People re-mortgage for a variety of reasons. Usually, it’s to get a better more competitive interest rate in order to reduce monthly payments and possibly to fix the rate, for a given period of time. In addition to these reasons, sometimes people use a re-mortgage to release additional funds, using some of the equity in the value of their home, to perhaps improve their property or to clear debts.
By re-mortgaging and fixing the interest rate of a mortgage loan, people are able to budget more effectively - knowing exactly what they will be paying each month.
Since March 2020, on average – UK properties have increased a staggering 15% in value and with fixed interest rate deals still being cheaper than they were – pre pandemic, now is the ideal time to look at new fixed rate mortgage deals. This is proven by the latest mortgage industry statistics that has shown that during November 2021, re-mortgages accounted for 56.8% of mortgage searches. The suggestion, at the recent budget, that the Bank of England’s base rate might increase in the near future, has certainly played a part in this statistic.
For those considering re-mortgaging, we will answer some of the most asked questions.
Q: Is it a good time to re-mortgage?
A: Yes. Property values have increased greatly and this, in most cases, allows for the possibility of a more favourable ‘loan to value’ LTV; one of the contributing factors to achieving a better loan interest rate. Furthermore, as already stated, there are two- and five-year fixed rate deals that are still more competitive, despite a few rate increases from some lenders, than they were -pre pandemic / two years ago.
Q: Is it expensive to re-mortgage and do I need a solicitor?
A: If you are re-mortgaging with your current lender then you don’t usually need a solicitor. If you are intending to use a new lender, then possibly yes, however in such instances, some new lenders are prepared to cover such fees using their own legal team. However, there will also be re-mortgage arrangement, administration and valuation fees. With a new lender, a surveyor is usually required to visit your property to do a full assessment for valuation and loan purposes.
Q: How long does a re-mortgage take?
A: If its with your existing lender, they don’t usually need to come out and do valuations or involve solicitors and therefore, the time frame can be as little as 3 to 4 weeks – but this does largely depend on whether you intend to borrow a further amount against the value of your property, also you will often get a better deal by changing lender. If you are using a new lender, you and your property are unknown to them. This will involve searches, surveyors reports and legal work. As mentioned previously, it might be that the lender pays for the legal work, however, the time frame is obviously extended and therefore, you should be looking at a minimum of around 8 weeks.
Q: If its with my existing lender, am I guaranteed to be accepted for a re-mortgage?
A: No. Not necessarily! Whilst one tends to think that everything will be fine because I have been with my lender for years and they will be keen to keep my business; this isn’t necessarily always the case, particularly if you are borrowing additional funds. Since the credit crunch, the application criteria and the process as a whole has, tightened up a great deal and as such, you will be treated, in most cases, as a ‘new applicant.’ This means that you very much need to ensure that your credit history, aside of the mortgage, is in good health and that you can show good bank statements, employment history, earnings and if in business – good accounts.
To find out more about your re-mortgage options, talk to independent mortgage specialists – Dunham McCarthy. We can help choose the best mortgage package for you whilst giving you useful, free advice, on how to be mortgage ready.