MORTGAGES
Remortgage
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Remortgage - what you need to know
When you purchase your property, you like many people will need a mortgage as a loan to help pay for your home. Depending on the mortgage product you chose there will come a time where you’ll need to remortgage or choose to get more preferential rates. You can do this by going through your current lender or by looking at new providers available.
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Why should I remortgage?
When it comes to remortgaging, there are many reasons why you would want to do it. It might be to cut costs from your existing mortgage and perhaps opt for a more competitive rate in which to pay back your mortgage or you could need some cash. This might be handy for times where you have life events that need sizable chunks of money, like university fees, etc. It may be worth doing whether you’re looking to save yourself some money or release some of the capital in your home.
Getting ready to remortgage
It’s important that when you are looking to remortgage, you get yourself ready in order to boost your chances of getting the best deal. That means ensuring your credit score is nice and healthy so that you make yourself more attractive to the right lenders. You might want to make sure that your income is stable and that no one is out of a job currently.
As well as doing this, you’ll want to have a discussion with your partner if necessary to make sure you’re both on the same page in terms of what you need and want.
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What remortgage should you choose?
There are different types of remortgage options to choose from and depending on your financial situation and credit score, this will also dictate how many are available to you. In terms of the different types, you have fixed-rate and variable. The variable option has three different categories that are tracker, standard variable rates, and discount rate mortgages.
With fixed-rate, deals will often be anywhere from one year to 15 years. This fixed deal means you know exactly what you pay and that rate won’t change during the time you have this mortgage. However, even though that has its positives, it also has the downside of losing out on the opportunity to drop down to a lower rate if it were to come along.
For variable mortgages, the repayments can move up and down. A tracker mortgage follows a fixed economic indicator. A standard-variable is one that moves 2-5% above the base rate and can be what you end up on after the two-year fix or variable deals are over.
Finally, the discount rate mortgages are often the most affordable but will be short-term in deals. With these variable options, you’re getting more flexibility than a fixed rate, but that could mean you’re paying more one month to the next. That presents some challenges if you are on a tight budget or trying to manage other monthly payments.
What fees will there be?
Whenever you remortgage, there will be a number of fees that you will have to take into consideration. Arrangement fees are also charged sometimes by the lender to establish a new mortgage and some lenders may have booking fees that are on top of this arrangement fee. You may also require the help of a solicitor or conveyancer and that will cost money. Some remortgaging options may require you to pay for valuation fees and if you’re moving to another lender, there are early repayment charges and exit fees to consider. Although you might not think they’d matter much, the costs can be very steep so it’s important to factor this in.
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How do I get the best remortgage deal/ How can a Mortgage Broker help?
In order to get the most appropriate mortgage deal with the best interest rates possible, you want to be in a healthy position from a financial standpoint but also have the knowledge of what is out there. A mortgage broker can be a great addition when it comes to remortgaging your home because they have everything in terms of access to the lenders market and can handle the whole process without you not needing to lift a finger. Speaking to an expert like a mortgage broker will ensure that you get the most appropriate deal for whatever remortgage package that you go for. Whether that’s a two-year fixed rate or a variable option like the tracker mortgages.
It’s important to do your remortgage right so that you are not caught out by unexpected costs or time delays. Knowing all the information and getting expert advice can help prevent that from happening.
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FAQ
A mortgage is a loan from a bank or building society that allows you to purchase a property. The loan is repaid over several years with interest dependent on your personal financial situation.
A mortgage can be between one or more people. However, if you do not keep up your repayments, the lender can repossess your property.
All mortgage lenders have their own requirements. The following factors take a part in whether you will be given a mortgage offer, and how much the lender is willing to borrow you:
- Amount you wish to borrow
- Size of your deposit
- Employment status and income
- Credit rating
- Outgoings
- Existing debt
- Your age
- Length of the mortgage term
- Your credit status
- If you are applying solely or jointly
To be accepted by a lender, you need to assure lenders that you can repay your mortgage. One main aspect lender’s look at is your credit report to check your repayment history. Your credit file will include current and existing records on items such as credit cards, loans, overdrafts, mortgages, mobile phone/s, some utility payments and all accounts that have been open in the last 6 years. If your credit report shows arrears, defaults, CCJs, debt management plans or bankruptcy in the past, there are mortgage options available which we can help you with.
To get a mortgage you will need to save a deposit of at least 5%, but the more you save, the better your mortgage rate will be. If you have an existing property you own, you can use the equity in your property for this. Our skilled mortgage advisors can talk and guide you through the benefits and the difference in your monthly payments by increasing your deposit.
As soon as you have found the property you want to buy, our mortgage brokers will evaluate your personal needs and situations and recommend a mortgage product that is right for you. They will compare a wide variety of mortgage quotes, including products that cannot be found on the high street or comparison sites. This guarantees that you get the right deal at a right price.
If you agree to the mortgage product your advisor suggests, you will receive your Agreement in Principle (AIP). This will provide you with an estimated total of how much the lender is willing to borrow you and allows you to put an offer in on your ideal home.
If your offer is accepted, you will need to arrange a solicitor to deal with searches, surveys and contracts, which we can arrange for you. We manage the entire mortgage application process through to completion, liaising with your solicitor and lender to make sure your application is successful.
There are different mortgage options such as a remortgage. In this case we would recommend looking for a new mortgage deal approximately 3 months before your current deal expires. By beginning the mortgage process early it will allow you to prepare ahead of time to compare all the available mortgage products and submit your application. Do not worry if your mortgage is approved early as we will ensure that the completion date corresponds with your current deal’s end date.
A lot of mortgage lenders will lend you up to five times your salary. However, this all depends on several factors including your age, number of dependants and current financial commitments. Lenders will work out how much they will lend you based on what you can reasonably afford each month after you have paid your bills, credit cards, loans etc.
In addition, our mortgage advisers will assess your individual needs and situations to see how much you can realistically borrow before an application or credit search is completed. If you choose to continue with the application, our advisers will understand which mortgage lenders to approach to ensure you get the required loan amount.
In order to buy a property with a mortgage, you will need to save a deposit of at least 5%. However, the more you can save, the better your rate will usually be. There are a few exceptions to this as follows:
- If you already own a home, you can use the equity from your property for the deposit
- If you are a council tenant and are looking to buy your current home under the Right to Buy scheme, most mortgage lenders will now accept your Right to Buy discount as a deposit.
As property prices increase, first time buyers are struggling to save enough money to buy a home. In cases like this the government has therefore introduced ‘Help to Buy’ to allow first time buyers to get on the property ladder.
Our expert mortgage advisors are aware of various mortgage deals available and can help you decide which mortgage deal best fits your needs.
When buying a home, you will need to save enough money to pay for other factors and not just your mortgage deposit. This also includes paying for your mortgage fees, moving costs and legal expenses. We have listed below all the possible purchase and moving expenses you may have to pay, to help you with your budgeting. The exact fees and amount you will pay, is dependent on the value of the property you are buying and your chosen mortgage lender.
Mortgage booking fee: Some mortgage lenders will charge this to secure a fixed-rate or tracker deal.
Cost: £99 – £250
Mortgage arrangement fee: Some mortgage products will incur a mortgage arrangement fee, in addition to the mortgage booking fee. This fee is either paid upfront or added to your mortgage debt. If you chose to add it to your mortgage, the cost will increase over the lifetime of your mortgage.
Cost: £1,000 – £2,000
Telegraphic transfer fee: Needs to be paid to the lender to transfer the amount you are borrowing for the mortgage to the seller’s solicitor.
Cost: £25 – £50
Mortgage broker fee: If you use a mortgage advisor to arrange your mortgage for you, you will need to pay a fee or commission, depending on the value of your mortgage.
Cost: £197- £597. However, this may vary if you need to use a specialist lender
Valuation and survey fees: Charged by the lender to value the property you are buying. The cost varies according to which survey you choose:
Home condition survey: Most basic and cheapest of all the surveys and often used for new-builds.
Cost: £250
Homebuyer’s report: More in-depth survey, assessing the inside and outside of the property, and also includes a valuation.
Cost: £400
Building survey: A complete survey generally used for older or unconventional properties. Although they are the most expensive, they are certainly worth considering, as it could potentially save you a lot of money if any structural problems are found with the property.
Cost: £600
Higher lending charge: Can be charged by lenders if you borrow most of the value of the property.
Cost: Approximately 1.5% of the amount you borrow
Searches: Your solicitor will arrange for the local authority to check whether there are any issues that could affect the property’s value. The local council can charge a fee for carrying out these searches and may also request that a drains search be done at the same time.
Cost: £250 – £300
Legal costs: You will need to instruct a solicitor to carry out the necessary legal work for you.
Cost: £850 – £1,500 plus VAT
Stamp Duty Land Tax (SDLT): Charged on all purchases of UK land and property over £125,000. However, the amount you will pay is dependent on the purchase price of the property you are looking to buy, and whether you have owned a home before as follows:
First home: First-time buyers are exempt from paying SDLT on the first £300,000 of the purchase price of a property up to the value of £500,000. All purchases in excess of £500,000 will pay the standard stamp duty rates as follows:
- £0 – £300,000: 0%
- £300,001 – £500,000: 5%
Next home: If you are currently or have previously been a homeowner, you usually pay SDLT on increasing portions of the property price:
- £0 – £125,000: 0%
- £125,001 – £250,000: 2%
- £250,001 – £925,000: 5%
- £925,001 – £1.5 million: 10%
- £1.5 million+: 12%
Second property: If you are looking to buy an additional property, you usually have to pay 3% on top of the normal SDLT rates as follows:
- Less than £125,000: 3%
- £125,001 – £250,000: 5%
- £250,001 – £925,000: 8%
- £925,001 – £1.5 million: 13%
- £1.5 million+: 15%
For example, if you buy a next home for £275,000 the SDLT you owe is calculated as follows:
0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the final £25,000 = £1,250
Total SDLT = £3,750
Information correct as of October 2021 – Source: www.gov.uk/stamp-duty-land-tax
Removal costs: Paid to the removal firm (if you choose to use one) to pack, transport and deliver your possessions to your new home.
Cost: £300 – £600
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