FAQs

It is advisable to start the remortgage process 3-6 months before your current deal ends to avoid automatically being placed on your lender’s standard variable rate (SVR). SVR is the interest rate that is charged once an initial/fixed period comes to an end, monthly payments could change each month depending on the rate.

Firstly, you should check your credit score as the lenders will do this as part of your application and it is a good idea to check this beforehand to get an idea of any potential issues. You can see if there are any changes that you could make to improve your score before applying. Having a good credit score will enable you to access the best advertised rates from lenders.

If possible, hold off applying for any credit just before your mortgage application

Get an estimate of your property’s value – you can either use online tools such as Zoopla or contact your local estate agent to get a valuation. We work with various estate agents in Manchester and Cheshire that offer free valuations.

Collect your required paperwork in advance. You will usually need to provide your last 3 months’ bank statements and payslips as a minimum or 3 years accounts/tax returns if you are self employed. You will also need proof of your current address such as utility bill or council tax bill and photo ID such as passport.

Consider your income and outgoings and think about what you can afford in terms of repayments. You need to ensure you don’t overstretch yourself. Consider the long term impact of these repayments. You might be hoping that an increase in the value of your property will balance out the additional borrowing but please remember that property prices can also fall and potentially leave you in negative equity. It is important to consider whether your finance or lifestyle factors have changed since you initially took out the mortgage.

Compare rates – There are various mortgage calculators available online which will help you to do this. You could also instruct a mortgage adviser or mortgage broker to assist you as they will have access to a range of products across the market with various different lenders.

Equity is the portion of your home that you own i.e. the difference between how much you have left on your loan and the current market value. If you’ve owned your house for a while you have probably seen a rise in the value and paid off some of the mortgage too meaning you have a potentially substantial amount of equity available.

There are many reasons why you might want to remortgage to release equity. You may want to do this in order to fund home improvements and ultimately add value to the property. If you have carried out significant home developments or renovations and want to release the equity gained from the increase in value, you can apply for a remortgage to do this but expect the lender to scrutinise any application, requesting documentation and they may also want to carry out their own valuation before making a decision.

This could be a cheaper way to pay for your home improvements or renovations when interest rates are low compared to a personal loan where interest rates are usually much higher however whether this makes financial sense for you will depend on how much you have paid off on the mortgage and the current value of the property. It is also important to remember that personal loans are often for shorter terms meaning that the debt is paid off more quickly than the mortgage and you could end up paying more in the long term if you remortgage.

You may wish to release equity in the property to clear and consolidate other existing debts. Whilst this can reduce your monthly payments, it is worth noting that you will be paying it off over a longer term as personal loans tend to be shorter in term than mortgages.

Some people want to free up cash to help their children buy their first home or to fund them through university. Equally some people want to use the money to start a new business.

Whatever your reason, it’s worth noting that it is possible that when you remortgage to release equity, your interest rate increases due to you having a higher loan-to-value (LTV). Loan-to-Value (LTV) is essentially the size of your mortgage or loan in relation to the value of the property. It is shown as a percentage. For example, if you have a mortgage offer with an LTV of 80%, your mortgage will be up to 80% of the property value.

You will also need to consider the affordability of taking on a larger loan. This is likely to result in higher monthly repayments or a longer mortgage term and if you fail to keep up with these repayments, you could end up having your house repossessed. If house prices fall, you could find yourself in negative equity if you have taken on a larger loan and no longer have much equity in the property.

Many lenders will not allow you to switch deal until you have had your mortgage for at least 6 months. Exceptions to this are property investors that use expensive short term finance called bridging loans to buy unhabitable properties at auction. Due to the unattractive rates, investors will usually want to renovate and then remortgage as soon as possible to secure a lower rate.

After the initial 6 months, you can remortgage at any time however if you have a fixed term deal then you are more than likely going to incur early repayment charges if you remortgage before the end of the deal.

If you wait longer, you are likely to have more options for new loan deals.

Some lenders will be more willing to offer you a remortgage sooner than others so if this is something you are interested in, it is worth checking with your mortgage adviser or lender as to whether this flexibility is something they can offer you.

Bear in mind that remortgaging won’t always mean there is equity to release in the property. If you took a 90% mortgage and are only 1 year into paying off the loan, you are unlikely to have sufficient equity within the property to release it as lenders will only usually release equity up to 90%. For remortgages the maximum LTV lenders are usually willing to loffer when you release equity is around 75 – 85%.

If you have carried out significant home developments or renovations and want to release the equity gained from the increase in value, you can apply for a remortgage to do this but expect the lender to scrutinise any application, requesting documentation and they may also want to carry out their own valuation before making a decision.

The legal process of remortgaging takes on average between 4-8 weeks if you are changing lenders. It is therefore a good idea to start considering your options and planning your remortgage at least 3-4 months prior to your fixed deal ending.

Remortgaging is a change of mortgage deal on your property. This could mean moving to a different lender or switching deals with your existing lender. Before remortgaging it is important to consider the following points as this will affect what deal will be best for you:

1. Why do you want to remortgage? Is this to save money on your monthly payments, to pay off the loan sooner, to consolidate existing debts or perhaps to release equity in the property.
2. Do you want the certainty of fixed monthly payments or would you prefer a variable rate deal
3. Flexibility – do you want the ability to make overpayments or to move the mortgage to a new property if you move? Do you want to consider special features on the mortgage such as an offset mortgage that allows you to reduce the interest using your savings but reseving the ability to dip back into those savings if needed.
4. Do you want a repayment or interest only deal? Although interest only deals will usually have smaller monthly payments as you are only paying off the interest, you will need a repayment plan as to how you intend to pay off the capital of the mortgage at the end of the term. A common example of this is to sell the property but this is usually used for buy to let properties rather than main residences.

All of the above will influence which product will be best suited to you. The deal with the lowest monthly payments may not be the best fit for you depending on your circumstances and goals. It’s therefore important to consider the bigger picture.

There are some steps that you can take to improve your chances of getting the best remortgage deals:

Compare deals from different lenders – don’t just go with your current lender and the deal they offer you. Use online calculators and comparison sites to see what rates are potentially available. You could also consider using a mortgage adviser or mortgage broker. They will have access to a range of mortgage products from different lenders and will be able to compare these for you. Ensure they are qualified, authorised and regulated by the Financial Conduct Authority and ask what they charge for their services. Some do offer this free of charge but take a fee from the lenders instead.

Reduce your loan to value ratio – each mortgage product has a limit on how much you can borrow in comparison to the current value of your property. This is represented as a percentage and called ‘loan to value’ or ‘LTV’. The lower your LTV, the more deals that are likely to be available to you and you are more likely to obtain

Improve your credit rating – having a good credit score will enable you to access the best advertised rates from lenders.

Consider the fees – administration fees, legal fees and valuation fees on a mortgage deal could end up offsetting a low interest rate so the deal may not be as good as it first appears.

Remortgaging can be a great opportunity to save money on your mortgage repayments.

The best deals available are usually those that have fixed terms and so a discounted rate is offered throughout this fixed term. When this comes to an end, you will move on to the lender’s standard variable rate which follows the Bank of England base rate. This will usually result in you paying a far higher rate than the one you had previously and by remortgaging you may be able to secure a new fixed or tracker rate at a lower interest rate thereby saving you money.

However, there are many factors to consider which will affect whether you are likely to save money by switching mortgage deals.

Firstly, do you your research on the rates available. There are various mortgage calculators available online which will help you to do this. You could also instruct a mortgage adviser or mortgage broker to assist you as they will have access to a range of products across the market with various different lenders.

Secondly, consider the fees that you will incur during the remortgage process and ensure these won’t outweigh the savings that you are going to make by securing a new rate. This is particularly relevant where you are still in a fixed term deal as you are likely to have to pay an early repayment charge if you leave this deal early. This is usually calculated as a percentage of the loan remaining and can be quite considerable for example where there is a large loan outstanding or you are still in the early stages of the fixed term.

Thirdly, consider your future plans. Locking into a 5 year fixed deal might present you with a great saving upfront but if you plan to move house within the next 5 years, this may not be the best option for you overall as you risk having to pay potentially hefty early repayment charges.

You may also be able to save money on your mortgage where your property has increased in value or you have more equity in the property. This is because the loan-to-value changes as you decrease your loan amount. For example, if you took out a £135,000 mortgage on a £150,000 property your loan-to value would be 90%. If 3 years later the property is now worth £195,000 and you have also paid off £20,000 on the loan then your loan-to value would now be 60% and you are likely to be able to get much more competitive rates from lenders.

If you only have a small amount of the loan left to pay then the savings to be made from switching to a different rate may be too small to make it worthwhile.

It is therefore advisable to consider your personal circumstances, future plans and to compare different deals with different lenders before deciding whether remortgaging is the best option for you.

There are a number of different fees and costs to be aware of if you are considering remortgaging and it is important that you are aware what fees will be applicable so that you can work out if it is worth remortgaging or not. Some fees will not apply to you, but knowing what costs may be applicable should give you a rough idea of how much it will cost you to remortgage.

It is important to be aware that you may incur costs for leaving your existing mortgage deal early and so costs are not just associated with your new mortgage deal.

Your existing mortgage lender may apply an early repayment charge to the amount required to repay your existing mortgage and this is something that you would have been made aware of in your mortgage offer. Early repayment charges usually apply to mortgage products that are a fixed rate of interest for a set period of time, typically 2, 3 or 5 years. The early repayment charge is payable if you want to leave the mortgage before the fixed period has expired. The charge is usually a percentage of the outstanding mortgage debt and it often reduces the longer you stay with the product. If you think an early repayment charge will be payable on your existing mortgage, you should speak to your lender to find out exactly how much it will be. If you dint want to pay this fee, you are best to wait to remortgage until after the fixed period of interest has expired.

Some lenders may also charge you a deeds release fee and you can check your original mortgage offer to see if this fee will be payable. A deeds release fee is not charged by all lenders, but if it is charged, it can be anywhere between £50 – £300.

In relation to a new mortgage, you may be charged a product or arrangement fee. Lenders often give you the option to pay the arrangement fee upfront or you can ask for the fee to be added to the mortgage loan. If you choose to add the arrangement fee to the mortgage, you will pay interest on it so it will cost more in the long run (but it does mean you don’t have to pay it straight away if you cannot afford to).

A valuation fee is sometimes payable on a new mortgage, but some lenders do not charge for this as part of a remortgage deal. If the valuation fee is payable by you, it can cost between £200 – 500 depending on the value of the property and it will be payable on application.

Remortgaging does involve legal work and a conveyancing solicitor will need to be appointed to carry out the legal work for your lender and you. A conveyancing solicitor will need to review the title of the property, obtain redemption figures for your existing mortgage to ensure there are sufficient funds to pay this mortgage off on completion of your new mortgage, review and prepare a report for you on your new mortgage offer, send the mortgage deed to you to sign and register the new mortgage at the land registry.

If you have used a mortgage broker, their fee may also be payable by you, there are a lot of brokers who are fee-free so you may want to bear this in mind when you are choosing a mortgage broker.

Lenders can be selective about who they lend to and how much they lend to them and the Financial Conduct Authority requires them to carefully check mortgage affordability to ensure you could afford to pay. To do this, they undertake a mortgage affordability assessment, which considers a number of factors, including your credit records.

When you make an application for a mortgage, lenders will work out a credit score for you. Your credit score helps a lender assess the likelihood of you being able to keep up with your mortgage repayments. It is usually the case that a higher score means that you are seen as a lower risk; the more points you score, the more chance you have of being accepted for a mortgage at better rates.

If you have ‘bad credit’ it means that you have a low credit score. There can be a number of reasons for this, such as missed payments on a loan or not paying bills on time. If you have never taken out any type of credit, you will not have any credit history at all, which can also have a detrimental effect on your ability to get a mortgage.

Having bad credit does not mean that you cannot get a mortgage, but it can make it more difficult to get a mortgage. For example, if you have previously taken out a loan and then you have defaulted on your loan repayments, this could indicate that you will not be able to meet your month mortgage repayments.

There are some lenders that offer certain mortgages that are specifically designed for borrowers with a bad credit history, however these types of mortgage products usually attract much higher rates of interest and fees.

If you have bad credit and this has resulted in you not being accepted for a mortgage, it may be better for you to try and build up your credit score and then reapply at a later date for a mortgage. In doing this, it will improve your chances of getting a mortgage.

It can be really helpful to speak to a mortgage broker who will be able to help you find out what mortgage deals are available and can help you find the product that is best for you and your circumstances.

If you are looking to remortgage, perhaps because you are looking to borrow a bit more, there are lots of online calculators that can help you get a better idea of what amount you will be able to borrow and also how much your monthly payments are likely to be on that amount of borrowing. The results of the online remortgage calculators only act as a general guide and you should get in touch with a mortgage advisor who will be able to tell you exactly how much you will be able to borrow and advise you on what the best deals are based on your individual circumstances.

How much money you can borrow is usually dependent on the following:-

• The value of the property that you are looking to remortgage
• The extent of any other financial commitments that you already have, for example credit cards, hire-purchase agreements, unsecured loans etc
• How may dependents you have
• Your earnings
• Any other sources of income you may have
• Your outgoings, for example your household bills, school fees etc
• Your credit history
• The equity in your property

Lenders can be selective about who they lend to and how much they lend to them and the Financial Conduct Authority requires them to carefully check mortgage affordability to ensure you could afford to pay. To do this, they undertake a mortgage affordability assessment, which considers all of the above.

The consequences of taking out a mortgage that you cannot afford can be very serious and in the worst case scenario a lender can repossess your home; this will mean that you will lose your home and your credit record will be damaged (which is then extremely difficult to repair).

As a general rule of thumb, borrowers can usually borrow four to four and a half times their annual income. If you are taking out a mortgage with another person, your affordability assessment will more than likely be based on your joint annual income.

You can remortgage at any time, but if you are not coming to the end of your fixed or discounted rate term, you are likely to have to pay an early repayment charge. It is for this reason that most people choose to remortgage as they are getting to then end of their fixed rate period. When your fixed rate period comes to an end, your existing mortgage might not be a good deal anymore and so it is always beneficial to review what other mortgage deals are on the market before your fixed rate period comes to an end.

You should allow yourself 4-6 months to review your options, speak to a mortgage advisor and apply for a new mortgage so that your new mortgage can be completed as soon as your fixed rate period comes to an end; this way you will not have to pay an early repayment charge and can move to a better product straight away.

You can usually lock in a new mortgage offer three to six months before your current deal ends and you want the new mortgage to start. You should be aware that you may have to pay an arrangement and/or valuation fee to lock in your new deal (although a lot if deals don’t have these or at least don’t require them to be paid upfront) and if you don’t end up proceeding with the mortgage you may not be entitled to these costs back.

If there is an urgency to complete your remortgage, for example if you don’t want to get put on a variable interest rate, you should speak to a few conveyancing solicitors before instructing them to ensure that they can work to your timescales.

Although there are often a number of benefits to remortgaging, there are also some drawbacks to remortgaging too and these should be considered if you are thinking about remortgaging your home.

Remortgaging may not be the best thing for you to do though if:

• You have a very small mortgage and may be less likely to make a saving if the fees are high; in this case it may be better to stick with your existing mortgage. Some lenders will not lend on borrowing of less than £25000.

• Your early repayment charge is very large and so it may be too expensive to change your mortgage product until your early repayment charge reduces. When you benefit from a fixed rate of interest for a certain period, your lender will apply an early repayment charge to the loan if you want to repay it within this period. Depending on how far into the fixed rate period you are, early repayment charges can be very expensive. The closer to the end of your fixed rate deal that you are, the cheaper the early repayment charge will be.

• The value of your home has dropped, meaning that you may not be able to borrow as much if you remortgage or the rates available to you may not be as competitive.

• You’ve had credit problems since taking out your last mortgage – lenders can be selective about who they lend to and the Financial Conduct Authority requires them to carefully check mortgage affordability to ensure you could afford to pay. When you apply for a new mortgage, the lender will require you to provide a lot of information to them, such as pay slips, detail of other outgoings, credit commitments etc

• You’re already on a very good rate, which may mean that it would be better for you to stay with your current mortgage deal, at least for the time being.

• Stretching your borrowing over a longer period of time increases the overall cost of your debt and so although it may reduce your monthly payments if you switch to a mortgage for a longer term, it may cost you more in the long run.

You should always weigh up the pros and cons or remortgaging and speak to a mortgage broker for advice on what the best deals are for you and your situation.