Getting Ready for a Remortgage
Remortgaging your home can save you thousands and cut months, if not years off your mortgage loan period. While the process is relatively straightforward, here are a few tips to help your application go through smoothly.
Start getting ready to remortgage early
Currently it can take three to six months to remortgage your home, which means if your fixed rate mortgage is due to end within this period, you’ll need to act before you are bumped up to the mortgage provider’s more expensive standard variable rate.
This is especially true if you are self-employed or have a complicated way of generating income, such as if you’re a company director who’s remuneration includes dividends, or your pay may be made up with commissions, bonuses or overtime.
Run your own credit check first
Credit reference agencies, such as Experian, can help you flag up any potential problems with your credit rating, before your lenders do their own credit search.
It’s important to understand your credit report, and know what to do if there are any black marks against your credit history.
Head to our credit reports hub to find out how to download your credit reports for free.
Find the best mortgage
There are so many offers and deals, it’s easy to become confused. But take your time and find the best deal for your circumstances. Sometimes a specialised remortgage broker can find better deals and save you many thousands of pounds.
How much do you need to borrow?
This is an often overlooked point, but make sure that you can borrow enough to pay-out your current mortgage without any shortfall.
It’s best not to guess. Contact your mortgage provider and ask them how much would you need to pay off your mortgage on a specific date. Also ask if there are any early repayment charges or admin fees, and how much they will be.
Estimate your property’s market value
You’ll need to get a good idea of how much your property is worth, before you put in your remortgage application. Don’t be tempted to overestimate its value, as the lender will employ their own valuer to appraise the property’s worth.
There are some homes that may be in negative equity, or prices in that area have fallen, and so they may be undervalued by the surveyor. This is not the end of the world and there are some options open to you if your property has been undervalued.
Calculate your home’s loan-to-value (how much of it you own)
Once you have estimated your home’s current value, you can work out the difference between what you still owe on a mortgage, and what your home is worth.
This ratio is called loan-to-value (LTV), and will affect how good a deal you’ll get on a remortgage. To find out your LTV simply divide the amount you still owe on your mortgage, by the home’s current value. Multiply that figure by 100 and that will be the LTV on your property.
What that means is that if you owe £150,000 on a £200,000 property, then the LTV is 75%. The more equity you have, then the lower the interest you’ll likely pay when you come to remortgage.
Keep your credit history clean
Don’t take out any non-essential loans in the run-up to remortgaging and avoid spending large sums of money where possible.
Make sure you pay utility bills, credit and loan repayments on time, including your current mortgage. This will help convince lenders that you are financially responsible and a good loan risk.