In this helpful guide we examine what a remortgage is, how a remortgage works and if it’s right for you.
What is a remortgage?
A remortgage is the process of moving your home’s existing mortgage to a new lender. Remortgaging could help you save money, but you need to weigh up the fees involved with the potential savings you could make. Here’s how it works:
Why do people remortgage?
People remortgage for many different reasons, including:
Finding a better deal elsewhere – you might be on a standard variable rate (SVR) and want to move to a fixed-term rate.
Coming to the end of a fixed-term deal on your current mortgage and wanting to lock in a lower rate with a new lender.
The loan-to-value on the home is lower (as more of the mortgage has been repaid).
Wanting to get ahead of a rise in interest rates, which would affect mortgage rates.
How a remortgage could help you save
One of the big reasons people remortgage is to save money on their monthly payments. If you’re on a standard variable rate that is higher than the fixed-rate deals currently available, you could save by switching – either to a fixed-rate mortgage or one that ‘tracks’ the Bank of England’s base rate.
If your home has gone up in value and you’ve paid off enough of your mortgage to give you a lower loan-to-value, it means you own more of your home and have less to pay off. Remortgaging could result in lower monthly mortgage payments because you’re paying off less of a loan amount (and in turn, less interest on it too).
How long does the remortgage application take?
The process can take between four to eight weeks from the time you apply so it’s good to start planning early. If you’re coming to the end of a fixed-rate or tracker term, your lender should tell you that your mortgage will move onto their standard variable rate. This could be an ideal time to move if you find a better deal elsewhere, or you may even find an attractive deal with the same lender and go through a ‘product transfer’.
How does remortgaging work?
How much does a remortgage cost?
Existing lender fees
Your existing lender could charge you a fee if you’re leaving them early into a fixed period in your mortgage. This is known as an ‘early repayment charge’ and could be in the range of 1% to 5% of your outstanding mortgage balance. They will also charge you an ‘exit’ fee of around £50 to £100 to cover their administration costs.
New lender fees
Your new lender could charge you a range of fees, so before you commit it’s important to check what you will pay. This will help you calculate whether a move is financially beneficial overall. Their fees could include;
Application fee to set up your new mortgage. Could also be called an ‘arrangement’, ‘product’ or ‘booking’ fee. This could be around £1,000.
Valuation and conveyancing fees. Some providers won’t charge for these, but it’s worth checking if you are moving to a new lender.
Solicitor’s fee covering the legal paperwork to do with managing the transfer of your mortgage.
Is remortgaging right for you?
Is a remortgage right for you?
Whether or not you remortgage all depends on your situation and the type of mortgage plan you’re currently on. You may want a mortgage that lets you make overpayments, or you could be coming to the end of your current deal’s fixed term and think the lender’s SVR will be too high. One of the most important things you can do before you decide is gather your current mortgage paperwork, look at the fees and get some expert advice on your next steps.
What about product transfers?
If your mortgage is coming to its maturity date but you’d prefer to stay with your current lender, you could consider a product transfer. Switching to a new mortgage product with the same lender could save you money and time.
Know you know how a remortgage works it’s time to consider if a remortgage is right for you. Speak to an advisor from local award-winning mortgage brokers St Barts Finance to discuss your options. Click the link below to book an appointment straight into one of their adviser’s diaries.
How Does A Remortgage Work?
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Want To Know The Sale or Letting Value Of Your Property?
Book your complimentary sales or rental property valuation now.
James has lived in the Poole & Bournemouth area for over 25 years and has an extensive knowledge of the conurbation. He started his career in the property industry in 2015 following his graduation from the University of Kent, Canterbury and has worked in a variety of different roles in this time. Formerly a Sales Manager, he brings an in-depth understanding of the industry to his current role as Marketing Manager at Martin & Co.
