Homeowners in the UK regularly remortgage their property. But anyone switching lenders may not realise they need remortgage solicitors.
Remortgaging is when a homeowner moves from one lender to another without moving home.
You can also remortgage with the same lender, often when a fixed-rate deal comes to an end.
- Other reasons for remortgaging are:
- To realise some of the equity in the property;
- Fund repairs, renovations or add an extension;
- Switch ownership from one person to another, often as a result of a relationship breakdown.
Your remortgage solicitor will deal with all the legal work required, including working directly with your lender.
What to do when you remortgage
Ideally, the first port of call for anyone considering a remortgage is to talk to their current lender or to get advice from an independent financial or mortgage advisor.
Many lenders are offering longer fixed-rate deals, allowing homeowners to lock in their repayments at an affordable level while interest rates remain low.
Fixed-rate deals offer certainty that your repayments won't go up if interest rates do. However, the risk is that you may end up paying more than you need to if interest rates were to fall.
Talk over your options in full with the lender or broker to get the best deal for your circumstances.
What fees will I pay?
Most mortgages come with an arrangement fee that you must pay to the lender.
Often they will offer you the option of adding this fee to the loan. But this can work out more expensive in the long run as you will end up paying interest on the fee.
If you're moving to a new lender altogether, they are likely to want a valuation to ensure the property is worth the money they're lending on it.
You will have to pay this valuation fee, although some mortgage offers come with a free valuation.
Again, consider paying this fee up front to save yourself money in the longer term.
Do I need a remortgage solicitor?
Yes, you will need a conveyancing solicitor to carry out the essential legal work on the remortgage.
Some lenders will offer free legal work. Do check the small print as it's likely you will be paying for these legal fees in some other way.
Homeward Legal works with expert remortgage solicitors who are experienced in completing all types of conveyancing work.
What is equity?
Equity is the difference between the value of your home and the outstanding mortgage remaining on it. The more equity in your property, the better the mortgage deals you can access.
Lenders will only lend a percentage of the value of the property, typically 75 or 80 percent. This is known as loan-to-value.
Here's an example of how that might work in practice.
Your home has been valued at £275,000 and you currently owe £175,000 on the mortgage. Your equity is therefore £100,000 and the loan-to-value is 63 percent.
You want to remortgage by borrowing an additional £50,000 to extend your home. That would take your outstanding mortgage to £225,000, reducing the equity to £50,000.
Your new mortgage's loan-to-value is now 81 percent.
Early repayment fees
Most lenders will impose Early Repayment Charges (ERC) when you pay off some or all of your mortgage early.
This might affect your costs when it comes to remortgaging.
ERCs are typically part of the terms and conditions of a special deal. For example, if you take a five-year fixed-rate mortgage and want out of the deal after two years, you will typically pay an ERC for doing so.
All remortgage solicitors will discuss the fees and charges you are likely to be paying.