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What Is Remortgaging and How Does It Work?

Remortgaging, in simple terms, is a process whereby a homeowner can pay off their original mortgage with the proceeds of a new one.

Remortgaging, in simple terms, is a process whereby a homeowner can pay off their original mortgage with the proceeds of a new one.

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What Is Remortgaging and How Does It Work?

Remortgaging, in simple terms, is a process whereby a homeowner can pay off their original mortgage with the proceeds of a new one. 

There are many reasons to remortgage, such as: 

  • You are about to come to the end of your existing mortgage rate
  • You are looking for a better deal than your current mortgage provider can offer
  • You might be planning to borrow more money against your property

We can help you understand the ins and outs of remortgaging and give you insight into the benefits and considerations of this process. 

How Does a Remortgage Work?

A remortgage is the process where you can replace your already existing loan with a new one. Doing this can secure you with better interest rates, release equity, or consolidate your debts. 

If your credit score has significantly improved, there has been a shift in the housing market, or even if you have new personal financial goals, remortgaging can be a great option to capitalise on these changes. 

Assessing Remortgage Options:

Reasons for remortgaging can vary. Perhaps your financial situation has improved, and you want to reduce your loan size without incurring overpayment charges. Or, you want to renovate your home and a bigger loan will help cover the cost. Or maybe, you have an improved credit score and want to reduce the amount of interest, relieving financial stress on your household. 

The overall process of re-mortgaging can be quite quick, only taking a month or two. So, you want to make sure that all your research on lenders, interest rates, and potential savings is done before you make a decision. 

You can use simple online budgeting tools to help you assess the different remortgage offers and what they will provide you. Make sure to check your current loan provider first to see if they can offer you a better deal before looking elsewhere. 

Remortgaging My House:

So, you have made your decision, and you are ready to say ‘I am remortgaging my house!’ But there are steps you need to take before you can apply for a new mortgage. 

  1. Gather all essential documents that you might need, including proof of address, I.D., credit reports, proof of income etc. 
  2. Go to your chosen lender and complete an ‘Agreement in Principle’. This allows you to find out if the loan provider is willing to lend to you. 
  3. Take a step back and consider all the costs from this point on. There will be application fees, valuation fees and solicitor’s fees among others. This is your opportunity to check hidden fees as well, such as exit or early repayment fees for your chosen mortgage. 
  4. With your ‘Agreement in Principle’, you can now apply for your new mortgage. Here is where all your gathered documents will be needed. Your potential loan provider will perform a hard credit check, which can affect your credit score, and they will arrange for your property to be valued. 
  5. Receive your remortgage decision. 

Applying for a new mortgage can be tricky. It is a jargon-filled process with many hidden fees and confusing details. If you feel overwhelmed, or just want a helping hand, reach out to The Openwork Partnership’s expert advisers for assistance.

Remortgaging Details:

There are many things to consider, but the main remortgaging details you need are relatively simple. 

The documents you need are the same as when you applied for your first mortgage:

  • Proof of identity, such as a passport or driving license. 
  • Proof of address, dated within the last three months. It can be any official bill or bank statement with your address. 
  • Proof of income. Your last three months of payslips, bank statements, and your latest P60. This differs for self-employed people, who need to provide two years' worth of accounts, the last three months of bank statements, the last three years of SA302s, and the last three years of tax overviews. 
  • Proof of Mortgage and Affordability. Providing up to twelve months of bank statements, showing mortgage payments as well as your latest mortgage statement. 

Once you have been approved for a new mortgage, a solicitor will work with you and the lender to facilitate the payment of the existing mortgage, the calculation of fees, as well as the fund transfer for completing the process. 

Please note that this process, including the valuation of your property and the solicitor, can incur fees. To get around this, some loan providers offer these services for free. Take this into consideration when deciding who to secure your loan from. 

Benefits and Considerations of Remortgaging:

There are quite a few benefits to remortgaging your house, but there are also certain aspects to consider before you follow through with your plans. 

Benefits of Remortgaging:

Remortgaging can open the door to many possibilities. It’s important that you look across the mortgage market to see what rates and options are available. You can even remortgage to secure more equity for renovating your house. 

Depending on your circumstances, you can choose to remortgage with a new type of loan, moving from a fixed rate to a variable, or vice versa. Remortgaging gives you the flexibility to re-assess your financial situation and save money in the long term. 

Important Considerations:

There can be risks. You may incur charges such as arrangement fees, early payment fees and solicitor fees. Plus, remortgaging means that a hard credit check will be made, which can harm your credit score. 

Some of these can be mitigated, however. Make sure to time your remortgage with the end of your current mortgage term to avoid overpayment penalties. You can also look for a new lender who will provide valuation, solicitor, and arrangement fees for free as part of your deal. 

Careful financial planning is essential before you make any decision to remortgage. Make sure your goals are clear and you have good long-term financial habits to assist you moving forward. If you are looking for financial advice of any kind, The Openwork Partnership can help you achieve your overall financial objectives.

Concluding thoughts:

Remortgaging is quite a simple process from the outside, but choosing to remortgage might be a bit more complex. You might need more equity or might be looking to reduce overall financial burdens. In any case, remortgaging can help you to save money long term, or it can help you to achieve your financial goals. 

However, making big financial decisions, such as remortgaging can be stressful. The Openwork Partnership is here to help, with a strong team of financial advisers, up and down the country.

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