or less, it may not be cost effective.

Available funds

If flexibility is the aim, offset mortgages can allow you to deposit other savings you may have into a current account in order to reduce the mortgage balance. You will not earn interest on these savings, but the interest charged on the mortgage is higher than on deposits, meaning you can still make savings whilst having full access to funds when needed.

Fees charged

Various fee structures are in place in an attempt to deter mortgage holders from switching. Commonly these include early repayment charges (ERCs) and deed transfer fees which erode the benefits of potentially switching. It is worthwhile reading the small print of your mortgage documents in order to fully understand any charges levied beforehand to avoid any surprises.

Frequently asked questions

When should I not remortgage?

There are numerous situations where remortgaging is not an ideal solution. Examples include:

  • You are already on a competitive mortgage rate deal.
  • You have not built up enough equity in the property currently.
  • High early repayment charges (ERCs) apply making the remortgage not viable.

To find out more information, visit our Guide to Remortgaging.

Are there costs involved with remortgaging?

A range of charges may apply should you decide to remortgage. These include early repayment charges (ERCs), exit penalties and deed transfer fees payable to your existing lender in an effort to minimise any incentive to switch providers. A fee may also be charged for obtaining mortgage advice.

How much can I borrow?

This depends on your personal circumstances and includes factors relating to the amount of equity you already have in the property and your financial status in regards to credit scores. A remortgage is treated as a new application so affordability checks are required.

Where can I obtain a remortgage deal from?

Remortgaging is a common practice with most financial institutions offering this service. It is in their interest to obtain custom from other providers so it is often welcomed with specific perks added which may include a contribution to any exit fees that are payable to your existing lender.

When should I consider remortgaging?

There are numerous reasons why you may consider remortgaging including the following:

  • You are coming to the end of a fixed-rate deal and wish to avoid paying the unattractive standard variable rate (SVR).
  • You want to release equity from a property.
  • You believe you can obtain a better interest rate on your mortgage.

For a more detailed discussion of the above points and more, visit our article on Guide to Remortgaging.

How does a remortgage work?

A remortgage involves switching loan deals by changing to another product or provider. The process involves repaying an existing loan by taking out a new one. There are a variety of reasons why this process remains popular amid homeowners.

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