With interest rates at an all-time low, falling from 0.25% to 0.1%, you might be wondering if you could secure a better deal on your mortgage. It might not be a great time for saving your money, but it could be an excellent time for borrowing.

You may have heard of remortgaging before but never really delved into the details. Put simply, remortgaging is when you move your mortgage from one place to another. This could be with the same lender or with a different lender. Remortgaging allows you to change the terms, interest rate, repayment period and more.

Mortgages tend to be the biggest financial commitment you’ll ever make, so it makes sense to check you’re always on the best possible deal. Remortgaging comes with fees, so you won’t want to remortgage as often as you might change broadband packages. But it is certainly worth looking around to see what is available – particularly when interest rates are low.

Just because you already have a mortgage, it doesn’t mean you will be automatically accepted. You’ll need to consider your financial position and if changes to your mortgage could derail your repayments.

What is remortgaging?

Remortgaging is essentially applying for a new mortgage, paying off your existing mortgage with the new mortgage, and then continuing to make payments on the new mortgage. You might do this to secure a better deal, to release some equity from your home, or because a fixed-rate mortgage has come to an end.

Just as you would shop around for the best possible deal on your utility bills, you can also use remortgaging to secure a better deal on your monthly mortgage repayments. You could also pay back your mortgage sooner by switching to a lender that allows over-payment without a penalty.

If you’re considering a remortgage, speak to a specialist mortgage broker to find out how they can help you secure the best possible deal.

Things to consider before remortgaging

Remortgaging is not something you should do on a whim. You need to consider your financial situation and make sure you won’t be losing out as a result of the changes. If you do find a cheaper mortgage, consider the following before making the switch.

1. Find out if the lender is offering a fee-free mortgage. Many lenders will do this to tempt customers from other lenders to switch their mortgage to them. If there is a product fee, you could lose money by switching.
2. Check if your current lender charges early repayment fees. Since you will be closing your mortgage account early, there may be a fee attached that could make remortgaging more expensive. The early repayment fee might be a fixed fee or a percentage of the outstanding balance.
3. Calculate your current LTV as it will be different to when you first applied. The LTV is your outstanding mortgage divided by the value of the property. So if you have an outstanding mortgage of £100,000 and the property is worth £250,000 the LTV is 40%.
4. Make sure you are ready to apply for a mortgage. You’ll have to jump through the same hoops as the first time you applied for a mortgage. Check your credit score, pay down your debts, and keep your monthly spending in check as you prepare to apply.
5. Use a mortgage broker to find the best deal. You’ll save money in the long run if you seek professional advice. A broker might come with a fee, but when they can save you money in fees and interest, this will nearly always pay for itself.

When should you consider remortgaging?

Remortgaging isn’t as simple as switching your Sky package, so you should only consider doing it when it is of most benefit to you. This could include:

• When interest rates fall
• When your current mortgage product is up for renewal
• When you want to switch from interest-only to repayment
• When there is an opportunity to secure a better rate
• When you want to be able to make overpayments
• When you want to borrow money by releasing equity

The most common reason for remortgaging is when your fixed-rate mortgage comes to an end. The most common term is 2, 3 or 5 years. After this period, you will be moved to a standard variable rate.

With this type of mortgage, your payments could go down with interest rates, but they can also go up. If you want stability and some reassurance that your repayments will always be affordable, you can look for another fixed-rate mortgage.

Curious about remortgaging? We help homeowners navigate this complex area and secure the best possible deal. Find out more about remortgaging with Niche Mortgage Info here.

How much does it cost to remortgage?

The cost can vary depending on your home and current situation. Staying on the same mortgage product for the entire term of your mortgage would be incredibly rare, and most people will shop around to find a better deal once their fixed term comes to an end.

If your circumstances change at any point during your mortgage term, you might think about increasing or lowering your payments. Likewise, if you decide you want to release equity from your home for improvements or big expenses, you will need to remortgage. Before making any big financial commitments, you need to ask: how much does it cost to remortgage?

While you might save money on your monthly repayments, with fees and other expenses to consider, you might not be saving money in the long term. Read on to learn about the expenses associated with remortgaging

Remortgage fees

The first thing to consider is the cost of remortgaging. You might be drawn in with the temptation of lower interest rates, but if the fees are added to the final mortgage amount, this could lengthen the mortgage term, and increase the amount you pay overall.

These fees won’t apply to every application, as all lenders are different, but you can expect to face a few of these remortgage fees throughout the stages of the application. Remember that your time is also valuable. Remortgaging is an involved process that will require you to prepare financial information, just as you did for your initial mortgage application. Consider this in your affordability calculations.

The arrangement fee

The arrangement fee is paid to the lender to set up the new mortgage. You may also see it referred to as the product fee. The arrangement fee will vary by lender, but you can expect to pay a higher arrangement fee with a lower interest rate.

Lenders might charge this as a lump sum upfront, or they might add this to the mortgage. Paying upfront might be a bit of a shock to your finances, but the alternative is to pay it with your mortgage. This means there will be interest added to the payments. More info about this here.

Your legal fees

You already own the home, so you don’t need to go through the usual transfer of ownership. But you will need to legally change the details of the lender. This means you’ll need to instruct a solicitor or conveyancer to handle the paperwork on your behalf. If you were happy with your solicitor from your original mortgage application, they may offer a discount for handling your remortgage.

The valuation fee

Before you can remortgage your property, you will have to pay for a valuation. This will work to your advantage if you are hoping to release equity from your home. Some lenders include the valuation in their fees, but others will charge this as a separate fee. Make sure you check with the lender so you don’t get caught out with unexpected charges.

The early repayment charges (ERC)

When you pay off your mortgage early, some lenders will charge a fee. Check the fine print to find out if you will be subject to these additional charges. If you are remortgaging in the middle of a fixed-term deal, you will be subject to the early repayment charge. But once you move onto the standard variable rate, the ERC will no longer apply.

The broker fee

If you work with a mortgage broker to find the best possible deal on your remortgage, they will charge a lump sum fee. This might feel like an added expense you can do without, but choosing to work with a broker has its obvious advantages. When you go straight to your bank or other lenders, you might not be offered the best possible deal. A broker can help you find the best interest rates and lowest fees for your circumstances.

To find out more about remortgaging with Niche Mortgage Info, get in touch with our team today. We can help connect you with the right lender for your circumstances, no matter your situation.

Since the Mortgage Market Review, many lenders have been reluctant to engage with existing customers as they are unable to offer advice. This has affected Halifax for Intermediaries and BM Solutions (formerly Birmingham Midshires) customers. This means that anyone using these services would have to change lenders if they want to make changes to their mortgage, rather than accessing different products from the same lender.

By working with an intermediary such as Niche Mortgage Info, we can provide access to these products for existing customers. This means that these customers can transfer their mortgage to a preferable product free of charge.

A product transfer can help you in the following ways:

• Access better interest rates
• Complete the process without status checks
• No valuation fees are required
• No charge for legal fees
• Switch to fixed payments
• Quick processing times

Why trust Niche Mortgage info with your transfer?

We offer access to the brokers that can get you the best possible deal. If your aim is to transfer your mortgage products without incurring any fees, we can help make this happen. Through our extensive network of whole-of-market brokers, we can help to match you with the right person for your situation.

Get in touch today to learn more about product transfers with Niche Mortgage Info.

If you already own a home, you may reach a point where you think about remortgaging. Securing your first mortgage allows you to move into the home, but remortgaging a home is essentially just moving borrowing to a different lender to secure a better deal.

Some lenders will allow you to use the opportunity to release some equity from your home. You might do this to carry out some home improvements, clear your debts or take an expensive holiday. Sometimes, remortgaging will allow you to secure a better deal on your mortgage. 

With more equity in your home, you will be in a better position than when you first bought your home and only had your deposit. This gives you some bargaining power and allows you to move to a different lender to get a better deal.

Lenders are keen to attract borrowers from their competitors. This means you can shop around for a better deal and adjust your mortgage to your current financial situation. While some people are happy to keep paying their mortgage for longer if they have smaller monthly payments, others will be keen to make overpayments and reduce the term – and overall cost – of their mortgage.

These are all achievable by remortgaging your property, but you will need to understand the process first. In some situations, you could be worse off by remortgaging, so it’s important to speak to the experts before making any big decisions.

How does remortgaging work?

Remortgaging is a lot like securing your first mortgage, but this time, you can also take into consideration the equity you have already built up in your home. This might allow you to secure a better deal.

Sometimes it pays to switch, and sometimes it doesn’t. You need to look at the size of the outstanding mortgage and then think about how much it will cost to switch. Many lenders will charge something known as an arrangement fee, which can wipe out your chances of making any savings.

You apply for remortgage in the same way you would apply for a first mortgage. Lenders will look at your financial situation, your recent financial behaviour, and your current employment. If your financial position has changed significantly, you might be unable to remortgage.

How does the value of your home impact the remortgage process?

The value of your home may have changed significantly since you first moved in. You may have renovated the property, or you may have moved into an up-and-coming area. Lenders will always want to check the value of the property hasn’t fallen since you purchased it, but an increase in value can work in your favour.

In the case of falling property prices, if you are left with negative equity, you will be unable to remortgage without investing more in the property. Some structural issues may also make it difficult to secure a remortgage.

In many cases, lenders will conduct a valuation from the curbside, so you will need to tell them about any changes made to the interior that will increase the value. If similar properties have sold in the area for significantly more, you can send details to the lender.

If the value of your home has increased, this can be good news for you as it means you are applying for a mortgage with a smaller LTV. If you remortgage and are unable to keep up with the repayments, the lender will be able to sell your home for a higher price. This gives them added security.

Remortgaging to lower your costs

If your fixed-rate mortgage has come to an end, you might be interested in remortgaging to help secure your finances. A variable rate mortgage might not be suitable for those who like to be able to budget. While the chance of lower interest rates may be tempting, a rise in the interest rates could make some lending products unaffordable.

Another way to make your mortgage more affordable in the short-term would be to remortgage for a similar term to your original mortgage. With more equity built up in your favour, you could spread out the payments over another 25 years, resulting in lower monthly payments. Remember that longer terms will increase the total amount of interest you will have to pay.

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Remortgaging for flexibility

Many people find they are in a better financial position a few years into their mortgage repayment schedule. This might be down to greater financial security, lower mortgage payments when compared to rental payments, or making career progress. When you are in a better financial position, you might find that you want to be able to make overpayments to clear your mortgage faster.

Not all mortgages allow you to do this, so you may wish to remortgage to be able to make overpayments. There are also options to use a savings account to temporarily freeze your interest payments. Provided you don’t touch the savings, you can offset the interest, but the savings will always be there if needed.

Remortgaging for stability

Some people will use remortgaging to release some equity from their home. By borrowing a little more than you need, you could clear your outstanding debts and start with a clean slate. This can be helpful, but you must pay close attention to the long-term cost.

While mortgages are offered at much better rates than overdrafts and credit cards, you could end up paying back a lot more over the term of the loan. Remortgaging to clear your debt should be a last resort, as it can put you in a worse financial position in the long-term.

What are the disadvantages of remortgaging?

There are a few disadvantages that you need to think about before moving forward.

• If your financial position has changed for the worse, or if you have recently become self-employed, you might struggle to remortgage. This is why it is important to select a mortgage product that will always be affordable, as no one knows what the future holds.
• By stretching your debts over a longer time frame, you are increasing the overall amount you pay for your home. While you might only be concerned about your monthly repayments, it’s important to think about the lifetime value of the loan.
• Many remortgage products come with fees. This can cancel out any savings you could be making in the long and short term, so make sure you understand the full cost before moving forward.
• By extending the term of your loan, you are extending the period that your home may be repossessed if you are unable to keep up with the payments. When the finish line is in sight, it makes sense to pay off the mortgage rather than remortgage for short-term gains.

What happens when you remortgage?

Remortgaging is simply moving your borrowing from one lender to another. You will continue to live in your home and will own the same amount of equity unless you decide to release some. As this is only a financial arrangement with your lender, you will not need to go through the process of conveyancing again. However, you may need to arrange a valuation of your home.

Working with a broker to remortgage

Understanding if you would be in a better or worse financial position after remortgaging can be difficult to get your head around. This is where working with a mortgage broker can help. Not only will they have access to all of the latest lending products, but they will also be able to guide you towards the lenders most likely to accept your application.

A mortgage broker can help you to navigate the best deals out there and determine which ones offer value for money. Start by being honest with your broker about what you are hoping to achieve. If you simply want to lower your monthly costs by any means necessary, they can help you achieve this. But if you are determined to pay back your loan as quickly as possible, they can help you find a lender that allows overpayment. If you don't know what ask, see our previous posts. 

Remortgaging to buy a second property

If you have built some equity in one property, it is not uncommon to use this to purchase another property. This is popular among property developers to help manage their finances. You might want a small property in a city where you work, or you might be looking for a holiday property in the countryside.

It’s important, to be honest with the lender about the purpose of the second property. If you are buying a holiday residence, they might scrutinise your finances more than if you are purchasing a second property as a buy-to-let investment. This is because the buy-to-let property will be expected to generate some income which will offset the mortgage payments.

Again, working with a mortgage broker will help you to determine the best course of action for your circumstances. Since you will be making a financial decision that could impact your life for the next 20 years, it makes sense to get some guidance and support along the way.

Applying for a mortgage for the first time is a steep learning curve. You will be introduced to many new concepts and terms that may make the whole process feel a lot more daunting. The mortgage underwriting process is one such example of a complex and opaque field. 

In this guide, we will break down the underwriting process for the typical mortgage application. We’ll outline what the process is, who is responsible for it, the steps in the process and the things you can do to increase your chances of being accepted.

What is underwriting?

Every financial application will undergo a process known as underwriting. This process calculates the level of risk for the lender so that they can determine how much interest should be charged on the loan. It also helps the lender decide if they are happy to take on the risk. 

If the risk is considered to be too high, your application may be rejected. If the risk is high but still acceptable, you may be offered a loan at a high rate of interest. And if the risk is low and you are very likely to be able to pay the loan back in full, you will be offered a low-interest rate.

What is an underwriter and what role do they play in the mortgage process?

The underwriting process is carried out by a mortgage underwriter. These are highly trained individuals who work for mortgage companies. They are tasked with assessing the risk attached to each lending application, whether it is for a mortgage or a personal loan.

The mortgage process needs underwriters to help determine the interest rate you will pay on your mortgage. The mortgage underwriter will also play a role in determining the affordability of a loan and deciding how much you can borrow.

Why do banks use underwriters?

Banks use underwriters and the underwriting process to manage their risk. Every financial decision comes with a certain level of risk. In the mortgage industry, lenders are trying to manage the risk that a borrower might be unable to keep up with the payments. 

If the lender is forced to repossess the property, there is always the chance that the property will sell for less than it was originally purchased for. This would leave the lender out of pocket, as they would not be able to get their full investment back.

When does the underwriting process happen?

When your mortgage application reaches the underwriting stage, there is still a chance it could be rejected. The underwriting stage happens after you have gone through the soft credit check and the scorecard steps. 

At this stage, the lender brings together all of the information they have about you and the property to determine if lending you the money to buy the property is worth the risk.

After the underwriting process is completed, you will be given a final decision on your mortgage application. This can be an incredibly stressful time for applicants, so it helps to understand the steps in the process so you can be prepared.

What are the steps in the underwriting process?

Understanding the steps in the underwriting process can help you to ensure your application succeeds. When you understand what the lender is looking for in advance, it can be easier to pre-empt any potential problems.

Remember that the underwriting process is not just about assessing risk to the lender, it’s also about making sure that the mortgage is affordable and responsible. The validity of your documents will be scrutinised and any information you have provided about your income, expenses and expenditure will be put under the spotlight.

Most mortgage providers in the UK will follow the same underwriting process which can be broken down into the following sections:

• Policy rules. Every lender will have their old policy rules which your application must satisfy. This can include things like your age, your credit history, LTV and your legal status. Your mortgage broker or advisor should help you to understand if you meet all of these requirements before you submit your application.
• Credit reporting. The mortgage underwriting will look at your credit history to determine if you are likely to be able to repay your mortgage. They will use statistical models to compare your application to other applications in the past.
• Fraud checks. These checks ensure that you aren’t laundering money or lying about your identity. They will also look at the source of your deposit, so you may have to provide more details. If you were given your deposit as a gift, for example, the underwriter may need more details to satisfy this section of the application.
• Affordability. Every lender will use a different calculation for affordability. In general, this calculation will take into consideration the information that is gathered during the underwriting process. 

For example, the underwriter will look at your current financial situation, ongoing debts, average expenditure and potential for increases to your income. They will then determine how much they are willing to lend you based on this information. 

Many lenders will calculate affordability based on a multiple of your annual salary, typically 4-5x your annual income. For if you’re earning £35,000 per year, you might be offered between £140,000 to £175,000.

• Property valuation. The final part of the puzzle is the property valuation. Lenders will carry out their valuation to make sure you aren’t paying too much. They will also look at things like the age and condition of the property and the construction materials to make sure the property won’t fall in value unnecessarily.

How long does this process take?

There isn’t a fixed time for the underwriting process. It will vary depending on many factors including:

• The details of your application. If they require further information, this can slow things down.
• The experience level of the mortgage underwriter. A new underwriter might be slower to work through the checks.
• The number of applications. During busy times of the year, such as over Christmas and New Year, office closures might lead to delays in your application. Spring is also a busy time for applications so you may have to wait longer.

What might cause an application to be rejected?

There are a few different reasons that a mortgage underwriter will reject your application. These can typically be put into two categories. Either your situation changed while the application process was taking place, or the underwriter discovered something in your application which makes you high risk.

If you have been made redundant while you are waiting for a decision, this could impact your ability to repay your mortgage. In this situation, it might be wise to wait until your finances improve before you move forward with another application.

If your mortgage is rejected because the underwriter has unearthed something which makes you a high-risk borrower, this will need to be addressed before you submit another application. The underwriter may discover a discrepancy between your stated earnings and what is coming into your account every month. Or they may have unearthed an undeclared debt which changes the risk level for the lender. 

In some cases, it is items on your bank statement which can cause an underwriter to reject your application. Gambling websites appearing on your bank statement is a common reason for a mortgage application to be rejected. In some cases, applications have even been rejected for having foul language in payment references. 

While it might seem funny to send money owed to a friend with a swear word in the payment reference, this could impact your ability to secure a mortgage. 

How can I increase my chances of being accepted?

Working with a broker can help you to avoid some of the most common reasons that applications get rejected. A broker will be able to assess your finances and your current situation and determine the likelihood that your application will be accepted. If there are any issues with your application, these can be cleaned up before it gets to the underwriting stage.

A rejected application can be a huge blow to your confidence and it might leave you wondering if you will ever be able to get a mortgage. If your application is rejected, you should find out why the mortgage was declined. Lenders will usually tell you the reason, but you may need to chase this. In some cases, you simply need to increase your deposit or reduce your other debts to make your application lower risk. 

If a mortgage application is rejected at the soft check phase, this is unlikely to show up on your credit report. But an application rejected by an underwriter will show up on your credit report. If this happens, it’s a good idea to wait a while before submitting another application.

The best way to increase your chances of being accepted while also making the application process less stressful is to work with a broker. This is particularly true for those with unique financial situations such as business owners and the self-employed.