Guide to remortgaging

Remortgaging is where you move your mortgage from one lender to another by paying off the original mortgage with the proceeds of the new one, using the same property as security.

If you are with another lender and are looking to remortgage for a better deal, MAB can search for mortgages that could save you money.

Why remortgage?

There are three main reasons for remortgaging:

To reduce your monthly repayments by securing a cheaper mortgage.

To release some of the value in your property for other spending such as home improvements.

To find a more suitable product due to a change of circumstances.

Things to consider

If you are nearing the end of your current deal or paying the standard variable rate, it’s a good time to start thinking about remortgaging.

However, it’s worthwhile reviewing your mortgage regularly anyway to ensure it continues to best suit your needs.

You can switch your mortgage at any time, but be aware that you may have to pay early-repayment charges (ERCs) if you’re still within the term of a specific mortgage deal.

It’s vital that you compare your current deal with any you may consider switching to. Always look beyond the headline interest rate.

Before you start shopping around, speak to your existing lender to see if they can offer you a better deal.

How much will it cost?

The good news is there’s no stamp duty to pay. However, a number of costs may be involved, including the following:

Product fees – these could be application and completion fees, which will be a set charge or percentage of the loan amount. Some product fees can be added to the mortgage, others are payable when you make your mortgage application.

Legal fees – these fees will pay for a solicitor to cover conveyancing, surveys, arranging completion dates and the transfer of funds. Some lenders offer products with no legal fees.

Valuation fees – you will also have to pay for a property valuation before your potential new mortgage provider will approve your application.

Early-repayment charge – this is payable if you pay off your mortgage early, when it is still within a specified mortgage deal.

How do I find the right deal?

Ask your current lender for a redemption quote (there may be a charge for this, so consider using your last mortgage statement as a guide). This will explain how much it would cost for you to pay off your mortgage, including any fees and charges that may apply. You will need to borrow this amount from a new provider before being able to switch.

Shop around for the best deals

Speak to lenders directly and use comparison websites. If you don’t want to do this yourself, you could use a mortgage broker such as Mortgage Advice Bureau, who will search 90 lenders to find the right mortgage for you.

When comparing mortgages, make sure you are comparing like for like:

• Repayment (capital-and-interest) or interest-only
• The type of loan
• The term of the loan
• The period of the special rate
• Maximum loan-to-value ratio (LTV)
• Fees and charges
• Additional features or conditions

Get your paperwork together

You may need:

• proof of your ID – passport or driving licence and National Insurance number
• proof of your address for up to 5 years – utility or council tax bills
• proof of your employment – P60/payslips/accounts
• proof of your financial situation – income, outgoings and assets (such as bank statements)
• proof of your current mortgage – mortgage statement and redemption statement from your current lender.

Valuation
Your home will have to be revalued. This usually involves your lender arranging a surveyor’s visit. However, some lenders will simply use a desk-top assessment or drive-by valuation that doesn’t require a visit but may still incur a fee.

Legal work
A solicitor or conveyancer is needed to do the legal work. Either your lender will instruct one or, if you wish to use your own, the lender will usually insist they are on their approved list. There is less legal work in remortgaging than when you buy a house. Some lenders offer fee-assisted legal work on some products.

Insurance
You should already have insurance in place to protect your home. However, if you remortgage, it’s a good time to review your cover, especially if the valuation indicates your property has increased in value. If you’re borrowing extra money for home renovations or an extension, remember to make sure you have sufficient cover for both the buildings and contents of your improved home.

It’s also a good time to review your future financial goals and plans for you and your family.