12 Sep, 2023/ by Homeward Legal /Remortgage

We are in uncertain times, with problems seemingly coming from all sides impinging on the ability to budget and to look to the future with any investments.

The housing market is stuttering with increasing reports of some homeowners falling into negative equity and economists predicting interest rates could impact some mortgage repayments.

And, when it comes to remortgaging, the latest statistics from LMS for June 2023 don't paint a completely rosy picture:

Average monthly payment increase for those who remortgaged their property in June 2023The percentage of borrowers who increased the size of their loan in June 2023The percentage who took out the most popular product, the five-year fixed rate loan in June 2023The percentage who identifying lowering their repayments as the reason for remortgaging in June 2023

All of which uncertainty raises the question as to whether it is a viable time to look at remortgaging your property. This article discusses the process of mortgage and the benefits and negative aspects of going through with it.

What is the purpose of remortgaging?

There are quite a few reasons why people decide to remortgage their property, rather than, say, take out a standard loan or look into the possibilities of equity release.

According to Mortgageable, the top reasons are:

  • Different mortgage products - A popular reason for remortgaging is simply that there is a better rate on a different mortgage product, which makes repayments more beneficial and manageable. 

Or the terms you are currently on with your mortgage lender are coming to an end (for example, a favourable fixed-rate term is ending). However, if you're comfortable accepting the new terms, you don't have to remortgage.

  • Borrowing money for specific projects - you might want to take out some of the equity accrued in your home (or you are mortgage-free currently) to pay for a variety of options, including home improvements, extensions, a new car, holidays, paying off debts and so on. 

You'll almost certainly have to provide information on your plans and evidence that this is what you've spent it on to satisfy your lender as part of their terms.

  • Changes in circumstances - you might currently co-own a property with a spouse or partner, or you were part of a group who combined their finances to buy the home originally. 

Things change in life, of course, and you might be going through a divorce, or one or more of your co-mortgagees have simply decided to move on to other places, and you want to buy out their portion of the building's ownership.

  • Buying a second property - you might be wanting to get into the rental business and have found a property to do up and put on the letting market. If you have sufficient equity in your current market, this might be an option, although your lender may like to take your potential rental yields into consideration when deciding whether to grant your application.

There is another increasingly common reason for a homeowner to want to remortgage their own property. It's a variant on the famed “Bank of Mum and Dad”. 

Over the decades, it has become increasingly difficult for first-time buyers to step on the property ladder, because house price increases have far outstripped the rises in disposal income, and the sale of council houses without replacing them, which means that more and more homes are out of the first-time buyer's reach.

This is one of the principle reasons why adult children remain at home later into life. While there are Government schemes to help first-time buyers, it is increasingly common for parents to remortgage their own homes to facilitate their offspring's embarkation on the property ladder.

Which properties can't be remortgaged?

Even if you think you are in a strong position for remortgaging your property, there are a few reasons why mortgage lenders turn you down, including a poor credit rating. It's unlikely that, if you have or have had a mortgage that your credit history is non-existent, but you need to check your credit rating to ensure you are in a strong enough financial position to proceed.

The lender's rules for lending might also mean that your plans for remortgaging are inviable. So you need to do your research before approaching the companies for a loan.

But the principal reason for denying a loan will be that the lender's assessment of your financial situation shows that you simply can't afford it, or that to go ahead is deemed to be too risky.

So, it's less about the property you are planning to remortgage and more about your current financial situation and how much equity there exists in your property.

How do you approach the best remortgage deal?

There is a lot of independent help and guidance available when it comes to choosing the write mortgage product for your purposes, including Money Saving Expert and Compare the Market among several others.

These are a good starting point in your research.

You will also need to do your homework on your financial status - and therefore your ability to repay the monthly amounts without the potential of defaulting. You should also consider the necessity of the loan you're looking for against the financial position you'll be in once you have taken it out with the lender.

You might also want to discuss your situation with a mortgage broker, who will do the leg-work to get you the best deal. However, be aware that such services are not free, so be aware of the broker's terms and conditions.

Do I need a conveyancing solicitor to remortgage my property?

It depends on how you are proceeding with the remortgage application.

If you are moving to a more beneficial product with the same lender that provided the current mortgage, you won't need to engage a conveyancer. This is known as a producttransfer rather than a remortgage.

If, on the other hand, you are remortgaging with a different lender, you will need to appoint a conveyancing solicitor. This is because the principal task of the solicitor is to manage the legal side of transferring the title deeds and ownership from the existing position (i.e. to the new mortgage lender). The work is not as extensive as it would be when purchasing a new property, so it will be cheaper.

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