People remortgage for many reasons – they might be reaching the end of their current mortgage deal, their current deal might not be suited to them, they may wish to release equity in the property or may simply be trying to reduce their monthly repayments.
This guide will shed some light on how the remortgaging process works.
1Planning for a remortgage
When thinking about remortgaging it’s important to take into consideration the costs and fees you may be required to pay.
Product fees – Mortgages often come with an application or booking fee and there can be some other charges for setting up a mortgage.
Lender’s valuation – Your mortgage lender will carry out a valuation to make sure that the property is worth what you are planning to remortgage it for. A standard valuation report can cost from around £125-£2,870, depending on the value of the property. At M&S Bank, however, we offer customers one free standard valuation report when remortgaging to us.
Existing mortgage lender – Your existing mortgage lender may require you to pay an early repayment charge. Each lender will, however, have different terms and conditions, so it’s worth speaking with your mortgage provider to find out what the position is.
Good credit score
Having a good credit score can be just as important in securing a remortgage deal as it was when taking out your original mortgage. For this reason it can be worth avoiding anything that might have a negative effect on your credit rating. For example, high levels of debt, any mistakes on your credit report and applying for several loans or credit cards in a short period can all have an impact on your credit score.
2How much can you borrow?
When applying for a remortgage there are several essential pieces of information that lenders need to know. These include:
- How many people are applying?
- What is your yearly income?
What are your regular expenses? The following will often be considered:
- Loan and credit card repayments
- Council tax
- Domestic utilities (gas, electricity, water)
- Insurances (buildings and contents, car life, payment protection)
- The cost of owning a vehicle (tax, insurance)
- Child maintenance payments
Why not use our mortgage calculator to get an idea of how much you might be able to borrow?
3Finding the right mortgage
You can call us to talk to an advisor who will be happy to take you through the range of M&S Bank Mortgages and your options. You can contact us on 0800 923 1536. Lines are open 8am-8pm Monday to Friday and 9am-1pm Saturday (excluding bank holidays).
You can also view our range of mortgages online
Alternatively, you may choose to talk to a mortgage broker or independent financial advisor.
What is a loan to value ratio?
Simply put, your loan to value ratio is the size of your mortgage in relation to the value of the property. It is usually given as a percentage. For example, if your mortgage is £300,000 and the property is valued at £400,000 then your loan to value ratio (LTV) would be 75%.
4Find a conveyancer/solicitor
Conveyancing is the legal process undertaken when you are buying a home. However, if you decide to remortgage with a new lender, legal work will be required to remove your original lender’s interest and register it with your new lender.
5Complete a full mortgage application
Speak to a bank or building society
You may choose to look towards a bank or building society for mortgage advice. M&S Bank offers advice on our range of mortgages. We will be able to provide advice on our most suitable product for you, depending on your circumstances. If you want to apply, we will take you through the application.
Consult a mortgage advisor
Mortgage lenders and brokers that provide advice will conduct a review of your individual needs and circumstances. This is commonly called a fact find. Where appropriate the mortgage advisor will then make a mortgage recommendation that meets your needs and objectives. Some brokers will search for a suitable mortgage across a wide range of lenders, sometimes referred to as the ‘whole of market’, while others will have a panel of lenders that they work with.
How to prepare for your application
You might want to think about gathering all the important and required documents that you’ll need when applying for a remortgage. These could include:
- Your last three months’ payslips
- P60 form from your employer
- Bank statements of your current account for the last three to six months
- Statements from your savings accounts
- Proof of benefits received (if applicable)
- Statement of two to three years’ accounts from an accountant if self-employed
- Tax return form SA302 if you have earnings from more than one source or are self- employed
- If you are self-employed you should look to provide information alongside your tax return, which supports what the SA302 says about your income, such as bank statements
- Utility bills
- Passport or driving licence as proof of identity
You may also need to provide a list of your outgoings. This often includes things like outstanding borrowing on credit cards and other loans, as well as household bills, including council tax, utility bills, insurance policies, and general living expenses.
When calculating the total cost of your mortgage you are normally provided with an Annual Percentage Rate of Charge (APRC). The APRC is calculated using the annual rate of interest and also taking into account other fees that are part of your mortgage such as valuation and arrangement fees. All lenders must use the same calculation method for an APRC so you can compare costs.
Your lender or broker should calculate the full cost of your mortgage for you. However, there are other fees that can be incurred, such as mortgage arrangement fees and mortgage broker fees. So it can be wise to ask for these to be explained to you. For more information on the other potential costs you may want to look at What else to budget for.
Have a valuation completed
Your mortgage lender will arrange a mortgage valuation. A mortgage valuation is essentially for the benefit of the lender – it makes sure that the value of the property is sufficient security for the amount being borrowed.
Have your application accepted and receive offer
When you receive an offer you often have a certain number of days to consider the offer and accept it. Once all the paperwork is finished and approved, your mortgage lender will contact you and your conveyancer.
Your existing mortgage lender will calculate the remaining mortgage up to the date that has been set for the transfer of funds. Your conveyancer will arrange this from the details you have provided to them. If you have asked for any additional funds as part of the remortgage, to make home improvements for example, then your conveyancer will confirm with you when you will receive those funds.
The material contained in this article is intended for information purposes only and not as advice.
You should obtain professional legal or other advice if you are unsure about the effect on you of any matter in this article.
Published: 26 January 2018