A remortgage is when you have a mortgage with a lender on your property and decide to change the mortgage from one product to another. You may want to change lenders to have a better mortgage deal with a new lender or borrow more money.
Before you remortgage, it is important to consider the following:
Is my current mortgage subject to an Early Redemption Charge? You can find this out by contacting your current provider. An Early Redemption Charge will mean you will pay a charge, often referred to as a penalty, if you change your mortgage within a certain period. The Early Redemption Charge usually decreases over time. It is important to understand if you have an Early Redemption Charge to determine if it is in your best interests to move lenders/products. If so, you need to take into consideration the charge/penalty as this will be added to the final statement from your current lender.
Similarly when looking for a new mortgage product your financial advisor will confirm if there is an Early Redemption Charge which will be payable, should you wish to move from your new lender.
If you are raising additional funds against your property, ensure as part of your budgeting you can afford the increased payments and are aware of the term over which you are taking out the mortgage.
Obtain professional advice on the mortgage product that is best for your circumstances, but also shop around to get the best deal.
How to Remortgage
A remortgage is similar to some elements of a sale and purchase in some respects. Once you have found your product your advisor will submit an application your behalf. Some lenders will offer a free legal service and will appoint a Lawyer to act on their behalf in relation to the remortgage.
If your application is successful the appointed Lawyer will contact you confirming they are instructed. As part of the application process you should ask if a ‘free legal service’ is part of the mortgage offer to assist with your budgeting. You should also be aware that the Lawyer will usually only act on behalf of the lender and legal fees may only cover standard fees and disbursements. If additional work is required the Lawyer should contact you to confirm you are happy with any additional fees payable.
As part of a remortgage you will not be required to obtain an Energy Performance Certificate. This is only relevant if you are selling your property.
The lender will request evidence of your identity, wage slips and other information as part of the application. They will also obtain a valuation of the property before they issue a formal mortgage offer.
Your appointed Lawyer will also request evidence of your identification and will usually ask you additional questions such as if there has been any work carried out at the property, who is living in the property, what the additional money is being used for, and whether have you received any claims or notices whilst living at the property.
If your property is registered, the Lawyer will obtain a copy of the registered title and ensure it is good and marketable title, which is a lender’s requirement. If the property is unregistered the Lawyer will ask you for the Title Deeds. Once they have the Title Deeds they will review the title to ensure it is marketable. If you have an existing mortgage the chances are the title is registered and the Lawyer can download the up to date title from the Land Registry, so you don’t need to do anything.
Read more about the differences between registered and unregistered land.
Most lenders do not require searches before they complete the loan, however some do. Your Lawyer will check the lender’s requirements and advise you of any matters that may delay the remortgage. If you are raising funds for a particular purpose and have a deadline, for example to purchase an investment property, you should ensure that your lender and Lawyer can meet your deadlines before you instruct.
If you have an existing mortgage, your Lawyer will write to the lender asking for a settlement figure, also referred to as a Redemption Statement. Once this has been received they will be in a position to notify you of any shortfall and also send you a final Completion Statement. You should always check the figures before completion, as it will be too late after completion. You should speak to your Lawyer about the best completion date for you taking into consideration your existing mortgage, as some mortgage products calculate interest daily whereas others calculate monthly.
If you have a mortgage that calculates interest monthly your best day to complete your new mortgage would be the last working day of the month. This will ensure you don’t get charged a further month’s interest whilst also paying your new mortgage. Your Lawyer will discuss these requirements with you before completion is agreed.
Your new lender will issue a Mortgage Offer when they are happy to proceed. This will be after verifying your identity, completing credit checks and confirming your affordability, together with any other requirements. You will receive a copy of the Offer, your Lawyer will receive a copy, as will your financial advisor. When you have received your copy it is worthwhile checking your Lawyer also has a copy.
There may be specific conditions contained in the Mortgage Offer which need to be satisfied. You should ensure you read the Offer carefully, and any matter you do not understand you should seek clarification from your Lawyer. Special conditions could include confirming whether there is a right of way to and from the property, or ensuring there is planning and building regulation approval for certain works. Your Lawyer may seek further information from you once they have received your Offer.
Once all the conditions have been satisfied, you are happy with the finances and all the documentation has been signed, your Lawyer will complete the final searches. If all is in order, your Lawyer will request funds from your new lender. The new lender may request 5 days’ notice to release the funds.
On the day of completion the Lawyer will receive the funds from your new mortgage lender, pay off the existing mortgage, transfer funds for any fees payable and arrange to send you the balance. The Mortgage Deed will be dated and submitted to the Land Registry to register the new mortgage against your property.