How To Remortgage a Residential Home To A New Lender
Remortgaging your home could help you get a better deal or raise equity if your fixed-term mortgage is coming to an end. In order to get the best remortgage deals in 2022, you might want to switch lenders rather than stay with your current one. You could save thousands of pounds each year by doing so.
Should I remortgage with my current lender or switch to a new one?
The benefits of staying with your current lender:
Staying with your current lender is always the easiest option - this is called a 'product transfer'.
You can save time shopping around, and your current lender will probably offer you some perks to keep you as a borrower, like reducing the valuation or set-up fee. Additionally, you may save on legal fees (unless you make major changes) and your lender may not need to do further affordability or credit checks.
When you remortgage early with your current lender, you won't have to pay any early repayment or exit fees. In contrast, if you go to another lender, these fees can be very costly.
You may find that staying with your current lender is the easiest option if your personal circumstances have changed significantly, like becoming self-employed or decreasing income, although the lender may still require up-to-date information on your current situation.
Why it might be better to switch to a new lender:
You need to be considering not only your current financial setup, but whether you might be thinking of moving in a couple of years, in need of a payment holiday, wanting to build an extension, or taking some money out to help a son or daughter get onto the property ladder, or investing in a rental property.
If you remortgage with a new lender, you have a greater chance of getting a better deal since your options aren't limited by what your current lender offers. You should be able to remortgage at a lower rate if you have more equity in your home and healthy credit history. This could save you thousands of pounds over the course of your new mortgage term.
New lenders will be keen to encourage you to switch, by offering attractive rates, cashback schemes, or free legal fees
Remortgaging with a new lender can also enable you to pay off a large chunk of your mortgage without incurring overpayment fees that your current lender may otherwise charge.
Good reasons to remortgage with a new lender
- Another bank or building society will most likely offer a better rate than your current lender is offering.
- You want to release some equity from the increased value of your home, but your current lender won’t do it.
- You want to rent out your home because you’ve moved somewhere else – so you now need a buy to let (BTL) remortgage
- You want to move back into a property you’ve been renting out – so you want to remortgage your BTL back to residential lending.
- Your financial setup has changed – maybe you had an interest and capital repayment mortgage, but now a lower monthly cost, interest only mortgage would suit you better.
- You get regular lump-sum bonus payments and you want the option of regular “overpayments” on your mortgage – but your current lender doesn’t allow it.
- You've paid off your mortgage and own your house outright, but now you want to take out a remortgage on it. Read more »
6 Simple Steps to remortgaging with a new lender
Step 1: Check when your current mortgage deal is coming to an end
The most urgent reason for needing to remortgage is if your current fixed-rate mortgage term (usually two or five years) is coming to an end and you’re in danger of reverting to your provider’s standard variable rate (SVR) which can be wounding.
The average SVR in 2021 was 4.41% - this is much higher than the average rate for a two-year fixed rate mortgage in 2022, which is around 2.5%.
Some lenders will give you notice three months ahead that your fixed-rate term is coming to an end. Others may only tell you a month before you’ll revert to their SVR.
You want at least four to six weeks to be looking at getting an alternative mortgage set up, and for any survey and legal work to be completed. Don’t let yourself get panicked into making a quick decision to stay with your current lender.
Step 2: Find out the best deal your current lender can offer, then start comparing
Your current mortgage lender wants you to stay with them, so they'll start bombarding you with sales material.
Ensure they are offering you the best deal for your situation. You want to know if they're offering any discounts on legal and valuation fees.
After that, do some comparison shopping.
In order to find the best mortgage deal for your financial situation, you need to do more research than just calling around for a few quotes to check that your current lender's remortgage offer isn't too bad.
Do you know the best lenders to go to for the kind of mortgage you need?
In reality, how many banks or building societies are you going to contact?
The advice that each lender gives you will only be about the types of deals they can offer you. They won't give you "whole-of-market" advice about other types of mortgage products that might suit you better.
Step 3: Contact an independent mortgage broker
You can do all the legwork yourself if you have the time.
But you still won’t necessarily know which are the right questions to ask, and what you should be looking out for. And that goes beyond:
- The current value of your property
- How much you paid for it
- How much equity you have in it (how much is outstanding on your mortgage)
A mortgage advisor will prompt you to consider not just your immediate financial needs but your future property-ownership plans. They will propose solutions you might not be aware of as well as steer you clear of pitfalls that could cost you a lot of money further down the line.
Once this “fact find” is complete a good mortgage broker will find the best remortgage deal for your particular circumstances.
Step 4: Agree on the deal, submit the application, and a valuation is instructed
When your mortgage broker comes back to you with the best remortgage offer available on the market they’ll walk you through the “indicative figures”.
If you’re happy with the costs, you accept the offer, pay the upfront fees and your application gets underway.
You pay your broker’s fee and they help you gather together all the detailed information that’s needed, and submit your application for you. An experienced broker knows how much additional information to give the lender; enough to forestall any future queries, but no extraneous detail that’s going to lead them in the wrong direction.
The lender will instruct the valuation on your home.
These are free with high street lenders, who can usually arrange an inspection within 24 hours of submitting the application. This could be an online “desktop” valuation, comparing prices of similar properties.
Or it might be a “drive-by” valuation or a full physical inspection (a standard valuation).
Private banks and specialist lenders usually require a standard valuation and will charge you. The cost of this varies from lender to lender and on property value.
A well-connected broker knows which lenders instruct valuations quickly, which can be a factor if you’re up against a deadline.
You’ll pay for the lender’s valuation, so part of your broker’s recommendation will have been based on whether a particular lender will consider the lowest-cost or fastest valuation to suit your circumstances.
Step 5: Legal work
The lender’s solicitor will give your solicitor the list of legal documents they require (property searches, mortgage redemption statements etc).
If your broker has found you a lender who offers “dual representation”, the same firm of solicitors that they use (on their “panel” of approved solicitors) will be able to act for you as well, saving on costs and time.
Your solicitor will also arrange funds in order to redeem your current mortgage and register your home with the new lender.
If your application runs into any snags along the way your broker will know about it and will be looking for solutions. They’ll also be chasing up progress along the way.
Step 6: Completion
Working through the legal side of things can seem painstakingly slow, but a lot of this work is for your protection, so you don’t want your solicitors to cut corners.
Overall, a remortgage should take between four and eight weeks, from start to finish, depending on how complicated your application is.
As soon as the legals are signed off, your remortgage is authorised.
What documents will I need for a remortgage application?
If you can gather together the following information, your remortgage application should run smoothly.
- Proof of income
- Your last three bank statements
- Proof of salary bonuses or commissions
- Latest P60 tax forms
- Mortgage statements
- If you’re self-employed: an SA302 form
Contact our team of specialist mortgage brokers to secure the best remortgage deal
Refinancing your mortgage can be time-consuming if you’re going to thoroughly research all the deals available. And you may not be able to weigh up which option is going to suit you best. At Clifton Private Finance, we specialise in providing high quality mortgage refinance solutions for UK and international clients.