A guide to remortgaging and product transfers
We have written a guide to demystify the process of remortgaging and help you switch to a new mortgage as smoothly as possible. We give an overview of what’s involved in the remortgage process, providing some basic information to help you find the right mortgage for your needs.
What is a remortgage?
A remortgage is the term given to arranging a mortgage on a property that you currently own but you either:
- Want to move from your existing mortgage provider to a different lender
- Want to borrow more than your current mortgage amount, for example, raise additional capital to pay for a renovation, even if you’re staying with the same lender.
Why do I need to remortgage?
Rather than moving house, you might want to remortgage and release some cash that you’ve built up in your home to fund an extension or a renovation project. In many cases, remortgaging can be a cost-effective way to borrow the additional money you need.
If you don’t want to raise any more money and would prefer to arrange a ‘like for like’ amount of borrowing on a new mortgage, then you potentially have two options: remortgaging or a product transfer.
Advantages of remortgaging
You could find a competitive mortgage that’s right for your needs and it could mean you save money too, if the interest rate is lower than what you’re currently paying.
If you’re currently on your lender’s standard variable rate (SVR), there’s every chance that by remortgaging, you’ll be able to reduce your monthly payment.
You may be able to use some of the capital in your home to fund a renovation project, for example, which may be a more cost-effective way to borrow a significant amount of money as the interest rate is likely to be cheaper than that of a personal loan from a bank.
Things to consider
You, and whoever else is named on the mortgage, will need to go through the full application process. This means full disclosure of your income, monthly committed expenditure, and any outstanding debts, the same way you’d apply for a mortgage if you were moving home. You’ll need to evidence your income – the process for this is different if you’re self-employed.
The property you’re borrowing against will need to be valued for mortgage purposes by a chartered surveyor. Some lenders charge for this although some include it in the cost of the product.
You’ll need a solicitor or licensed conveyancer to act on your behalf to ensure that the legal side of the remortgage process is taken care of correctly. Some lenders include either the full cost or a contribution towards legals in their products, but others don’t, so again it’s best to check up front so you can budget for any fees you may have to find.
Some lenders charge a fee for specific mortgage products. Again, you need to check if this is the case, and if so, what the amount is – if there is a fee, you may find your lender will allow you to add the costs of fees to the total cost of the mortgage, rather than having to find the money up front. Remember that’s an additional amount that you’ll be paying interest on over a number of years, so you need to factor that into your calculations.
What’s a product transfer?
Many people are familiar with the term ‘remortgage’, but haven’t heard of a ‘product transfer’ before.
If you’re happy to stay with the same lender and don’t want to borrow any more money, so are just looking for a ‘like for like’ mortgage on a new rate, you may be eligible for a product transfer. This is a much quicker process as you’re just choosing from the products that your lender offers, then applying your current mortgage balance onto a new deal with them.
Advantages of a product transfer
You don’t have to go through the same application process as you would with a remortgage. It’s usually a much quicker process and can often be done over the phone. Most product transfers can be done within 10 working days.
You don’t have to provide the same amount of paperwork to support your application, so this can speed up the process. You won’t need a mortgage valuation or have to enlist a solicitor or licensed conveyancer to deal with the paperwork.
Things to consider
You won’t be able to raise any additional capital. Taking a product transfer means that you’ll only be able to swap your current outstanding mortgage balance onto a new product, not borrow any more.
You’ll have to stay with the same lender, which means that you may not have access to the most competitive product available for your circumstances; you’ll only be able to select from the rates that your current lender can offer you.
If you want to add a partner to your mortgage, for example if they’ve moved in with you, or if you want to take someone off the mortgage (perhaps you’ve split up with a partner) then you won’t be able to do this on a product transfer. You’ll have to remortgage and go through the appropriate legal process.
If you would like to discuss things in more detail, contact me on 07375 886347 or visit our website at mortgageadvicebureau.com/cambridge.
Because we play by the book, we want to tell you that your home may be repossessed if you do not keep up with repayments on your mortgage. There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances, but a typical fee is up to one per cent of the amount borrowed.
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