Your Complete Guide to Remortgages

Looking to remortgage? Get the info you need below then speak to us for expert mortgage advice.

Looking to remortgage for a better deal, cut costs or raise cash? Not sure whether to stick with your current provider or switch to another lender?

Our simple guide to remortgages will help get you started.

Read Through or Jump to What's Relevant to You

What is a Remortgage?

A remortgage is a mortgage raised against a property you already own.

As a result, this can be either your main home, second property or investment property (buy to let). You can either have an existing mortgage or own the property outright (unencumbered).

Why should I remortgage?

There are many reasons to remortgage, but probably the most common are –

Switching to a better rate

There are basically 2 options –

  1. Switch mortgages with the existing lender – Also know as a product transfer, this is an easier process, but may not be the best deal. If you want more money, you may need to take out a further advance or secured loan / 2nd mortgage
  2. Change mortgage lender – The solicitor/conveyancer working on your behalf will repay your existing mortgage as part of the legal process. Any surplus money will be sent to you.

Aside of getting the cheapest rate, whether to switch mortgage with your existing lender or remortgage to a different provider also depends on your circumstances.

Thousands of mortgages are available in the market and they are constantly changing. If you’re unsure of which is best for you, get in touch for a FREE, no obligation chat with one of our expert advisers who will take a look at the whole of the market for you.

Paying Off Debt

Officially known as debt consolidation, you can remortgage to repay debt, but you need to consider this very carefully.

It may lower your monthly payments, but it’s highly likely to increase the total amount you pay back.

We’d recommend you explore all other options and do a full comparison of the total costs before committing to anything.

As independent advisers, we work entirely on your behalf and will be able to tell you whether this is the right approach for you.

Raising Money for Other Purposes

There are many other reasons for raising funds such as –

  • An existing product coming to an end
  • An existing mortgage coming to an end
  • Home improvements
  • Divorce or separation
  • Transfer of equity
  • Holidays
  • New Cars
  • Gifting money to family
  • Investment into a business
  • Buying a holiday home
  • Buying a buy to let investment property

Each lender has a different approach on what is an acceptable purpose to remortgage.

They will also have different requirements when it comes to how much equity is required for each purpose (the loan to value limits).

When should I remortgage?

There is no set time, but it’s important to consider any early repayment charges that may apply to your existing mortgage. You also want to avoid paying a standard variable rate wherever possible as this is likely to be costly when compared to other deals available.

When to Remortgage to Another Lender

To switch to another lender, you can start the remortgage process even if you have early repayment charges on your existing mortgage. Just don’t complete on the new mortgage until the penalties on the existing mortgage have expired (assuming you want to avoid paying them).

Although it’s a good idea to start in advance, you need to check with the new lender how long their mortgage offers are valid for. This will usually be 3 or 6 months. This is important because there is no point getting an offer 4 months early if it’s only valid for 3 months as it will expire by the time you need it.

When to Transfer Products with an Existing Lender

For product transfers with an existing lender these can be done very quickly. However, it’s still best to look at your options way in advance to avoid doing this just because you’ve left it to the last minute. Some lenders will waive early repayment charges for existing customers if you are within a certain time of your existing rate expiring (usually 3-4 months max.).

Timing and careful planning is important if you want to get the best deal while avoid potentially costly mistakes.

Feel free to get in touch for a FREE, no obligation chat if you’d like to discuss the best way to approach this.

How much can I borrow?

Affordability

Most lenders have affordability calculators online. These are useful tools, but only as good as the information provided. For example, some lenders accept bonus income, some don’t. Some will take 100% of overtime, some won’t. You need to know this type of information.

Also, look at your supporting documents (payslips, bank statements, accounts etc). Is there anything on there that an underwriter may consider when calculating how much you can borrow? Examples include pension contributions, child-care vouchers and salary sacrifice.

Credit Search / Credit Score

Getting a credit report is also advised. You can get your credit report for free and they are a vital tool for mortgage planning as this is what lenders use to asses you.

Don’t lose heart if you have a low credit score. Lenders usually have their own credit scoring systems and some lenders don’t credit score at all.

This is where you might need advice from an expert. Get in touch if you’d like a free, no obligation chat about your options.

Loan to Value (LTV) Limits

Depending on your plans, your loan to value may be restricted. It’s common for lenders to have different limits depending on the purpose for the remortgage (i.e. debt consolidation, home improvements etc).

It is also likely that there will be restrictions if you are looking for an interest only remortgage.

Each lender will view each set of circumstances differently. To get an idea of how much you can borrow, get in touch for a FREE, no obligation chat with one of our expert advisers.

What can I use the money for?

As mentioned above, there are many purposes for remortgaging such as –

  • Repay debt (Debt Consolidation)
  • Get a cheaper rate
  • An existing product coming to an end
  • An existing mortgage coming to an end
  • Home improvements
  • Divorce or separation
  • Transfer of equity
  • Holidays
  • New Cars
  • Gifting money to family
  • Investment into a business
  • Buying a holiday home
  • Buying a buy to let investment property

There are a handful of lenders who will consider remortgaging for business purposes, repaying a tax bill or gambling debts.

For these purposes it is likely you would be restricted on your options and may have to pay a higher interest rate. Contact us for a FREE, no obligation chat to discuss your options.

How long does it take to remortgage?

This depends on what route you take.

Remortgages vary depending on the lender and the solicitor / conveyancer. From application to completion, the best-case scenario can be around 4 – 6 weeks, but on average is 6 – 10 weeks.

Product transfers are usually quicker and can be instant as no additional underwriting, valuation or legal work required is usually required.

If further advances or secured loans are taken, these usually take on average around 2-4 weeks to arrange.

Whichever route you take, we would recommend starting the process around 3 – 6 months before the target completion date. This gives you plenty of time to plan properly.

How do I Find the Best Remortgage Deal?

Firstly, you need to know what is the best type of mortgage for you.

When advising people, we go through 6 key decisions (budget, product types, term, repayment method, insurance, providers).

When you have this information, there are many ways to find mortgage deals such as –

  • Talk to an independent mortgage adviser
  • Look at comparison websites
  • Speak to your bank / building society

When you have decided on the best product, you can request an agreement in principle with the lender.

WARNING

Each lender has their own criteria and way of assessing you.

This is where preparation is vital. Nowadays, finding a cheap rate is easy. Knowing whether you actually qualify for it based on your circumstances is the challenge.

Whatever happens, you need to assess your documentation and requirements against the lender’s affordability and criteria BEFORE requesting an agreement in principle.

Failure to do so may result in a decline, affect your credit score, waste your time and delay the process.

It’s also vitally important to only borrow what YOU feel you can comfortably afford, both now and in the future.

We deal with lenders from across the market and being independent we work entirely on your behalf. Get in touch to speak to one of our experts for a FREE chat with no obligation.

Should I Stay with my Existing Mortgage Lender or Switch?

Assuming you know what type of mortgage you want, whether to stick or switch really depends on your circumstances, how much time you have and the hassle factor.

Circumstances

Depending on your circumstances, sometimes, you may not have a choice. For example, if you’ve just gone self employed or part time, it could be that you might not meet the criteria to move your mortgage elsewhere. On the other hand, if you’re looking to borrow more money, your existing lender may not be happy to lend it to you so you may have to look elsewhere.

Timing

In terms of timing, you really need to allow a minimum of 2 months to switch lenders (ideally 3+). If you’ve left it to the last minute, you may find yourself having to stay with your existing lender to avoid higher monthly payments on the Standard Variable Rate (SVR).

Savings vs Hassle

Let’s assume your circumstances and timing allow you to consider all options. You need to compare what your existing lender will offer you to the rest of the market to make sure you get the best deal.

At this point, sometimes people also consider the hassle factor. How much of a saving is it worth to you to switch lenders? Everybody’s answer is different.

To compare products from the whole of the market, get in touch for a FREE, no obligation chat with on of our independent advisers.

How do I Apply for a Remortgage?

Assuming you’ve done your research and been agreed in principle, you can move forward with an application.

Applications are mostly done online and will usually be carried out on your behalf if you use an independent mortgage adviser or an adviser at a bank / building society.

KEY POINT – Before applying, it’s a good idea to get a redemption statement from your existing lender (if applicable) to show exactly what you owe. This will avoid potential shortfalls on completion which can create issues at the last minute.

On receipt of your application, the lender will carry out an initial assessment (underwriting). At this point they may ask for further information. They will also arrange a valuation.

For remortgage applications, it is becoming more common place for valuations (and in some cases underwriting) to be automated which can save time.

Assuming that they are happy with underwriting and the valuation, they will issue a formal mortgage offer.

A copy of the offer will be sent to your appointed solicitor / conveyancer. Once the legal work has been done, they will set a completion date.

Can I get an Interest Only Remortgage?

Interest only is available with remortgages, but each lender has its own criteria that need to be met.

There are usually requirements around loan to value, minimum equity, minimum income and a suitable repayment vehicle.

Do I need a Deposit to Remortgage?

No. Unlike with purchases, you will not need a deposit for a remortgage.

However, you will need equity in your property. The more equity you have, the more options you have and the cheaper your product will be.

How much equity do I need to Remortgage?

This depends on what you are looking to do.

There are some lenders who have offered remortgages up to 90% loan to value, but these will be very restrictive around acceptable purposes for remortgaging.

Usually, there are maximum loan to value limits for certain types of loan purpose and these vary from lender to lender. For example, it’s common for lenders to restrict limits for debt consolidation, but be more favourable for other purposes such as home improvements.

What if I’ve been Declined for a Remortgage?

The first thing you need to do is try and find out why.

The most common reasons will be –

  • Not meeting the lender’s criteria
  • Having an issue on your credit search
  • Not having a good enough credit score

Criteria

If it’s a criteria point, the lender should be able to tell you the problem (for example affordability, not employed or self employed long enough etc).

Credit Search / Credit Score

If it’s a credit search or credit score problem, they may or may not be able to tell you why. If not, this will be because they either don’t know (computer says no) or they can’t due to data protection (GDPR).

This is where you will need to go through your credit search (you can get a copy for free) and supporting documents to see if you can see any reason why there might be an issue.

You can then look to try and find a lender who will accept the circumstances.

Depending on the situation, it may be best to stay with your existing lender because they shouldn’t need to carry out a search / score. If you need further funds, maybe a further advance or a second mortgage / secured loan would be worth considering (this is where independent advice may be a good idea).

The good news is that that there are a number of specialist lenders who can assist with all types of situations.

WARNING

DO NOT request numerous agreements in principle with different lenders. This may affect your credit score and ultimately impact your ability to get a mortgage. Be as sure as you can be that the lender will accept you based on the information on your circumstances, credit score and documents before requesting an agreement in principle.

Alternatively get in touch with us. Our expert advisers have experience with lenders from across the whole of the market and will know what to look at if you’ve been declined elsewhere.

What’s the best product to take for a remortgage?

This really depends on your individual plans and circumstances.

When we help clients, we focus on 6 key decisions –

  1. Budget and costs
  2. Product and features
  3. Term
  4. Repayment method
  5. Financial Protection (Insurance)
  6. Providers

Once you have the answers to points 1-5 and properly assessed your supporting documents, you can move on to point 6 – find the best providers.

If you need any help going through the 6 key decisions or assessing your documents, get in touch for a FREE, no obligation chat with one of our expert advisers.

What if I have early repayment charges on my existing mortgage?

If you have early repayment charges (also known as redemption penalties or being ‘tied in’), usually you would look to avoid paying these.

There are occasions where it makes financial sense to repay early repayment charges (if you would save money by doing so). Other times it can be unavoidable (i.e. divorce, separation etc).

However, assuming you want to avoid paying them, the aim is to limit the time between your early repayment charges expiring and moving on to the lender’s standard variable rate.

Ideally, completion would be set for the day after your early repayment charges expire, but sometimes this is not possible (i.e. if the day falls on a weekend).

If you are looking at a product transfer, some lenders waive early repayment charges if you are within a certain time of your existing product expiring (usually 3-4 months max.).

The smart thing to do is start planning early. Ideally no later than 3 months, but there’s no harm in making enquiries around 6 months before your existing deal ends. This makes sure everything is ready in plenty of time.

If you’d like to discuss remortgage planning, get in touch and speak to one of our independent advisers who will be happy to help.

Can I remortgage with bad credit or a low credit score?

The good news is that there are specialist lenders who will consider mortgages for people with bad credit or low credit scores.

These can include people with missed payments, defaults, County Court Judgements (CCJ’s), Debt Management Plans, Involuntary Arrangements (IVAs) and Bankruptcy.

The best thing to do is get a copy of your credit report. You can then either find out exactly what the issue is and go from there.

If you need help with this, get in touch for a FREE, no obligation chat with one of our expert advisers.

What is a transfer of equity remortgage?

A transfer of equity occurs when somebody is transferring ownership of a property. Where there is a mortgage on the property, this usually means that somebody is either being added to, or removed from the mortgage. A common example for adding a borrower would be marriage or cohabiting, whereas for removing a borrower, it could be divorce or separation.

It’s common for people to carry out a transfer of equity at the same time as remortgaging as legal work has to be carried anyway. However, a transfer of equity can happen at an time (subject to acceptance from the existing mortgage lender if applicable).

It’s not a very complicated legal process and the legal costs are relatively inexpensive. The only thing to look out for is that stamp duty may be payable depending on the circumstances. This needs to be checked to avoid any unwanted surprises later in the process.

To discuss the process, costs or potential stamp duty liability, get in touch and we can look into this for you.

What does unencumbered mean?

An unencumbered property is simply a property without any debt or financial liability against it. Essentially, it’s mortgage free. This can be either because a mortgage has been repaid or the property was bought without a mortgage (cash purchase).

What happens if I have a shortfall on completion?

Sometimes a shortfall of funds occurs on completion. This means that there isn’t enough to either repay the existing lender or a reduced amount of what you were expecting if raising money.

This is usually because the mortgage amount outstanding with the existing lender is more then expected, there may be unexpected early repayment charges or the lender has added interest on to the balance for that month.

The best way to avoid this is to get a redemption statement from the existing lender right at the beginning of the process. This will give you the exact amount outstanding and include details of any early repayment charges.

If you don’t prepare properly and there is a shortfall on completion, it’s likely you won’t find out until late in the process (near to completion). At this point, you will be expected to be able to make provisions otherwise completion will be delayed.

Will I make two payments in the same month when I remortgage?

When redeeming (paying off) an existing mortgage, the existing lender will include any interest payable up until the day of completion (which is correct).

However, if the usual direct debt payment is due very close to this date (either just before or after), it’s likely that your usual monthly payment will still be taken. This probably means that you have overpaid and are due a refund.

Lenders will usually make the refund payment within 14 days (you need to check this with them). In order to avoid it, you will need to check with the existing lender prior to completion to see if you can agree a suitable solution.

Ultimately, where a person makes two mortgage payments in the same month, it usually works out correctly due to refunds being made (still check your completion statements though).

However, even if this is the case, some people do not have adequate funds to make two mortgage payments in the same month or at least need to plan properly for it.

The best thing to do is check with both lenders before completion around the final payment (existing lender) and the first payment (new lender).

Speak To An Easy Street Expert

Pop your details in below and one of our expert mortgage advisers will call you straight back...

Talk to a Mortgage Expert Today

Contact us to arrange a free consultation.
Speak To An Easy Street Expert