Is it time to remortgage?
What to expect when remortgaging a property
What you need to know if you are looking to re-mortgage.
Mortgage market view
With the Bank of England (BOE) continuing its mission to ease soaring inflation levels, it made its 10th consecutive rate increase in February 2023. We began the year with a base rate of 4.0% – the highest level since 2008.
As the base rate rises, we have seen a flurry of requests from Barclays Wealth Management clients looking to review their current mortgage deals, irrespective of whether they hold a mortgage with Barclays or with another provider. Clients have seen historically low rates since the end of 2008, with marginal changes when their initial products end.
Having a full review, rather than sitting on standard variable rates, is becoming the most cost-effective route to take. We expect to see continued high demand for reviews within Wealth Management in 2023.
Given the current environment, we wanted to provide more information on the steps to follow to review a mortgage and potentially remortgage.
What is a remortgage?
A remortgage is when you apply for a new mortgage with a different lender, but you remain in your current home. However, a remortgage is not the same as borrowing more money from your current mortgage provider.
Is it time to remortgage?
It is always worth checking the latest offers if your current mortgage deal is about to end or has already moved to a follow-on rate. Liam Boardman, Wealth Management mortgage specialist at Barclays, suggests that if your property is worth more than when you bought it, your loan-to-value ratio may have changed – and this could mean that you have access to a wider range of mortgage offers.
“Since late 2008, clients have been able to obtain historically low rates,” says Boardman. “Due to recent Interest rate and cost of living hikes, a review is more important than ever. This is especially important for clients who are coming off fixed rate mortgages. A formal mortgage offer from Barclays remains valid for six months from date of submission, subject to the application related conditions being met. This should provide ample time for you to look through options and potentially secure rates before the Bank of England reviews its rate again.”
Remortgaging could also help you raise money for home improvements or a special purchase. However, Boardman says that you should think carefully about whether you can afford the extra amount over the full mortgage term and on increased rates.
Boardman adds: “And if you’re planning to consolidate other debts, don’t forget that independent financial advice is available. It’s important to always remember that your home could be at risk if you can’t make the payments.”
Big changes in your life, planned or unexpected, could mean that your current mortgage no longer suits your needs. Whether you’re starting a family or expecting a significant change to your income, remortgaging gives you a chance to find a deal that’s a better fit for you now and in the future.
What to expect when you remortgage
The remortgaging process typically takes from four to eight weeks after you apply. For most applications, you’ll need to speak to one of the lender’s mortgage advisers, who are qualified to advise you about the best offer they can provide according to your needs.
Before you apply for a remortgage, think about the following five questions to help you get a clear idea of your situation and needs.
1. What will it cost to leave your current mortgage?
Some mortgages include charges when you leave under certain circumstances, such as an exit fee or early repayment charge. This could be thousands of pounds if your current mortgage deal hasn’t ended, so check the documents you received from your current lender or contact them for details.
2. What do you want from a new mortgage?
Do you want to lower your monthly payments or have the flexibility to pay off your mortgage sooner? Is a fixed rate right for you, so your payments won’t change for a set period? Think about what you need now and how your needs might change in the future.
3. Is your credit score in good shape?
When you apply to move your mortgage, the new lender will check your credit score with credit reference agencies. Before you apply, make sure the details on your credit score are correct, as even a spelling mistake in your address history could cause a problem.
4. How much can you borrow?
In the current financial climate, it is best to speak to one of our Wealth Management mortgage specialists. They can talk through current monthly pricing and implications if rates were to rise. Speak to your Wealth Manager to arrange this.
5. Which remortgage deals are available?
Once you know what you want and how much you can borrow for it, you can start comparing mortgage deals.
How the remortgage process works
It’s important to think about your wider financial situation when considering how to remortgage your home. Understanding what happens when you remortgage is also key. Here are the four steps you’ll need to take to ensure a successful remortgage.
1. Complete an Agreement in Principle
Most lenders now let you get an online Agreement in Principle (AiP) or provide you with ways to book an appointment with a mortgage adviser. Getting an AiP indicates that a lender is willing to lend the amount you need, without a full credit check. You don’t need to choose a specific remortgage deal and it’s not a guarantee you’ll be approved for a remortgage – but it will help you understand your options.
Boardman adds: “We highly recommend Wealth clients speak with one of our Wealth Management mortgage specialists. This provides the peace of mind on borrowing amounts before you start putting definitive plans into place.”
2. Consider all the costs
To make sure remortgaging leaves you better off, check whether the lender you plan to move your mortgage to charges any of the following:
- Application fee – a charge to set up your new mortgage. This is also known as an arrangement, product, or booking fee
- Valuation fee – to confirm the value of your property
- Solicitor’s fee – a solicitor will need to manage the transfer of your mortgage
- Ask any prospective lenders if you’d need to pay an exit fee or early repayment fee if you want to remortgage again in the future.
3. Apply for your new mortgage
You’ll need to provide information about your personal and financial circumstances, as well as details of your current mortgage. Make sure you have documents to prove what you earn and the paperwork for any current loans or other credit commitments you may have.
4. Completing your remortgage
The final steps of a remortgage are pretty much the same as buying a new property. Your new lender will carry out a credit check to confirm your current circumstances and arrange for your property to be valued. You’ll need a solicitor or conveyancer to handle the transfer of your mortgage. Some lenders may offer this as a free service.
Reviewing your overall options will be incredibly important in 2023, so ensure you have the right tools and are well prepared to make the most of whatever opportunity you may find.
Your Wealth Manager will be more than happy to put you in touch with one of our experienced mortgage specialists.
Things to consider
Subject to application, financial circumstances & borrowing history. Terms and conditions apply.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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