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Getting started with your home remortgage

A remortgage is when you refinance your existing home with a new lender, usually at the end of your initial rate period. Depending on the rates available at the time, you may be able to save a significant amount of money by remortgaging onto a cheaper deal. 

If you haven’t arranged your remortgage in time, you will automatically revert onto your lender’s Standard Variable Rate (SVR) once your initial rate period has ended. Lender SVRs are generally much more expensive than the rates available on the market. As such, it’s always worth exploring your remortgage options in advance to avoid seeing significant increases to your monthly repayments. 

Is it worth remortgaging? 

With lender SVRs much higher than other mortgage products available on the market, it’s important to explore other rates you could access to see if you could be saving. Your broker can calculate what your monthly repayments would be on a new mortgage rate compared to sitting on your lender’s SVR out of ease. 

When should I be looking to remortgage? 

The earlier you can start exploring your remortgage options, the better. Most lenders will let you secure a new mortgage rate up to six months in advance, meaning you can take advantage of today’s rates and mitigate any unexpected mortgage pricing increases. If mortgage rates go down before you complete on your new product, some lenders will still allow you to switch to one of their cheaper products. Either way, you’ll have better financial security and confidence in your new mortgage product by acting quickly. 

What types of products can you remortgage onto? 

There are thousands of different mortgage rates on the market to choose from, which is why dealing with one of our experienced and professional brokers gives you the best chance of finding the right deal for you. 

The types of rates that are available to you can be split into two categories: fixes or variable rates. 

Fixed rates

Fixed rate mortgages are the most popular option for homeowners as they give you financial security over a set period of time. A fixed rate mortgage means your monthly repayments are set for the length of the initial rate period. 

For example, if you secured a 5-year fixed rate, that means your mortgage repayments will remain the same over the next 5 years. 

Generally speaking, borrowers will choose to fix for 2, or 5 years, however, in some cases, homeowners will choose a 10-year fixed rate.  

The main benefit of a fixed-rate is the financial certainty, as you know exactly what your mortgage will cost for the length of the initial rate term, and have the security of knowing they won’t increase.

You can calculate your monthly mortgage repayments using our calculator here.

There are some drawbacks to consider, the main one being that, should interest rates go down, you will not be able to take advantage of cheaper mortgage rate pricing without paying the ERC and remortgaging, or switching products. 

Variable rates 

As the name suggests, variable mortgage rates mean your monthly repayments can move up and down on a monthly basis. Whilst it can vary, these changes in your repayments are largely down to UK economic activity. Variable rates can be split into a number of different categories: 

Tracker Rates 

Tracker rates simply ‘track’ a specified economic indicator, which is typically the Bank of England Base Rate (BBR). This means you mortgage rate will go up or down in line with any movement in BBR. 

For example, you may secure a tracker rate at Base Rate + 1.50%. As such, if the Base Rate was at 5.25%, you would pay interest at 6.75%. 

If the Bank of England increase their rates, then you will see your monthly repayments rise in line with the increase. This means if BBR rises significantly, you could face substantial increases to your monthly repayments. However, many borrowers opt for a tracker rate when they expect Base Rate to decrease, as if BBR falls, so do your monthly mortgage payments.

Whilst some trackers only last a couple years, the vast majority will run for the full term of your loan. As such, ERCs will vary with tracker rates, so speak to one of our expert brokers to see what these are on your mortgage. 

Discounted Rates

These mortgage products typically offer a discount on either the Base Rate or a Lender’s Standard Variable Rate (SVR). The discount lasts for a fixed period of time, which is generally 2 to 3 years. 

These rates are written as, for example, Discounted at 5.50% (SVR – 1.50%). 

Here, the rate you will pay is 5.50%, which is a discount of 1.50% off the lender’s SVR. 

The benefits of discounted rates are that they can be much cheaper than other rates, and you may see your monthly repayments drop with market changes. However, as with other variable rates, the main drawback is the financially uncertainty. Additionally, even if the UK money markets see pricing drops, if your rate is a discount off your lender’s SVR, it’s down to your lender to decide to decrease their pricing. 

To discuss which type of mortgage rate is best for you, speak to our team of expert brokers. 

What fees will I need to pay

As with your property purchase, there are a number of fees that you will need to factor into your overall remortgage costs. 

Lender Arrangement Fee 

The lender arrangement fee is what the lender will charge to set up the mortgage for you. How much the lender charges will vary depending on the provider and the product, but it will either be set as a percentage of the loan amount or as a fixed fee. 

For example, your remortgage product may have an arrangement fee of 2% of the loan. For a £200,000 mortgage, that equates to £4,000. 

Sometimes, lenders will offer mortgage products with no arrangement fees as an incentive for borrowers looking to save money. This will likely mean the mortgage interest rate is higher, but your broker will calculate whether this is the most cost-effective option for you. Arrangement fees can be a hefty charge in your remortgage process, so it’s important to factor this in when you’re approaching your remortgage. 

Many lenders will allow you to add this fee to the loan instead of having to pay it in full on completion. This can be a good way of saving money in the short-term, but remember, this increases your overall borrowing amount, and the interest charged on the fee will mean you repay more over the life of the loan.  

Valuation Fees

A valuation fee is what the lender will charge you to cover the costs of their property survey. This survey reassures the lender that the property value is accurate and that it’s suitable security for their mortgage. Lenders will be looking to make sure that, in the unfortunate event they need to repossess your home, they can resell the property to recover the loan. 

Valuation fees will vary from lender to lender but are generally priced around the £250 mark. Most lenders will offer free valuations as incentives on their remortgage products. 

You can access other surveys, which are more detailed and typically more expensive, such as a Homebuyers report or a full structural report. Your broker will advise you on whether it’s best for you to have one of these valuations, as it could prove invaluable to you depending on the age, condition, location, or type of property you own. 

Legal Fees

The legal fees will cover the costs of the conveyancing for your remortgage. Different solicitors will charge varying amounts for the legal work required on your remortgage, so it’s worth shopping around. It’s also important to remember that not all solicitors are on every lender’s panel. If you don’t have a solicitor already, your expert broker can help you find one. 

How to remortgage if you’re self-employed

It’s a common misconception that remortgaging as a self-employed applicant is more difficult. Lenders are very comfortable with offering to self-employed borrowers; you just need to make sure you have all the necessary documents on hand when submitting your mortgage application. Of course, one of our expert brokers will help you collate this, but you will typically need to include:

  • SA302 form – This should account for the last two years. You can substitute an SA302 with an HMRC tax overview.
  • Profits/dividends account records – Documentation supporting retained profits by the business, plus dividends you may have received. Lenders typically need two years’ worth to verify cashflow and other factors.
  • Business bank statements – Ideally you should provide two to three years of business accounts, and these should be signed off by a chartered or certified account. 

Frequently asked remortgage questions…

Can I take money out of the property when I remortgage?

Yes. Many homeowners choose to release equity, or ‘capital raise’, from their property when they come to remortgage. This could be to undertake home improvements to the property, to use as a deposit for a second home or BTL property, or even to help children with their deposits on their first home purchase. It’s worth discussing your plans with one of our expert brokers to learn what your options are and what your lender will be happy with before making any property finance decisions. 

Why should I remortgage?

You typically remortgage when your current initial rate period comes to an end to secure a new mortgage product and avoid reverting onto your lender’s SVR. Other reasons you may look to remortgage your home may be due to a change in your financial circumstances or to raise additional funds.

How long will it take to get a remortgage?

Generally speaking, it takes between two to six weeks to get a mortgage offer, but this will depend on your lender and the complexity of your application. Once you’ve received your mortgage offer, the next stage of the process usually takes a further 4 to 6 weeks on average.

What is an Early Repayment Charge (ERC)?

An ERC is a charge from your lender for repaying either all or an excess amount over an agreed limit off your mortgage before a set date. For example, if you choose to remortgage before your initial rate period ends, you may be liable to pay your lender an ERC. These charges vary depending on the mortgage product and the lender, but on a five-year fixed, rates are usually between 1-5%. Lenders will typically price these on a sliding scale, with the ERCs reducing the further you are into your initial rate period. You can find your lender’s ERCs on your mortgage offer, or alternatively, get in touch with our brokers. 

How long should I set the term of the mortgage for?

It’s important to differentiate between the overall term of the mortgage and the initial fixed-rate product term. The overall term of the mortgage may be anywhere from 25 – 40 years when you first take out the loan. The initial product term will typically be a 2, 5 or, in some cases, 10-year product that you will then remortgage from onto a new deal.

If you’re hoping to own the property outright, or have the disposable income and affordability, then you may be looking to keep the full term of the mortgage down. However, if your finances are tight or you want as much disposable income as possible, you may want to consider a longer term. This keeps your repayments as low as possible, however, remember that doing so will increase the total amount of interest you repay, and consequently increase the total cost of borrowing 

Speak to one of our expert brokers to discuss your options.

Can I get a remortgage with a bad credit score?

Having a poor credit score doesn’t mean you won’t be able to get a mortgage. However, more severe credit issues, the types of defaults you’ve had, and how recently you’ve had them may all impact your application. 

Each lender will have their own approach and appetite when it comes to bad credit, with some lenders having specific mortgage product ranges directed to homeowners with poor credit. 

It’s worth noting that a bad credit score could mean that the mortgage interest rates available to you are more expensive. If you have concerns over how your credit score could impact your mortgage application, speak to one of our expert mortgage brokers. 

Talk to an expert

Have all the facts and figures you need to purchase or remortgage your home? Our experts will make the whole process easier for you! Give us a call or choose a convenient time for us to call you. Drop us an email or chat with a human on our live chat.

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