Day One Mortgages can help borrowers to remortgage their property as quickly as possible after the purchase transaction completes.
This type of remortgage may be suitable for individuals seeking to benefit from lower interest rates, changing their mortgage provider, or accessing more equity. It can also aid in debt consolidation and reducing monthly payments.
Securing a remortgage shortly after buying a house can be somewhat difficult though. But will be much easier with the assistance of an experienced mortgage broker.
What is a day one remortgage?
A day one remortgage is a mortgage option that can be used shortly after buying a property, and differs from a traditional remortgage in that the property owner’s name may not yet be properly updated at Land Registry.
In order to qualify for a remortgage, many lenders enforce the “six month rule” which requires the owner’s name to be on the Land Registry for a minimum of six months.
Fortunately, there are lenders who provide mortgages without this requirement, but applicants typically must present evidence of ownership, such as the title deeds and a signed property purchase agreement, to be eligible for the loan option.
The restriction relates to any remortgage application made within the first six months of property ownership.
Why is there a six month waiting period?
The six month waiting period serves to protect both the lender and borrower by ensuring legal ownership and minimising risks associated with early lending on a property.
Lenders have the ability to verify the condition and value of a property before lending against it to prevent instances of property owners seeking to remortgage with exaggerated valuations.
CONTACT A REMORTGAGE EXPERT
If you wish to investigate your re-mortgage options we can put you in touch with a fully qualified whole of market mortgage broker.
How do they work?
The process of a day one remortgage is similar to that of any other remortgage. The borrower must complete an application, provide necessary documentation, undergo a property valuation, and await lender approval.
It is normally necessary to confirm ownership of the property, as the name will not yet have been amend on the Land Registry records.
This will be done by your original conveyancer. If you know that you are likely to be remortgaging within six months of purchase, it’s a good idea to given them a heads-up at that time.
The rest of the process is the same as normal. Once the valuation and underwriting are finished, the lender will issue their mortgage offer. This can then be accepted and the new mortgage can start.
Why would you need a day 1 remortgage?
There are various factors that may lead to the need for remortgaging a property soon after its purchase.
You initially paid cash for the property
There are several reasons why cash is used, it’s a popular choice for auction purchases but often time constraints make it difficult to obtain a traditional mortgage. Ultimately, when there is a deal to be made, cash is often the preferred method of payment.
After finishing the project, it is possible to arrange a remortgage to access the equity. It should be noted that remortgages for investment properties usually have a maximum loan-to-value ratio of 75%.
You inherited a property
If you plan on keeping the gift, a remortgage may be necessary to access the equity it holds. This could potentially fund maintenance or improvements, or be put towards another property purchase.
You used someone else’s money
And now they need it to be returned, which seems reasonable. This provides another valid reason to withdraw capital value through re-mortgaging.
You were going to flip the property
But the plan has changed and now a long-term mortgage is necessary.
The property wasn’t habitable
In these situations the property can be purchased with a short-term bridging loan, with time factored in for necessary improvements. The owner is now seeking to remortgage in order to pay off the bridge loan and secure a lower interest rate.
There weren’t any worthwhile deals around
However, better options are now available.
What are the advantages of using a broker?
An independent mortgage broker can be beneficial in securing the best deal on your day one remortgage by having access to a wide range of lenders and providing expert guidance throughout the process.
Some lenders enforce the 6 month rule, which limits the number of options available.
Brokers, on the other hand, have access to a wider range of lenders who specialise in certain niche areas and only work with intermediaries.
Brokers will first evaluate your financial status and identify the lender that is most likely to approve your application. Additionally, they will engage in negotiations with lenders to secure the best possible terms for your loan.
Brokers can assist in explaining the legal obligations linked to day one remortgages and ensure FCA compliance, which is especially crucial if remortgaging within a six-month period.
At the end of the day, brokers are there to get you a better deal and save you time and money in the process.
Which lenders offer day one mortgages?
Various lenders, including both traditional banks and building societies like NatWest, Santander, Nationwide, and Barclays, along with specialist lenders such as Shawbrook Bank and Together Money, currently provide day one remortgages.
It is recommended to seek the guidance of a broker as lenders may have varying criteria that are important to consider when selecting the most suitable option for your circumstances.
Remortgaging options may be impacted by poor credit, but solutions are normally available.
What information is needed?
To complete a day one remortgage application, it is necessary to submit specific documents and information.
These include proof of identity, like a passport or driving license, proof of current address which can be a recent utility bill, evidence of income and expenditure, such as recent bank statements, and any other relevant documents.
When applying for a remortgage, it is necessary to provide information about the property, including its current market value and any existing mortgages on the property, which may include property auction finance.
How to get the best deals
When seeking a day 1 remortgage, comparing products from various lenders can be a challenging and time-consuming process. Engaging the services of a mortgage broker to find the most competitive rates can be a sensible way of saving time and money.
As with many similar situations, there are a good number of willing lenders that only deal with brokers, and do not accept direct business.
A large deposit and low loan to value typically result in better mortgage rates. When remortgaging, lenders will use the property equity in place of a cash deposit.
Having a strong credit score and verifiable income is crucial for obtaining favourable terms from lenders. Stability in employment or consistent earnings for self-employed individuals can also positively impact loan applications.
