Remortgage

If you want to change your current mortgage we can help.

What is a remortgage?

A remortgage is where you pay off one mortgage loan on a property and replace it with another from a different lender.  You will need to instruct a solicitor because they will need to remove the original lender’s charge from the property at HM Land Registry and submit the new lender’s charge in its place.

If you arrange a new loan deal with your existing lender it is not technically a remortgage because the lender’s charge over your property remains the same.  However, you may still need to have your property re-valued by the lender to ensure there is sufficient equity.

Why remortgage?

There are many reasons to remortgage but the principle ones are to reduce monthly payments or to obtain a lump cash sum to pay for a one off expense, such as home improvements (which hopefully will increase the value of the property) or a holiday, car etc..  Home owners sometimes remortgage to pay off other debts, credit cards etc. but this should be done with caution because more interest will be paid in the long term and there is a temptation to take out more short term borrowing once the initial pressure is released.

Can any home owner remortgage?

In order to remortgage you must have sufficient equity in your property.  The equity in your property is the difference between the property’s market value and the total amount of money borrowed against the property.  So if your property is valued at £200,000 and there are two loans totalling £150,000 already charged against it then your equity will be £50,000.

The loan terms you receive will depend on what percentage of the equity you wish to borrow.  If you want to borrow a large percentage of the equity in the property the terms you are likely to be offered will be less favourable than if you only required a small percentage.  The reason for this is that the lender’s investment is at greater risk if you are borrowing up to the limit of the equity in the property because, should you default and the lender be forced to repossess and sell the property, they are less likely to recuperate their loan.

If you have no equity, or negative equity, you will not be able to remortgage.  And even if you have a small amount of equity it is unlikely that you will find a lender willing to offer a loan in the current market.

How do I work out whether it’s worth remortgaging?

You need to make sure that the costs involved in remortgaging do not outweigh the reasons for doing it in the first place or the cost of alternative sources of finance.

The costs are likely to be legal costs, valuation fees, new lender’s fees, existing lender’s fee for removing their charge and any penalty for paying off their loan early.  You may find your new lender is willing to meet some of these costs as an incentive but be sure to work out the overall cost.

You may decide to work these costs into the loan by borrowing enough to cover them but remember that you will then be paying interest on the costs for the term of the loan, which could be considerable.

Depending on your reasons for remortgaging, you may find that the costs are more than you will gain in reduced monthly payments or that a shorter term, unsecured loan, suddenly looks more reasonable.

And remember, that a mortgage loan is secured, by charge, against your property.  This means that if you default on your payments you run the risk of the property being re-possess by the lender and sold to pay off the loan.

So, if you would like further advice about remortgaging please contact Anthony, Natalie, Catherine, Karen or Amy on 01752 668246 or send an email by clicking here.

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