Your Guide: Remortgaging

Create are here to make remortgaging as simple as possible for our clients. We’ve created this helpful guide to support your purchase. 

 

If you’re unsure what you’re looking for, talk to one of our specialists.

Feel free to contact us and chat through your requirements.

Speak to an expert about your circumstances and lending needs.

Remortgaging

For many, remortgaging can be a straightforward and simple process, for some however, changing mortgage can be difficult. In any case, having access to the whole of the market makes a real difference. 


Going direct with your current lender can really limit your options. As well as varying rate, there are many different types of remortgage to choose from that suit a whole manner of preferences, so gaining some market

knowledge before you dive in might be a good idea. 


Below is some info to give you a foundation level understanding of what’s out there. 


What is equity? – Equity refers to the amount of the property you own, compared to the amount of property that is mortgaged. For example, a house worth 100k with a 65k mortgage, has 35k of equity.

 

The loan to value (LTV) for this mortgage would therefore be 65%, so you would be eligible for any product advertised as “up to 65% LTV”.
 

How to get the most suitable remortgage deal


The most suitable rates for remortgages at the moment are some of the lowest ever, though some of these can come with some hefty product and application fees.

 

It’s important to not just go for the top of the table ‘headline rate’ and take into account the total cost of the mortgage over the initial period. 

 

Getting the right remortgage rates

If you have clean credit, loads of income, and equity in your property, getting the right remortgage UK rates can be simple and you are usually free to look through the remortgage comparison tables, and apply to any of them you choose.

 Not everyone will be eligible however, as each lender has different criteria on who is and isn’t acceptable – They look at the income you earn including overtime, bonuses, commission, pensions, and benefits; they asses your credit score and payment history; the amount of borrowing you have; the amount of equity in the property; and even the property type.

 

The main factor that determines which is the cheapest remortgage deal for you, is the equity you have in the property.

In simple terms, the more equity you have, the lower the risk to the lender, and the better the rate.

If you want advice on which out of the thousands of mortgages is the right remortgage deal for you, then just make an enquiry and an expert will be in touch..

Remortgage for capital raising

There’s all sorts of reasons why people want to remortgage and borrow additional funds on top of their mortgage.

It may be to raise capital to buy a new property, it may be a remortgage to gift some money to family, a remortgage to pay off debts, a remortgage to put money into a business, a remortgage for a special purchase like a car or bike, or a remortgage to fund a special occasion like a wedding or big holiday.

Whatever the purpose, lenders all have a different opinion. This is why talking to experts who deal with the whole market is important, because although certain lenders may turn you away, others would welcome you with open arms.

Alternatives to remortgaging

There are alternatives to remortgaging. Financial products such as buy to let mortgages, homeowner loans, secured loans and other 2nd charges* can mean lenders assess you in a different way to the way standard 1st charge mortgage lenders will look at you.

 

This means that if you have been declined for a mortgage when you want to borrow more money, there are other options to consider. It may then be possible to get a remortgage if self employed or a remortgage with bad credit.

*Secure loans and second charge mortgages are available by referral to a master broker only.

 

Whatever your background or circumstances, Create the financial future you deserve.

Feel free to contact us and chat through your requirements.

Speak to an expert about your circumstances and lending needs.

Fee free remortgages

Remortgaging in most cases is a lot simpler than buying. As you already have the property there’s no need for the same rigorous legal process, searches, or inspection.

The new lender will want to make sure that the house is sound and worth what you’ve put on the application form (so may only arrange a ‘drive-by’ or even online valuation), but then it’s just a case of switching the charge held on the property from one lender to the next.

Because of this, and because they want the business, many lenders offer a free service to switch over, including a free valuation, free legal services, and often no product fees.

Each case is different however so it’s important to get good professional advice to determine which is the right product for you at the time of application).

 Fixed rate remortgage

In the same way it’s important to look at ‘total cost’ over your fixed period, it’s important to decide which would be the most suitable deal for you in general.

Fixed rates are now very competitive, and in the market over the last year or so, have often been better than variable rates.

Fixed terms can range from 2 years up to 10, and with new products coming and going all the time, it’s not uncommon to see fixed periods for even longer.

Tracker rate remortgage

In exactly the same way as fixed rates, most tracker rate mortgages have an initial period where you are tied into a contract, with penalties to pay if you leave early (early repayment charge, ERC).

 

When calculating the total cost over the initial period, you must also factor in the probability and risk of any rate rises during that time – obviously if you have a tracker the same rate as a fixed rate over 2 years, then it makes sense to go for the fixed to avoid it increasing.

If you don’t think rates will change in that time, and the tracker is a lower rate, then maybe it would be the most suitable choice. It really comes down to personal preference and how able you are to sleep at night knowing rates could jump in the morning.

Fixed remortgage or tracker remortgage?

 

This really is a personal choice and not something that can be decided by reading something you found on the internet.

Over the past few years, fixed rates have competed well against trackers and often come out cheaper, but this may not always be the case.

If you like to know where you are in your payments every month, and think you may feel uncomfortable on a rate that could go up or down, then a fixed would be most suitable– even if after 2 years it works out more expensive, because in reality no-one knows what’s going to happen with rates, and it’s a gamble either way.

If you fix instead of a cheaper tracker and rates don’t move over the contract period, it’s cost you more – if you take a tracker for cheaper but rates go up, it may cost you more.

Choosing the right mortgage term

The term you choose to have your remortgage for depends mostly on your current financial situation in general, including your monthly budget and any projected changes in earnings as you move through the term.

25 years is a standard benchmark, as it tends to sit most comfortably all round for those who take a new mortgage – 35 years seems like a long time, and not many people want to be paying a mortgage into retirement.

However, if you are young and expect to be earning a lot more in the coming years, then taking a longer term to have a cheaper monthly payment now, may seem like a much better option.

Generally though, if you have set a sensible budget from the outset, then it would be most suitable to just adjust the term around that.

 

Think carefully before securing debt against your home, your home may be repossessed if you do not keep up repayments on your mortgage.

 

 

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