Many homeowners are aware of remortgaging, but few understand how it works. In this guide, we explain what a remortgage is, what one can be used for and how to assess if it is a viable financial option for you.
With the housing market expected to slump over the next few years, remortgaging could be beneficial for homeowners who want to improve their homes for a sale or to live in.
What is a remortgage?
Simply put, a remortgage means switching your current mortgage for a new one, without leaving your property. This can be for a number of reasons, but generally people switch between lenders to get a better rate of interest on their mortgage. Remortgaging is also a way to release equity built up in your home over time.
Why would you need one?
There are several reasons to apply for a remortgage. When rates are low and demand for property shrinks, remortgaging can be beneficial to reducing your interest rates and monthly payments.
Remortgaging can also be helpful if you want to make home improvements. By releasing some of the equity in your property for an extension, energy-efficient upgrades or plumbing and electrical work, you could also increase your property value.
How to assess your viability?
Evaluating your credit rating, payment history and financial health will help you to assess if you will be eligible for a remortgage. If needed, talk to a mortgage adviser or lender to get impartial advice about your viability for the loan term.
How long do they take?
Processing time for remortgaging can vary, but on average it takes between four and six weeks. It is important to remember that there are many factors taken into consideration when you apply. Your property will need a valuation and your financial health will be independently assessed before a decision is made on your application.
What are the fees?
In most cases, the fees for taking out a remortgage with a lender are less than buying a new property. The legal process for remortgaging is less complicated and therefore cheaper. You will not need a survey, as you already live in the property, and there is no stamp duty for remortgaging.
However, there are repayment charges, legal fees, valuation fees and costs related to arranging the loan. Make sure you assess your budget and financial options before applying for a remortgage.