Whether you’re approaching the end of your fixed-rate deal or looking to release equity from your property, understanding how remortgaging works can save you time, money, and stress.
In this guide, I’ll walk you through the process step by step, drawing on my experience handling countless remortgage cases. We’ll cover what remortgaging is, why you might want to do it, the detailed steps involved, timelines, costs, and some tips to avoid common pitfalls. By the end, you’ll have a clear roadmap, and if you’re in the North East, feel free to reach out to us at Toomey Legal for personalized advice. Our fixed-fee conveyancing services ensure no hidden extras, making the process straightforward and transparent.
What is Remortgaging?
At its core, remortgaging is the process of switching your existing mortgage to a new one, either with your current lender or a different one, without moving house. It’s essentially refinancing your home loan. This differs from a “product transfer,” where you stay with the same lender and simply switch to a new deal they offer, no solicitor is typically needed for that. However, if you’re changing lenders or altering terms significantly, legal work comes into play to update the property’s title and ensure everything complies with regulations.
Remortgaging has become increasingly popular in recent years, especially with fluctuating interest rates. According to recent market data, millions of UK homeowners remortgage annually to secure better deals. It’s not just about getting a lower interest rate; it can also help you borrow more against your property’s value, extend or shorten your mortgage term, or even consolidate debts. But it’s not always the right move, if you’re locked into a deal with high early repayment charges, it might cost more than it saves.
Why Remortgage? The Benefits
Before we get into the nuts and bolts, let’s explore why remortgaging might be beneficial for you:
- Lower Interest Rates: If your fixed or introductory rate is ending, you’ll likely revert to your lender’s standard variable rate (SVR), which can be much higher, often 4-5% above base rates. Remortgaging to a new fixed or tracker deal can lock in savings.
- Releasing Equity: As property values rise (especially in growing areas like the North East), you might have built up equity. Remortgaging allows you to borrow against this, perhaps for home improvements, buying a second property, or funding life events like education or weddings.
- Changing Terms: Want to pay off your mortgage faster? Extend it to reduce monthly payments? Or switch from interest-only to repayment? Remortgaging gives flexibility.
- Debt Consolidation: Some use it to roll high-interest debts (like credit cards) into their mortgage, though this extends the debt over a longer period and should be approached cautiously.
- Better Deals Elsewhere: Loyalty doesn’t always pay in mortgages. Switching lenders can access exclusive rates or cashback offers.
Of course, there are risks: if rates have risen since your last deal, you might end up paying more. Also, if your credit score has dipped or your income changed, options could be limited. That’s where professional advice shines, at Toomey Legal, we often collaborate with mortgage brokers to ensure the best fit.
When Should You Start the Remortgaging Process?
Timing is crucial. Ideally, begin 3-6 months before your current deal expires to avoid slipping onto an expensive SVR. If you’re within three months of the end, you can often “lock in” a new rate with a lender, giving you a buffer. Key triggers include:
- Your fixed-rate period ending.
- Needing extra funds.
- Property value increases making better loan-to-value (LTV) ratios possible (lower LTV means cheaper rates).
- Life changes, like job loss or family expansion, necessitating adjusted payments.
Avoid remortgaging if early repayment charges (ERCs) are steep, typically 1-5% of the loan, or if you’re borrowing over 90% of your property’s value, as deals are scarcer and pricier.
The Step-by-Step Guide to Remortgaging
Step 1: Assess Your Current Situation
Start by reviewing your existing mortgage. Check your outstanding balance, remaining term, current rate, and any ERCs or exit fees (usually £50-£200). Use online tools or contact your lender for a redemption statement, this shows exactly what you owe.
Next, value your property. Free online estimators like Zoopla or Rightmove give a ballpark, but lenders will conduct their own valuation later. Calculate your LTV: divide your mortgage balance by property value and multiply by 100. Aim for under 80% for the best rates.
Tip: Boost your credit score now. Register on the electoral roll, pay bills on time, and close unused credit accounts. If self-employed, gather two years of accounts.
Step 2: Research and Compare Deals
Shop around. Use comparison sites like MoneySavingExpert or Confused.com to view rates. Consider fixed-rate for stability or trackers that follow the Bank of England base rate.
Engage a mortgage broker,they access whole-of-market deals, including exclusives, and it’s often free (they earn from lenders). Factor in fees: arrangement fees (~£1,000), valuation (~£300, often free), and legal costs (£200-£500).
Apply for an Agreement in Principle (AIP), a non-binding lender confirmation of what they’d lend. It’s quick and doesn’t affect your credit much.
Step 3: Apply for the New Mortgage
Once you’ve chosen a deal, submit a full application. Provide proof of income (payslips, tax returns), ID, bank statements, and property details. The lender assesses affordability, runs a credit check, and arranges a valuation (desktop or in-person).
If approved, you’ll receive a formal mortgage offer. Review it carefully for errors, special conditions (e.g., repaying other debts), and comments on the valuation.
Step 4: Instruct a Solicitor or Conveyancer
This is where firms like Toomey Legal come in. Once you have your offer, instruct us to handle the legal side. We’ll send forms for your details, ID verification (online for convenience), and a small deposit for searches.
We request your current redemption statement to ensure the new loan covers it. For leasehold properties (common in apartments), we check lease terms meet the new lender’s criteria and notify the freeholder.
Step 5: Property Searches and Title Review
Lenders often require searches: local authority (planning issues), water/drainage, and environmental. These cost £200-£300 and take 1-4 weeks. Some accept indemnity insurance (~£30) instead, speeding things up, it’s at their discretion.
We review your property title for issues like restrictions or disputes, ensuring it’s “marketable” and compliant. If all’s well, we prepare a remortgage report and send the mortgage deed for your signature.
Step 6: Report to Lender and Request Funds
Any discrepancies (e.g., name errors) are flagged to the lender. Once resolved, we submit a Certificate of Title, requesting funds. Lenders need 3-7 working days’ notice.
Step 7: Completion Day
On the agreed date, we get your verbal confirmation to proceed. Funds arrive, we repay your old mortgage, and transfer any surplus to you (e.g., released equity). Your old account closes.
Step 8: Post-Completion and Registration
We apply to HM Land Registry to register the new charge, this takes 2-8 weeks. You’ll get updated title documents. Update your buildings insurance to note the new lender.
Throughout, communication is key. Delays often stem from slow paperwork or unexpected issues like spray foam insulation (which can worry lenders about structural integrity).
Timeline and Costs Involved
A straightforward remortgage takes 4-8 weeks from application to completion, but plan for 12 if searches are needed or it’s leasehold. Legal work post-offer is 2-4 weeks.
Costs vary:
- Legal fees: £200-£500 (fixed at Toomey Legal).
- Searches/Indemnity: £200-£300 or £30.
- Valuation: Often free.
- Arrangement/Booking fees: £1,000+.
- ERCs: Potentially thousands.
- Land Registry: £20-£65.
Total? £1,000-£3,000, but savings from lower rates can recoup this quickly. Use calculators to compare.
Common Pitfalls and Tips
- Ignoring Fees: Always calculate total costs, don’t chase the lowest rate if fees wipe out savings.
- Credit Issues: Poor scores limit options; fix early.
- Overborrowing: Releasing too much equity risks negative equity if prices fall.
- Chain Delays: Unlike buying, no chain, but lender backlogs can slow things.
- Insurance Traps: Don’t buy lender-pushed policies; shop around.
My top tip: Start early and get expert help. At Toomey Legal, our conveyancing flowchart (available in our knowledgebase) outlines similar steps, and we’re pros at North East properties.
Conclusion
Remortgaging can be a smart financial move, offering savings and flexibility when done right. By following this guide, you’re well-equipped to navigate it. Remember, every case is unique, factors like leaseholds or shared ownership add layers.
If you’re considering remortgaging in the North East, contact Toomey Legal today at 0191 605 3710 or enquiries@toomeylegal.co.uk. Our team ensures a smooth, fixed-fee process tailored to you. Let’s make your property work harder for your future.