How Does Remortgaging Work

In this latest blog post, we discuss how the remortgaging process works and what the advantages are.

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How Does Remortgaging Work?

If you’re a homeowner, your property is probably your biggest asset. Being a homeowner doesn’t always come easy as you probably don’t own your house in its entirety.

This is where having a mortgage in place comes in. So, you’ve taken a mortgage out on your lovely home and several years down the line you’d like to do a few home improvements. But, where can you get the money to do so?

Remortgaging your current property can provide you with financial flexibility by taking out another mortgage, all whilst borrowing more cash in the process. This means that overall, you can switch to a new mortgage and maybe even get better interest rates in the process.

By getting a new mortgage, you can even borrow more money so you can make those home improvements you’ve always wanted or choose to do with the money as you please.

Your best bet is to get in touch with a financial advisor to go over the finer details, but for now, here is a breakdown of remortgaging your property to release money.

What is Remortgaging?

The basics of remortgaging are simply switching your current mortgage to a new one. And it really can be as simple as that, with the right financial advice. Whether this is with your current lender or a new one, anything is possible.

You may be thinking, why remortgage when you already have one in place, but there are many reasons why people do and what it can mean for you. As said before, a new mortgage can free up some cash and therefore you can make any home improvements you desire.

Remortgaging is also a popular way of releasing equity from your property to gather a cash lump sum, in order to consolidate any existing debts. It’s only natural that your property is going to go up in value over time, and if you’ve been paying your mortgage for a fair few years then you’re more than likely eligible to take some money out of your property’s equity.

Remortgaging with a new lender is a possibility when you change the terms of your new mortgage. It should be noted that in the long run, your mortgage payments may increase, as, in theory, you’re basically taking out an additional loan for taking the equity out. But before doing so, it’s always best to do your research on your current financial circumstances to see if remortgaging is right for you.

Remortgage Checklist

The Advantages of Remortgaging

If you’re still on the fence about whether you should remortgage or not, then do think about it logically. It is a big financial decision to make and not one that should be made lightly.

To help put your mind at ease, here are a few pros of remortgaging your property:

  • Borrowing at a new lower interest rate than what you are paying now
  • The ability to release equity from your home to consolidate debts or make home improvements
  • Using equity to receive a cash lump sum
  • Switching to a new deal that is more suitable for your current financial situation
  • If your current deal is about to end, remortgaging can assist with this and we can help you find a new one
  • If your properties value has dramatically increased, it’s worth using the benefits of this
  • If you want to overpay and your current lender won’t let you, then why not switch
  • You want to switch from an interest-only mortgage to a repayment method
  • You simply just want to borrow more money.

When should you Remortgage?

The best time to remortgage is when the value of your house has gone up. This will then provide you with more equity.

If you don’t know a great deal about your current mortgage policy, have a look at when it is due to end on your current rate.

The best time to consider a remortgage move is approximately 3 months before your current deal is due to end.

This ensures you will have enough time to research and go through the application process.

Mortgage Capacity Assessment, Mortgage Repayment Plan
How Does Remortgaging Work

Do you need a Solicitor to Remortgage?

Depending on how smoothly the transaction is, you don’t ultimately need a solicitor.

If you are remortgaging with your current lender, it can just be a simple money transfer and therefore no legal work is required.

However, if you are switching lenders and releasing equity, you may find yourself needing someone to finalise the legalities.

The Remortgaging Process

Before you consider remortgaging, really think about why you are doing it and if it’s the right option for you. Consulting with a financial advisor can assist with any queries you may have or alternative options. However, if you have thought long and hard about it and know it is what you want going forward, you are probably wondering what the process is like.

Below is a brief step by step guide to how the remortgaging process works:


1. The reason why you want to remortgage

Even though you’ve been thinking about it up to this point, you need to have a goal in mind; whether this is home improvements, consolidating debt or just changing your repayment costs, you need to go in with the reasons for the remortgage.


2. Seeking financial advice

Whether this is from a financial advisor, mortgage broker or your current/ new lender, it is important to have these conversations before the application itself.

These specialists will be able to work out if remortgaging is the right move for you and what it can mean financially in the long run. You want to ensure you can make the new repayments without straining your living costs.


3. Working out if you can afford it

Whilst speaking to your advisor, you do need to be realistic and think is it really something you can definitely afford further down the line. With your previous mortgage, you will know too well that it is clear that missing repayments can lead to having your property repossessed.

Looking for a fixed-rate mortgage could be ideal for you in this situation, so you always know what you’ll be paying.


4. Discussing with your current lender

You want to hash out the small print and ensure you are making the right decision. Whether you are staying with your current lender or moving elsewhere, they may be able to offer you a competitive deal, depending on what you’re after.


5. The application

If all of the above has gone smoothly, you are now ready to apply. Just as you did with your previous mortgage, you will have to complete an application form and provide all your financial documents again. Your lender and financial advisor can assist with this.

Once you’ve done it before, you should be aware of what this process entails as it does not differ.


6. Debating whether you need legal expertise

In some cases, you will need a solicitor to finalise the legalities of a money transfer. Some lenders will have their own in-house legal team do it on your behalf, or you can hire your own. Either way, a solicitor isn’t always necessary but advised, just as is a financial advisor.

This process isn’t as daunting as it seems, and can all be done with the right assistance along the way.

How Does Remortgaging Work for a Life Event

Have you got an expensive life event coming up that may require a loan? Have you considered remortgaging?

Getting a loan or paying for something on a credit card is all well and good, but if you are wanting to borrow a substantial amount of money, what does this mean for you in the long run? An interest-free credit card is great until the interest actually kicks in.

What if you want to borrow £30,000? The interest on this sum is not going to be pretty.

The average British wedding is now approximately £30,000, but do you want to be worrying about high interest on your special day? Say your current property is worth £350,000. If you were to remortgage, you could borrow £30,000 and take a new mortgage out for £380,000.

This could then add to your new repayment plan, and it’s almost like this out of sight out of mind money situation; which overall, is quite ideal when paying for a big life event

Excited Couple reading a letter about Mortgages

Before you consider this step, you need to ask yourself if remortgaging is right for you. It’s quite a big decision to make and not one that should be done without care. By remortgaging your home, you are basically increasing your debt in the long run, and therefore will have to pay more back going forward.

Obviously, this all goes without saying, and something like your dream wedding can make it all worthwhile. But there are always pros and cons to consider in this situation. You firstly need to ensure that your property actually has equity to take out. If not, by speaking to a financial advisor you can review your options and alternative methods.

If your property has gone up in value, you’ve paid a good amount on your current mortgage and you have equity in your property, then you are onto a winner. The higher the market value and the more equity, the more eligible you are for the most competitive rates.

This could actually mean you end up paying less in monthly payments than you are now. Even though in the long run you end up paying back more, for the time being, your monthly rate could be at a reduced cost. If you have a big life event like a wedding or honeymoon to consider, then having reduced living costs could be ideal for you.

Therefore, remortgaging for a life event is definitely something to consider when speaking to your financial advisor.

How Does Remortgaging Work for a Property Extension

This is one of the most common questions when it comes to remortgaging “Can I remortgage to pay for home improvements”, and in the short of it, the answer is yes.

But yes comes at a cost and making this decision shouldn’t be done lightly.

When it comes to remortgaging there are numerous factors to consider and the biggest one that often gets overlooked, is what happens in the long run. Yes, remortgaging can put you in a good financial position now, but what about the long run?

You have to consider that remortgaging may overall end up costing you more in the future, and if you have accepted this then you are ready to apply. It can also be especially worth it if you have dreamed of these home improvements and have weighed up the pros and cons.

How Does Remortgaging Work for a Property Extension

If remortgaging is right for you then taking a cash lump sum out to get an extension could be a perfect solution to your problems. It means you don’t need to take an additional loan out and can enjoy the equity from your own home.

If your current home has gone up in value and you’ve paid off a reasonable chunk on your current mortgage, then remortgaging could be ideal for you. It can give you the financial flexibility and freedom to do things such as an extension.

As long as you have equity in your home and can afford the repayments, then remortgaging for home improvements could be for you.

A hypothetical example of a home improvement situation could be that your current property is worth £400,000. You want to use £30,000 to knock a wall down and extend the back of your home. If you switch to a new mortgage of £430,000, then this will provide you with enough money to pay for your extension and then you are able to devise a new payment plan for your new mortgage.

Due to the costs of extensions, remortgaging is a more popular option than opting for a loan as if your property value has gone up, you are more than likely to receive better rates for borrowing additional money and paying it back at a better rate.

Releasing Money for Debt Consolidation

Are you at a loose end with your debts? Do you feel like all you do is pay interest? Then remortgaging could be for you.

Alongside home improvements, releasing money from your home for debt consolidation is a popular way to become more financially flexible. Say you have a few credit card balances to pay off, with an interest rate of 18% plus, sometimes it can feel like all you are paying is interest.

If you were to take a cash lump sum to consolidate your debts, yes it can seem like you’re borrowing a loan to pay a loan; but in the long run, your new mortgage interest rate could be something such as 4% interest, in comparison to your current 18%.

Therefore, even though you are paying it off over a longer period of time, you are also paying dramatically less. It is an ideal way to lift a weight off your shoulders and have more flexibility.

But considering remortgaging should not be done so lightly and it’s probably best to consult with a financial advisor. You need to ensure that there actually is equity in your house. You can check the value of your home and see if it has increased since you first purchased it. If this is the case, then you are off to a great start.

The more equity in your home, with an increased market value, means you are more likely to be offered the most competitive rates. This could then mean lower mortgage payments going forward.

It should be noted that using remortgaging for debt consolidation will not necessarily erase your debt as it just temporarily switches onto your mortgage until it is paid off. It is also worth noting that when it comes to remortgaging, just like your first mortgage, you will be required to undergo a credit check score.

This is something to consider if you have multiple credit cards or loans on the go at current. If there is anything you can do to improve your credit score in the meantime, it is always worth looking into.

For whatever reason you wish to remortgage, always seek the advice of a financial advisor to see what the best options are available for you. If remortgaging isn’t something you wish to do then alternative options are also available.

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