What does remortgage mean?
When you remortgage you switch your mortgage over to a new lender and a new deal but without moving house.
It’s possible to remortgage any property that you own; main residence, buy to let house, holiday home or a second home.
You apply to a new lender for the remortgage. When this application has been approved your solicitors will request the mortgage money and use it to pay off your existing mortgage.
Around a third of all mortgages arranged each year in the UK are re-mortgages.
Table of Contents
- What does remortgage mean?
- Why would I need to remortgage?
- When Can I Remortgage?
- Can I remortgage early?
- How Long Does It Take to Remortgage?
- The Remortgage Process
- Can I remortgage to release equity?
- Can I remortgage with the same lender?
- Do I need a deposit?
- Can I remortgage if I have a secured loan?
- Can I remortgage within 6 months of purchase?
- Can I remortgage an unencumbered property?
- Can I change a standard mortgage to buy to let?
- Can I change a standard mortgage to a holiday let?
- What’s a transfer of equity remortgage?
- Can I remortgage to purchase a buy to let?
Why would I need to remortgage?
At some point your interest rate deal will end and if you do nothing then your mortgage will be charged at the lender’s (much higher) Standard Variable Rate (SVR). At this point your monthly payments will go up, possibly by quite a bit.
To avoid this you can move your mortgage to a new lender and take advantage of their lower interest rate deals. This is the most popular reason to remortgage.
Because this process involves a brand new mortgage, you can take the opportunity to make some changes, such as:
- Change the mortgage term, extend or reduce
- Borrow some extra money
- Change the repayment method
- Reduce your mortgage
- Change to a flexible offset mortgage
- Alter who’s on the mortgage via a transfer of equity
When can I remortgage?
It’s usually best to complete the remortgage as soon as your current interest rate deal ends. This means starting the process about 3 months before.
Your broker will then have sufficient time to search for the best deal and then submit your application. There’s also a bit of legal work to do. Don’t worry about getting the timing right, leave that to your broker!
Can I remortgage early?
There’s nothing stopping you from remortgaging at any point during your mortgage. However, if this occurs before the lender expects then you could have to pay early repayment charges (ERC).
This is to be avoided as the cost could run into thousands of pounds. Ask your mortgage broker to calculate what the exit fees might be and whether this is still worthwhile for you.
How Long Does It Take to Remortgage?
Compared to buying a house, remortgaging is generally much quicker and easier. Mainly because you are not moving home and there’s no property chain or searches to worry about.
As you are applying for a new mortgage with a new lender there’s the normal requirements to prove your id, prove your income and credit searches etc. So having all of your remortgage documents to hand ahead of making the application will help.
From start to finish a standard re-mortgage should take around 4-8 weeks. If the new mortgage needs to start before, or after, a particular date make sure your adviser is aware of this.
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.
The Remortgage Process
RESEARCH
Get together with your mortgage broker and talk over what you need from a new mortgage. This could be a new fixed rate, making it more affordable, changing the repayment method or borrowing more money.
Make sure you understand any exit fees and the cost of re-mortgaging. After some research your broker will be able to recommend a mortgage product that meets your needs and will provide the paperwork that explains all of the costs.
APPLY
Now it’s time to apply for the new mortgage. As well as details about your employment status and income, the lender will need to know how much you owe on your mortgage right now and what you would like to borrow from them.
You will also need to include a value for your property, it may be helpful to search the internet for this. Whilst not completely accurate, sites like Zoopla do show a current estimated price.
MORTGAGE UNDERWRITING
Underwriting is where the lender assesses your application and looks at the affordability of the mortgage together with your credit profile. They will ask a surveyor to confirm the current value of your home, this may be done via a physical inspection, or via a desk-top/virtual valuation.
Your broker will be advised if they have any queries and can help you to answer these.
SOLICITOR
When you apply for a mortgage you still need to have a solicitor who will undertake the legal work involved. When remortgaging, most lenders will allow you to use one of their preferred conveyancers, either at no-cost or with a reduced fee.
Your conveyancer will have been working in the background carrying out legal checks on the property and any registered charges from the existing mortgage. As you already own the property these should not show up any surprises.
MORTGAGE OFFER
As with all mortgages, the offer is the lender’s official confirmation of how much they will lend you and on what terms. This will detail the repayments, interest rates, mortgage fees etc so it’s important to read through and make sure everything looks right.
Copies of the mortgage offer will be sent to your solicitor/conveyancer and also your mortgage adviser. The adviser will check to make sure it matches what has been agreed, including any amendments. You will need to sign the offer and send this back to the lender.
COMPLETION
Once the mortgage offer has been issued and the solicitor has completed their legal work, the mortgage can then start. Your broker can help with the timing to make sure that you don’t repay your current mortgage too early and incur unnecessary fees.
Your solicitor will be sent the funds from the new mortgage and they will use this to repay the current mortgage. If you have applied for extra money (capital raising) then this balance will be transferred to your bank account. This all happens on the same day.
THE END
Can I remortgage to release equity?
Yes, this is a popular choice for many borrowers. You can use a remortgage to release capital from your property for a variety of reasons: holiday, new car, home improvements, debt consolidation. It can also help you generate the deposit for a second property. Why you want the extra money is important to the new lender so we would suggest talking this through with your broker first.
Can I remortgage with the same lender?
Yes, this is known as a Product Transfer. It’s much quicker than a re-mortgage and does not require any income checks. However, it’s best to compare a product transfer to a remortgage to see which one is financially more beneficial. Your broker can do this comparison for you.
Do I need a deposit?
You won’t need a cash deposit to remortgage as the lender will look at your equity to determine the LTV. But a remortgage is a good time to use any spare savings to reduce your mortgage which will then lower the mortgage repayments.
Can I remortgage if I have a secured loan?
Maybe. If the secured loan is being repaid via a debt consolidation re-mortgage then this will probably be OK, subject to there being enough equity. If the loan needs to stay then the new lender will need to agree. Ask your broker to investigate your options.
It’s complicated!
For some people, applying for a re-mortgage is a little bit trickier. Possibly because of who they are; self-employed, just started a new job, had some bad credit.
Or, because of what they want to do and when they want to do it.
This is where an experienced remortgage mortgage adviser can really provide some added value by providing strategies, advice and guidance as well as finding you a great deal.
They will be experienced in providing solutions for situations like these:
Can I remortgage within 6 months of purchase?
This relates to something called the ‘6 month rule’ for mortgages. The ‘6 month rule’ is not really a rule and it is certainly not a law. It is guidance originally issued by the Council of Mortgage Lenders (CML), now known as UK Finance.
It applies to UK lenders and UK solicitors/conveyancers where a mortgage application is made on a property that the borrower has owned for less than six months.
The guidance encourages lenders not to accept applications against a property until the owner has been registered at the Land Registry for at least six months, some lenders extend this time period to 12 months. There are no hard rules to go by so each lender will interpret it differently.
Consequently it’s hard to know how a lender will react to these cases. Some may take a hard line and will not lend within the initial 6-12 months and others are a bit more pragmatic.
While many lenders will follow the guidance completely, there are still good options available for people that do need to remortgage and often these are referred to as a ‘day one remortgage‘. So yes, you can remortgage within 6 months of purchase.
Most people won’t find themselves in this position but remortgaging shortly after acquiring a property might be needed in these situations:
- You originally bought using a bridging loan and now need a long term mortgage
- The property was inherited. You would now like to access some of the equity
- You originally bought an uninhabitable property that has now been refurbished
- You bought below market value and would like to take advantage of the true value
If you find yourself in this situation then we can help. Our brokers have access to many specialist deals and lenders, which are not accessible to the public. Let us introduce you to a specialist broker who can help.
Can I remortgage an unencumbered property?
An unencumbered property is mortgage free and owned outright. This may be because the mortgage has been repaid some time ago or perhaps the property was received as an inheritance.
You are able to borrow against the property to release some equity and this would be via a re-mortgage.
How much you can borrow will depend on the purpose of the capital raising and also your own financial situation with regards to income and credit status etc. Even though you own the property, the lender will still need to make sure any new mortgage is affordable and of course that the property is suitable as security for the loan.
This article goes into a bit more depth – Can you remortgage a house without a mortgage?
If you will be receiving a house as a beneficiary of a will you might wonder: Can you release equity on an inherited house?
Can I change a standard mortgage to buy to let?
Yes, this is possible for most people and there are 2 ways that this can be done:
- Obtain a consent to let from your current lender. Essentially you are asking permission for the property to be used as a buy to let. This is the quickest option but your lender may decline your request. If approved some lenders will only allow this for a fixed period; 12-18 months for example.
- Re-mortgage with a buy to let lender. Here you will apply for a new mortgage with a new lender, on a buy to let basis. If appropriate you will also have the opportunity to change the mortgage term, repayment method and you may also be able to withdraw some equity. Most landlords prefer to have their mortgages setup as interest only, so this is the perfect time to do that.
You will find more useful information in our article: Switching to a buy to let mortgage
Can I change a standard mortgage to a holiday let?
Yes, and the process will be the same as for a buy to let:
- Obtain a consent to let from your current lender. Most lenders are familiar with buy to let but may not have much experience with the property being used as a holiday let. Consequently, there may be some resistance to grant consent.
- Re-mortgage with a holiday let mortgage lender. Here you will apply for a holiday let remortgage with a new lender. You will also have the opportunity to change the mortgage term, repayment method and you may also be able to withdraw some equity.
What’s a transfer of equity remortgage?
A Transfer of Equity (TOE) is a process of changing ownership of a property, either where one person leaves the property or perhaps when one person moves in. Often this situation arises due to changes in a relationship.
Where the intention is to ‘buy someone out’ of a house, this requires a change to the Title Deeds and also any associated mortgage.
Many situations that involve changes to property ownership will have a mortgage that also needs to be updated. From the lender’s point of view they will need all of the borrowers to re-apply for the mortgage. This means providing proof of income and outgoings etc.
A transfer of equity re-mortgage application needs to be made by the people who will be living in the property after any changes to deeds and ownership.
Do I need a solicitor to buy out my partner?
How do you add someone to a mortgage?
Can I remortgage to purchase a buy to let?
Many people will acquire property investments such as buy to let by utilising some of the equity they have built up.
A remortgage is a convenient way of accessing the equity in a property, you will apply for a mortgage that is larger that the one you have now to generate the funds needed. This is known as capital raising and it allows you to release equity so you can buy another house.
Commonly a main residence is used to raise the extra money but you could also re-mortgage any buy to lets, HMOs or holiday lets you have.
This scenario requires 2 mortgages, the first is the capital raising mortgage, and the second a buy to let purchase mortgage. An experienced mortgage broker can arrange both mortgages and ensure that applications are made to the right lenders, with the best possible deals.
FAQ
Frequently Asked Questions
Is it easy to remortgage?
Remortgaging is easier than purchasing a property as there is no property chain. The process is normally completed much quicker.
Do you need a solicitor?
A solicitor is needed for a remortgage. However, you may be able to use the lenders solicitor for either a reduced cost or maybe even no cost.
Can you remortgage to pay off debt?
Yes, many people choose to remortgage to pay off debt.
A debt consolidation remortgage could make your monthly repayments more affordable.
Can the self-employed get a remortgage?
Yes of course. Self-employed borrowers can apply for a remortgage and need to be able to provide proof of their income to the lender.
How does a Product Transfer work?
A Product Transfer is like remortgaging with the same lender. You apply to change over to a new interest rate deal. There’s no requirement for any income checks and the process should take just a few weeks.
Why use a broker?
If your remortgage is very straightforward then you may not need a broker. However, as well as dealing with the more difficult and specialist situations, a broker can help all borrowers to get the best possible deal from those available.
