When your current mortgage deal is close to expiring, you may want to remortgage so that you don’t end up on the standard variable rate (SVR), which can increase your repayments.
Here’s the remortgaging process explained, whether you’re looking to switch your mortgage lender or find a new deal with your current one.
Step-by-step guide to the remortgage process
1. Your current lender writes to you
If you’re on an introductory deal such as a two or five-year fixed rate, your lender will contact you well in advance of the expiry date, so you’ll know when you’re due to revert to the SVR.
Assuming the SVR is higher than your current rate of interest (which tends to be the case, though exceptions do occur), this is the time to investigate whether you can save money by remortgaging.
2. Ask your lender for a closing balance
Your lender will provide you with a redemption statement on request.
This tells you the amount needed to pay off the remaining mortgage loan (including fees). This is the amount you’d need to borrow if you choose to remortgage.
Again, make sure you have this information in good time.
3. Find a mortgage broker
The easiest way to be sure of the best deal when you remortgage is to go through a mortgage broker.
An independent mortgage adviser or broker can search the whole of the market to find the best deal for your circumstances, and usually has access to deals not available on the open market.
Read about mortgage broker fees.
4. Decide which type of mortgage you want
Decide whether to go for a repayment or interest-only mortgage.
Interest-only mortgages have lower monthly repayments, but you’ll need a way of repaying the loan at the end of the mortgage term.
5. Instruct a solicitor (if moving to a new lender)
If you’re changing lenders, you’ll need to appoint a solicitor or conveyancer.
They will sort out any paperwork needed in the process e.g. drawing up and signing the mortgage deed and transferring the title of the property.
6. Eligibility and affordability checks – get your documents ready
Having documents ready in advance will help speed up the remortgage process.
The broker or bank will want to see some or all of the following:
- Three months’ bank statements, payslips or both (if self-employed, your last three years’ accounts)
- Utility bills
- Credit card statements
- Address details (for the last three years)
- ID such as a driving license or passport
- Records of regular outgoings, such as subscriptions
- Proof of any bonuses or commission
- Your P60.
7. Lender issues a mortgage in principle
If happy with your documents, the mortgage provider will give you a mortgage in principle (MIP), a written indication of how much they might be prepared to lend.
This isn’t a mortgage offer, and it’s not binding, but it’s a useful indicator of what you may be able to borrow.
Also, if you’re remortgaging to buy a new home, estate agents take these seriously. A MIP lasts between 60 and 90 days, depending on the lender.
The lender will arrange a valuation, which the customer generally pays for, although sometimes it is included free of charge.
This simply confirms the house is worth the amount you’re asking to borrow.
It does not replace a survey to check the building’s condition, and in fact, is sometimes done online.
9. Mortgage application time
If you already have a MIP and are applying for your mortgage with the same lender, you’ve done part of the legwork already.
If you haven’t, the mortgage broker or lender will ask you about your job and the industry you work in, your income, spending, credit history, deposit size and any other financial commitments.
The more evidence you have of being a reliable repayer of credit, the more likely you are to have your application approved.
10. Receive mortgage offer
If the lender approves your mortgage application, they will send you and your solicitor a mortgage offer letter.
The offer usually lasts six months and outlines the amount you can borrow based on the credit checks, income verification and property valuation, together with any conditions.
Check the offer thoroughly to ensure the details are correct. Let the lender know if anything is wrong or if your circumstances have changed in the meantime.
11. Solicitor draws down mortgage funds and pays off old mortgage
The solicitor requests the money from the new lender and uses it to pay off the old mortgage.
12. New mortgage registered at the Land Registry
Your solicitor registers the mortgage holder’s details with the Land Registry. If applicable, the title deeds are transferred to the new lender.