A Complete Guide to Remortgaging
Many property owners might have heard of remortgaging, but they are not aware of what it involves or whether it is a feasible option for them. From working out what you can afford and assessing the different remortgage deals available, it is essential to have thorough knowledge when it comes to deciding.
Are you considering remortgaging your property?
Although remortgaging may seem uncomplicated, the process does however involve some legal legwork. The following narrative is intended to act as a guide to help you make the right decision.
What does it mean to remortgage?
Remortgaging is the process of moving from your current mortgage provider to a different lender. It normally happens when the first mortgage term comes to an end. There are good reasons as to why people consider remortgaging a property, as it is a great opportunity to seek out low-priced deals and save potentially hundreds of pounds every month on your mortgage repayments.
Why should I consider remortgaging?
The biggest benefit of remortgaging is to improve your finances, but there are several reasons as to why you might consider remortgaging your property.
Your current mortgage agreement Is coming to an end
You might consider remortgaging when your current deal is about to end. The typical length of mortgage tenure is between two and five years. When this ends, your lender will automatically put you on its Standard Variable Rate (SVR) and the chances are that the Standard Variable Rate (SVR) is going to be higher thus more expensive than your previous rate. This is usually the time when you might think about remortgaging before you start paying the higher rate.
You are looking for a better interest rate
If you are switching to a different mortgage provider, then you may be required to pay an early repayment charge, or redemption penalty. This may roughly cost you between 2% and 5% of your outstanding loan, therefore it is essential to weigh up the overall costs versus savings before deciding to switch.
You want to borrow more
There comes a time in life when you need that extra cash. Whether it is to pay for your home improvements, repairs or to pay off other existing debts. Your current lender might not approve your request to lend more money. In this situation, remortgaging with another lender may allow you to raise the money needed at a cheaper rate from the previous one. However, your new lender will want to know what you are borrowing the money for and might ask to provide evidence.
You worried about interest rates increasing
A mortgage rate and any Bank of England base rates are directly proportional to each other. If the interest rates increase the cost of monthly repayments also increase. Therefore, you might switch to find a lower fixed rate mortgage to avoid the rise of interest rates.
The pros and cons of remortgaging
While for many homeowners remortgaging can be a good financial move but for others it might not be an ideal option. So, it is important to carefully weigh the pros and cons depending on your financial circumstances and requirements, before moving forward with the remortgage process.
Advantages of remortgaging include:
- Paying lower interest rates.
- Freeing up disposable capital for expenses.
- Consolidating your debts into an affordable monthly payment.
Some of the disadvantages of remortgaging include:
- Additional payment of administrative fees or set-up costs
- Increased amount of time to pay off your debts
- If you cannot keep up with the payments, your home, can be repossessed
- The process takes number of weeks to complete.
What is the process of remortgaging?
Here are some key steps to follow when you start the process to remortgage your home or property:
Get a Redemption Statement from your current lender
When your mortgage deal is coming to an end, you will receive a letter or email from your current lender stating the expiry date. In that letter or email you will be provided with all the information on your rate of interest and whether the current mortgage is still a fair deal for you.
If you want to remortgage, you can request a redemption statement from the current lender. Usually, lenders offer better deals to existing customers that are considering leaving for a new lender. If your current lender does not offer you the best deal, then it is time to switch to a new lender to see what they can do for you.
Selecting a new lender and completing your “Agreement in Principle”.
If you have decided to remortgage, the next step is to select a new lender. When you’re comparing mortgage lenders you need to apply for an “Agreement in Principle”, from the lenders you are interested in. Normally when you apply for “Agreement in Principle”, the lender will ask for:
- Personal details, such as your name, date of birth and address.
- Address details for the past three years.
- Information about your income.
- Information about monthly expenses.
Once you have an Agreement in Principle (AIP) in place, you can proceed to apply for your remortgage.
Apply for remortgage
Once you have selected the right mortgage deal, you can begin the application process. This involves submitting a few documents such as:
- Identity proof such as a passport or driving license.
- Proof of residence (utility bills, credit card statements etc.).
- Bank statements for the last three to six months.
- Your last three to six wage slips.
- Proof of any bonuses/commission.
- A copy of your latest P60.
To speed up the application process it is necessary to submit all the required documents in one go.
Your lender will run a credit check
After submitting all the paperwork, your lender will run a credit check. This credit check will help them understand how you have managed your credit history. This means any late payments and IVAs on your record may highlight you as an unreliable borrower.
Finding out the valuation of your property
A valuation will be done on your property to ascertain its current market value. Valuation will be done both remotely and in person through an agent visiting your property and assessing its value. This property valuation will ensure whether your property has enough equity to qualify for the remortgage loan.
Check and review lender’s offer
Once you qualify for the remortgage loan, your lender will send an offer through post. You need to check and review the offer carefully. Make sure you double-check monthly repayments and other details mentioned in the offer.
The final step –ready for completion
When all the legal work has been done and you have reviewed the offer, you’re ready for completion. Upon completion, your mortgage will be transferred over, you will be informed about the date and amount of your first new mortgage payment.
What is the conveyancing process For Remortgaging?
You might already be familiar with what is involved in conveyancing for buying a new home. Whilst remortgage conveyancing process is less cumbersome, you still need to provide relevant information, and specific legal requirements should be met. You need to find a professional and experienced conveyancing solicitor to complete the remortgage process for you. A professional and experienced solicitor will be able to handle and walk you through the entire conveyancing process.
Conveyancing for a remortgage includes the following:
Step-1: Confirmation of identification
Once you have applied for a remortgage, your solicitor will need to verify your identity and carry out money laundering checks.
Your solicitor will also check the source of your funds, in accordance with the AML regulations. Following documents will be required to verify the source of your funds:
- Bank or building society statements
- Pension statement
- In case of inheritance: a bank statement and a letter from executors confirming the funds were received
- Dividend certificate, showing received funds from the company
Step-2: Verify title registration documents
To confirm that there are no other parties involved, your solicitor will need to verify the identity of each person named on the mortgage, and property deeds. Your remortgage solicitor will obtain title registration documents for your property from HM Land Registry to confirm you are indeed the legal owner.
If you are remortgaging a leasehold property, your solicitor will check the title deeds to confirm that the leasehold title meets your new mortgage lender’s requirements.
Step-3: Review your mortgage Offer
Once all the verification is completed, your solicitor will review the mortgage offer. Your lender will issue the formal mortgage offer to your remortgage conveyancing solicitor. The mortgage offer entails all the lender’s requirements. Depending upon the lending criteria your solicitor sets out the plan to satisfy the mortgage lender’s requirements.
Step 4: Request current mortgage statement
Your remortgage solicitor will ask for a current mortgage statement, from your existing mortgage lender to confirm the amount required, to redeem the mortgage.
Step-5: Apply for Local Authority searches
Your remortgage conveyancing solicitor will apply for local authority searches, to satisfy your lender’s property search requirements. Most lenders require only a Local Authority Search, whilst some will ask for search indemnity policy. Search indemnity policy is typically a quicker and cheaper option. If possible, ask your solicitor to avoid the cost of a full search.
Step 6: OS1 priority search and bankruptcy check
Your solicitor will request for a pre-completion search called an “Official search with priority”: whole title (OS1)’. This OS1 priority search prevents any other charges from being registered against the property. It also ensures that, registered title cannot be changed until after the remortgage process has completed.
Moreover, your solicitor will also carry out a bankruptcy check to confirm that none of the legal owners are/is bankrupt.
Step 7: Send the “Certificate of Title”.
The solicitor sends a ‘Certificate of Title’ to your new lender, only when the solicitor is completely satisfied that all registered owners of the property and the property itself meet the new lender’s conditions.
‘Certificate of Title’ confirms that everything is satisfactory and requests lender to release the remortgage funds.
Step-8: Completion Day
Prior to completion, your solicitor will send you a statement. This will confirm:
- The outstanding balance you must pay to complete the remortgage; or
- The funds you will receive once the remortgage conveyancing process completes.
In addition to that, completion statement will also include a list of fees and disbursements, including:
- Legal fees.
- Local Authority search fees.
- HM Land Registry fees.
- Fees for ID and bankruptcy checks.
Remortgage conveyancing solicitor will receive funds from your new lender on the completion. Your solicitor will use the funds to repay any existing mortgages on the premises and to settle the lender’s legal fees and disbursements. If there is any remaining balance amount, that will be transferred to your bank account on the date the transaction completes.
Step-9: Post completion
After completion, your solicitor must register the new mortgage at HM Land Registry. The process to update the register to record your new mortgage can take some time. This time duration can be longer for leasehold properties.
How long does the remortgage process take?
The entire remortgaging process usually takes 4 to 8 weeks. However, it may vary depending upon your documentation and other remortgaging needs. Providing all the relevant documents in one go can help speed up the process.
How much does it cost to remortgage?
Below we have explained some of the costs and charges associated with remortgaging.
Exit fees: Exit fees are also known as mortgage completion fees. These are the administration charges imposed by lenders when you have paid in full, or you have reached the end of your mortgage term/tenure.
Arrangement fees: The fee is charged for arranging a mortgage. Lenders always require borrowers to pay a fee which is usually around £1,000. You can clear this fee upfront or you can add arrangement fee to your mortgage balance. However, it is important to remember that adding arrangement fee to your mortgage balance means you will have to pay interest on the figure, and it will cost you more in the long run.
Legal fees: Legal fees are the service costs you need to pay a solicitor, or conveyancer to carry out all the legal work for you. Hiring experienced remortgaging solicitors such as Manak Solicitors will make the process smooth from start to finish.
Early repayment fees – Early repayment fees are only applicable if you remortgage before your current term ends.
Your goal is to maximize savings and secure the best remortgage deal. So, before settling to remortgage, it is important to investigate the potential fees you have to pay.
How can I get the right remortgage deal?
Whether you want to release equity or want a better rate, a remortgage could be just the answer. However, before you jump in, it is necessary to run through these tips and tricks to get the right remortgage deal.
Improve your credit rating
Before undertaking a remortgage, it’s necessary to improve your credit rating. If you have a bad credit score, your options will be limited, and you will be considered as an unreliable borrower. So, always make sure to pay all the loans on time and double check whether your name isn’t flagging red.
Reduce your Loan-To-Value (LTV)
By making improvements to your property, you can reduce your loan to value. Touching up the building’s exterior and improving extensions can make a difference during the valuation. The lower your loan-to-value ratio, the more favourably your application will be accepted. The lower LTV loans can also save you a fortune.
Seek Out low-interest rates
It goes without saying, a lower interest rate can not only save you money, but it will reduce the amount of interest you will pay on your loan over time.
Look for low fees
If you have a restricted budget, it is important to confirm what fees your perspective lender is charging, and same goes for your solicitor too.
Are “free legals” a good option in comparison to using a solicitor?
In today’s competitive environment, many lenders offer free legal services as an added incentive for clients to retain their services. However, the concept of “free legal” is not always what it seems. These generous “free legals” are often covered by additional hidden costs. These “Free legals” comes with
- Under-qualified legal staff
- Potential delays and poor service levels
- Lack of communication from the conveyancer
- Missing remortgage deadlines
Given the risks involved, choosing a professional and experienced solicitor such as Manak Solicitors will be a good decision. A professional and qualified solicitor will move the process smoothly and swiftly without missing the deadline. In addition, they will also help with any associated requirements, such as changing the ownership of the property and more. Remember there is no such thing as ‘free lunch’.
Manak Solicitors are here to help
If you have decided to remortgage your property, Manak Solicitors can make sure the process is as simple and as stress free as possible. Manak Solicitors have a specialist team of solicitors, in Sevenoaks, Orpington and Gravesend, who have a wealth of knowledge and experience dealing with both simple and complex remortgaging needs. Our conveyancing team will listen to your individual needs, and work with you to make sure you fully understand, the remortgage conveyancing process, and explain to you in layman’s terms all legally binding conditions.
Our remortgaging conveyancing team will always give you a fixed conveyancing fee estimate based on the type of property, its location and the valuation.
Get in touch with our expert remortgaging solicitors
To understand more about our remortgage conveyancing services, you’re welcome to call our experienced local teams on:
Sevenoaks: 01732 207 207
Gravesend: 01474 324 529
or email us: [email protected].
or fill in our contact form and we’ll call you back.