Remortgage Guide – Save time and money like a Mortgage Pirate.
This Mortgage Pirate remortgage guide will help you save time, money and stress.
Remortgaging a property can be stressful at the best of times. Unfortunately it isn’t a case of simply picking the lowest rate of interest from a list. There are thousands to choose from provided by hundreds of lenders all with differing criteria rules. It can also take substantial time to get something that meets your requirements ready in time for the switchover day.
However, there are ways to help make the process simpler. We aim to cover off some of the most effective tips in this blog post. Hopefully the remortgage guide will save you both money and precious time
Today we will cover:
Why remortgage?
First of all, most mortgage products run for a set amount of time regardless of what mortgage type you choose. This means that once a deal comes to an end things will change. One thing that will almost certainly change will be your monthly mortgage repayment.
Secondly, nobody wants to pay more than they need to. Therefore, the goal is always to remain on the cheapest mortgage possible provided that meets your future requirements.
Basically there are two main options. Do nothing or find a new deal.
What happens if I don’t do anything?
If you let your mortgage product come to an end without taking any action, you will most likely revert to your lenders standard variable rate of interest (SVR).
The SVR is a rate of interest set independently by your mortgage lender. They choose what this will be, although it is usually much higher than other deals on their product range. As the SVR is a form of variable rate, it can increase or decrease at any time. This makes it very volatile.
To illustrate this with an example. Today, 27th September 2023, the highest product interest rate with Virgin was 6.48% on a 10 year fixed deal. The Virgin SVR is 9.49%, over 3% higher.
Check your current mortgage offer for details of the rate you revert to at the end of your current deal. Not every mortgage will fall back onto the lenders SVR. Some will switch to a discount from this rate, or there may be a tiered period before the highest rates begin. Some lifetime products such as lifetime fixed or tracker mortgages, wont have a specific date when they expire.
Are there any benefits of doing nothing?
In most cases, the lenders SVR rate is a flexible product meaning that it does not tie you in. Therefore you can leave or switch to another option at any point. For some people, spending a short period of time on an SVR whilst they wait for a property to sell, a lump sum to arrive, or for market conditions to improve could save them money in the long run.
There are also occasions where an SVR interest rate is on par or lower than some of the alternative options available.
When should I start looking for a new deal?
Before the cost of living crisis hit, the earliest time to review your options would have been 3 months before the end of the current deal. This was because the new mortgage offer would usually expire after 3 months meaning you would have to start again. However, because of the rapid rise in demand during the recent Bank Of England base rate rises, many lenders extended their mortgage offers to 6 months. The idea being that you could potentially lock into a fixed rate 6 months early to protect against further rate increases. Many people took advantage of this and secured a decent option.
Not every lender allows a new mortgage product to be secured 6 months in advance. Always check that the new rate will still be valid by the time the current rate ends. If not you may have to select a higher new rate from their current range at the time, or pay an early repayment charge to switch early.
My tip would be to start thinking about your next mortgage 6 months before the rate comes to an end regardless of whether or not you can actually secure a new deal at that point. Think about what type of mortgage you would next time around. Whether you would like to make any changes to your mortgage such as the remaining term, overpayments or additional borrowing etc. Also consider any changes to your personal circumstances such as job changes, children, investment plans etc. Once you have a good idea of what you want your mortgage to do for you, you can then look at securing a product that is cost effective and meets those requirements.
Who can offer me the best new deal?
Always check what your existing lender can offer you and compare this to deals from the rest of the market.
Switching products with your existing lender can be called a rate switch, retention deal or product transfer. These offer a seamless transfer from the old product to the new one often without any further paperwork required. By switching products with the same lender they are unlikely to require a property valuation. Instead they will have an estimated figure in mind known as an indexed valuation. As the mortgage deeds are not being amended, no legal process is required.
This is the simplest way to remortgage assuming that your existing lender offer the best deal, and that you don’t need to make any substantial changes to your mortgage. Changing the remaining term of the loan, the repayment method or borrowing additional funds will require an underwriter to assess your income, expenditure and credit record.
It is still worth staying with your existing lender even if there is a small saving available elsewhere. This is because a fresh application with a new lender will require you to provide supporting paperwork to an underwriter for assessment. The property will need to be valued and there will be a remortgage legal process to swap the legal charge on the property from your current lender to the new one. This all takes time so if the saving is only marginal, it most likely wont be worth the hassle.
Remortgage guide – Whole of market.
Away from your existing lender, you can review the entire mortgage market for the best deal. As always it is best to use an independent whole-of-market broker to do this. Comparison sites show a warped view of what is achievable and wont tell the whole story. A broker will also be able to provide you with an accurate comparison to your current lenders deals. Most existing lender mortgage products are not publicly visible.
If you are looking to have a new deal in place and ready to start as soon as the existing deal ends, it would be wise to start the process no later than 4-5 weeks before the end date. This gives the time for the new lender to carry out their checks, send any paperwork required and also ensure that the legal firm have enough time to carry out their process and get the funds ready for transfer on the day. Ideally you application should be underway with at least 2 months to go.
What paperwork will I need?
As a general rule of thumb, you should provide the following items:
- The last 3 months payslips for each applicant. Self employed applicants may need to provide accounts covering 2 or 3 years. An SA302 and the corresponding tax year overview can also be used. Some lenders only require 1 year of evidence but aim for 2-3 if available.
- The last 3 months bank statements for each applicant.
- Proof of ID i.e. valid passport or driving licence.
- Proof of address. A utility bill or bank statement showing your name and address. This should be no more then 3 months old. The most recent council tax statement is a good one as it should show all names and can be up to 1 year old and still be acceptable.
The above list covers the basics. Other documents may be requested. This may include P60’s, employers references or credit reports etc. The underwriters will let you know if this is the case.
How do I apply?
If you are using a broker they will do this for you. They can apply to secure the chosen product as soon as they have verified the paperwork details. This applies for both alternative lenders and your current provider. They will be able to key the application details without delay and can also do so over the weekend or outside of normal office hours. Brokers will deal with the mortgage underwriters on your behalf making the process smoother and less stressful.
If you are applying directly to the lender yourself, you may need to book a face-to-face appointment at a branch or online. There may be a waiting time of up to a few weeks depending on how busy they are. Sometimes forms be completed online or over the phone but you have to be extremely accurate when doing this so as to avoid any mistakes being picked up later. Applying directly can be confusing due to the technical jargon used. If your case isn’t straight forward you may experience delays or excessive questions / requests.
How long does it take?
This will vary from lender to lender and how busy they are. A simple rate switch with your current lender can take 24 hours or less. The process is very straight forward. Allow up to 2 weeks if they are providing additional borrowing or you are contesting their estimated valuation.
Applying to another lender could take anything from a few days, to 3+ months depending on how complex the application is. On average I would say 2-3 weeks is fine. If the lender are under pressure due to high demand they may take hours to pick up the phone. I have also seen delays in excess of 10 working days just to assess a document submitted to them for review. If your underwriter is being picky they can also request any number of documents any any time. Ensuring to apply with as much time as possible before your current deal ends is vital.
What does a remortgage legal process involve?
Standard remortgage legal work covers the basics needed to swap your mortgage from one lender to another. In many cases, the remortgage product chosen will include the basics covered free of charge when using a legal firm nominated by the new lender. Alternatively, the lender may choose to offer cashback in lieu of the free legal service. This means that any suitable legal firm can be chosen and the lender will contribute a fixed sum towards the cost.
Any additional work required that falls outside of the remit for basic conveyancing (legal work), will have a supplementary fee payable. This may include adding or removing someone from the mortgage deeds, dealing with extra third parties involved such as housing associations, freeholders or second charge lenders.
The legal charge held over the property with your existing lender will need to be removed. Upon completion, the deeds of ownership will be transferred to the new lender. They will transfer the funds from the new mortgage to the existing lender and clear their financial involvement in the property. The legal firm will also carry out ID verification and anti money laundering checks.
What happens once the new mortgage has started?
As you pay for a mortgage in arrears, your first monthly direct debit payment to the new lender may not be taken until the following month. The lender will write to you within 1-2 weeks of completion confirming the date and amount of the first repayment. If you borrow any additional funds, these will be transferred to you via the legal conveyancer.
Put a date in your diary to re-assess everything again 3-6 months before the new deal comes to an end.
Remortgage guide summary.
We hope that this remortgage guide has been useful. There are many other posts covering topics relating to the remortgage process. These include choosing interest only or repayment, tracker mortgages, fixed rates and what may happen with interest rates.
Post compiled by Grant Carpenter CeMAP, CeFA – 15 years of regulated mortgage advice.
Please note that the content listed within this remortgage guide is purely for information purposes only and does not constitute advice.
