All the latest personal finance news - helping you make the most of your money

Home
Mortgages
Loans
Insurance
Savings & Invs
Debt
Endowments
Banking
Bills
Cards
Pensions

Mortgages

Insurance

Find ..

Tools

News, features & guides

Associate Article

Printer friendly version

Remortgaging

What is a remortgage?

The term 'remortgage' simply means switching your mortgage deal and/or mortgage lender.

One of the more common reasons for re-mortgaging your property is to reduce costs. By simply changing to a lower interest rate you can benefit from lower monthly repayments. You could also keep the monthly repayments the same, therefore enabling you to repay the loan quicker and reducing the overall term of the mortgage.

Why would you want to remortgage?

People decide to move their mortgage deal from one lender to another for many reasons. These include:-

To get a better deal
To save money
To raise additional funds to pay for home improvements
To raise additional funds to consolidate loans
To raise money to pay for a holiday or other large expenditure
To avoid paying your current lender’s standard variable rate
To fix your monthly mortgage payments
To move to a lender offering a more flexible mortgage for example one where you can make overpayments or even offset your savings against your mortgage payments.

Who offers remortgages?

Nearly all mortgage lenders – both banks and building societies, offer remortgages. The deals will vary depending upon:

How much you wish to borrow
How much you wish to borrow as a percentage of the value of your property (usually called loan to value) will affect the deal your lender offers you. The more attractive deals can be found where your loan to value percentage is less than 75%. This is because this poses little risk to the lender as should you default on your mortgage payments, the lender can sell your house and is highly likely to get back what you owe them even if house prices have fallen.

Your credit history
If you have a good credit history – i.e. always pay your mortgage and other bills on time and have never missed payments or made late payments in the past, you have no CCJs (County Court Judgements) or defaults against you. The amount of debt you have and the length of time you have been at your current address can also affect your credit rating.

Why you want to remortgage
Some lenders are happy to lend you money whatever your reason for applying for a remortgage. Other lenders are not happy to lend to you if you are raising money for debt consolidation (to pay off credit card bills, loans or other forms of debt). Some lenders will not allow you to remortgage if you have not been with your current lender for at least a year.

How much you earn
Just like when you first applied for a mortgage, when you remortgage, your new lender will want to know how much you earn to make sure that you will have sufficient income each month in order to make your mortgage repayments. Lenders will usually require proof of your earnings. The proof required will vary from lender to lender – some require three months payslips, other will accept copies of your bank statements showing your salary being credited whilst others will write to your employer to request a reference.

How much your property is worth
When you apply for any type of mortgage, whether this be to buy your home or a remortgage, your lender will want to ensure that the property you wish to mortgage is worth sufficient value for them to lend money against. Most lenders will request a mortgage valuation when a valuer is sent out to the property to value it. Some lenders, in an effort to speed up turnaround times and to keep costs low, will use a desktop valuation system that will value your property based on property valuation figures for your area. Most, but not all, lenders will offer a free valuation to encourage you to move your mortgage to them

What actually happens when you remortgage?

When you remortgage, you transfer your existing mortgage agreement to another lender. A re-mortgage will mean that the new lending company will pay the old provider the balance of the amount outstanding and you will continue making your payments to the new lending company.

Disclaimer:
myfinances.co.uk is not authorised to give advice under the Financial Services and Markets Act 2000.

Terms:
By using this site, you are deemed to have accepted our terms of use.

myfinances poll

myfinances is running a poll to get your views and predictions on house prices.