Your mortgage deal is probably coming to an end and you will be looking out to save money by finding out a new mortgage deal. You may need extra funds either to buy a new property or to do up your existing house to increase its value. Whatever the reason, here is the complete guide that discusses aspects of remortgages from A to Z.
- What is Remortgage?
A remortgage is a process in which you take out a new mortgage on the property that you own to either replace your existing mortgage deal or borrow money against the same property. In simple words, it can be defined as a process of switching from the existing mortgage to a new deal using the same property as collateral. You can remortgage with either the same lender or a new lender.
- Reasons to Remortgage
There are several reasons you will be looking out to remortgage. For instance, your existing mortgage deal is not competitive, you home’s value has gone up a lot, interest rates have increased, or you want to borrow more money. There can be as many reasons as possible, but majority of borrowers remortgage for these three specific reasons:
- To pay lower interest rates - Since the average repayment period of a mortgage is 25 to 30 years, the equity of your home is likely to have increased. The higher equity means the lower loan-to-value that enables you to secure the deal at lower interest rates. Remortgaging will help you repay over a longer period and the size of your monthly repayments will be smaller. If you took out a mortgage for first time buyers a few years back, now is the high time you remortgaged.
- To borrow extra funds - Your lender is likely to deny you lending more money unless you have settled the whole of your mortgage. You can contact a new lender to remortgage to avail lower interest rates and a small repayment size.
- You may want to overpay - You might have had your pay rise or you may have got money inherited. Your current lender might be prohibiting you from overpayment. A remortgage will allow you to get the deal with a lower interest rate, and the size of your loan will decrease.
- Which Remortgage Should I Opt For?
You will get a wide range of both fixed and tracker remortgage deals. Before you switch to a new deal, you must look out for saving money. You will pay fees when you close your existing mortgage deal and when you take out a new mortgage. Calculate the total amount of fees you will pay during remortgage and analyse that it is less than the amount you save by switching to a new deal. You can use popular mortgage calculators like Halifax mortgage calculator and moneysavingsexpert mortgage calculator to compare the cost of your remortgage.
Please note that some remortgages are only available:
- If you have a stellar credit history
- You are not a new borrower to the lender
- You have at least 40% of the deposit
- Types of Remortgage Deals
Following are the remortgage deals available to our customers:
- Fixed mortgages - As the name suggests, your monthly repayments will be the same throughout the term of the deal so you do not have to be worried about fluctuations in the base rate. You will know what you are paying each month.
- Tracker mortgages - These are a type of a variable rate mortgage. The interest rate will not be the same throughout the term of your mortgage as they fluctuate according to the Bank of England Base Rate. For instance, if the Base Rate increases or decreases by 0.4%, your mortgage rate will also increase or decrease by 0.4%.
- Freedom to fix tracker mortgages - It also acts as a tracker mortgage but you have the facility to switch to a fixed rate mortgage without paying off any fees anytime you want to. Please bear in mind fixed rates in the future may not be as competitive as they are today and you have only a single chance to switch.
How to Apply
Applying for a remortgage deal is as simple as taking out mortgage loans with us. You just have to fill out the online application form. Then we will consider your personal circumstances as well as your repayment capacity. The entire procedure will be done in the same way as we did when you applied for a mortgage for moving home.
- Things to Consider Before Applying
- Incomings and outgoings: You need to submit an evidence of your monthly income and your monthly expenses such as utility bills, medical bills, other debt repayments etc. We ask for such documents to consider your affordability.
- Credit checks: Each lender runs a credit check to evaluate the default risk. When you submit the online application form, we run a soft credit check. It does not affect your credit rating because hard inquiries do not show up on your credit report. Full credit check is done when you fill out the full remortgage application form. We recommend you to take a look at your score before applying for the remortgage.
- Affordability: Your income statement and other financial factors are considered to decide on the deal that fits your budget.
- Conveyancing: Under some specific circumstances, you will have to arrange a conveyance solicitor for additional legal work. The solicitor will verify your ID, current mortgage, property, and registry and find out the value of your property and so forth.
- Documents Required
If you finally decided to apply for remortgage, you need a couple of documents to speed up the process:
- Payslips of the last three months
- P60 to prove that you have paid tax
- ID proofs to confirm your identity and address. You can submit passport, bank statements and utility bills
- Mortgage statement to prove that you have been paying repayments of your current mortgage
- Steps to Apply for Remortgage
Follow these five steps to apply for remortgage:
- Value your property: The value of your property would have changed now, so the first step is to know the value of your property. This will help you choose the best mortgage deal at lower interest rates.
- Check your current mortgage: Talk to your lender to know when your mortgage deal ends, whether you are able to remortgage or not. Do not forget to check if your lender will charge any fees for switching to another deal. Your lender may send you a redemption statement to disclose the cost of your mortgage repayment including early repayment charges.
- Affordability check: Use the remortgage calculator to know how much you will be able to borrow. It will give you an estimate of total cost and monthly repayments. Do not ignore the importance of affordability or else you will lose your property.
- Get advice: We provide round the clock customer support. Do not hesitate to talk to our representatives who will let you know about our remortgage details after collecting the details of your financial condition. This will help you know about the best remortgage deal.
- Apply for your remortgage: If you have obtained a successful approval from our representative, you are free to apply for a remortgage deal. During the application procedure, you need to submit documents to prove your affordability and the value of your property will also be calculated before you sign the agreement.
- How Long Does a Remortgage Complete?
Remortgage application procedure does not take a long time with Shine Mortgages. Please arrange all of your documents beforehand when you fill out the application form. It will save your time. The entire procedure is completed within 30 minutes.
Is Remortgage Possible with Bad Credit Score
Bad credit remortgage is also possible like mortgages for bad credit, but you will end up with paying off slightly higher interest rates compared to those with a good credit score. You can choose the deal with fixed and variable interest rate based on your affordability. Make sure, that you will be able to repay your all instalments on time otherwise the lender will possess your property to liquidate it.
If you are planning to remortgage, you should focus on building your credit with following ways:
- Repay all your loans on time.
- Settle your credit card bills within the grace period.
- Take out credit building loans.
- Make sure your credit report does not consist of errors.
- Pay out all your utility bills on the due date.
Advantages of Remortgages
Here are some of the pros of remortgages:
- You will borrow funds at lower interest rates.
- They reduce your loan-to-value.
- You will get a more flexible deal.
- You may consolidate your debts.
We hope that you have found all basic details about remortgage. Shine Mortgages provides competitive remortgage deals to current or new borrowers. Do not wait if you want to remortgage as it can help you save huge money.