November 28, 2023

Remortgaging – All You Need To Know


Mortgages are generally people’s biggest financial commitment, taking up a large portion of their monthly outgoings. Lenders are more cautious while economic uncertainty continues. Mortgage companies, like other employers, face challenges in maintaining their normal services. As a result, timescales for processing and finalising applications have lengthened and this can mean a delay in receiving funds.

Should I Remortgage?

Making sure you have the best deal is important as it can save you hundreds each month. If you already have a mortgage and are looking to change lender, we can help you through the remortgage conveyancing process.

There are signs of a strong recovery for the remortgaging sector in 2021, as rising house prices boost homeowners’ equity allowing them to benefit from better loan-to-value products.

Why Do People Remortgage?

There are several reasons to think about remortgaging but the main reason is going to be saving money…Maybe your current deal is about to end. Many introductory mortgage offers only last a short time, often two to five years. This is the typical length of time offered on a fixed rate, tracker or discount mortgage. The most common time to remortgage is when this fixed or introductory tracker or discounted rate on your mortgage ends. 

  • Mortgage Term Ended: Once your introductory mortgage offer has ended, you will be on the lender’s Standard Variable Rate (SVR). It is unlikely this will be the cheapest option, so remortgaging is going to be something you will have to think about. Your lender may be happy to retain your custom so this should always be your first port of call.
  • Better Rates: If you are tied into an initial deal you might have to pay an early repayment charge of up to  2-5% of your outstanding loan. Regardless of exit fees, the savings can be huge
  • Change Of Personal Circumstances: If your current mortgage is no longer the most appropriate, a different type with different terms might suit you better.
  • Flexibility: The predictability of a fixed-rate remortgage might be more important than low repayments. Or maybe you’re earning more than when you took your mortgage out . Flexible features usually come with a slightly higher interest rate. 
  • Raising Extra Money: Affordability will be reassessed by your lender to make sure you’re not over-stretching your finances.

Early Repayment Charges

Most mortgages have an early repayment charge during the initial special discount period. Early repayment charges are often a percentage of the amount you owe. Some lenders charge a flat rate like 4% whilst others charge a higher percentage the longer you have left on your mortgage.

Check the costs on your mortgage statement, in your terms and conditions or by asking your lender for a redemption statement. This will confirm how much you owe and what fees you need to pay to clear the balance. Compare Agents will help you understand all charges that come with remortgaging your property.

Do I Need A Solicitor When Remortgaging?

It is especially important to employ a conveyancing expert when: 

  • Adding Someone To A Mortgage: you will need a solicitor as ownership of the property is changing. This is known as a ‘transfer of equity’. Deeds will have to be amended and paperwork drawn up specifying how you will own the property.
  • Removing Someone From The Mortgage – as above, this means that the ownership of the property is changing so a solicitor will be needed to amend the deeds.

Compare Agents can answer all your remortgaging queries. Contact us today for a quote.

Mortgage Rates And Availability In 2021

Mortgage Availability has been improving for several months now, providing a boost to both home buyers and remortgagers alike. There are currently more deals on the market than there has been since last March. In fact, the number of mortgages on offer has risen by 42%, with offers of low-deposit 90% deals being a driving factor. 

As for mortgage rates, the increased availability hasn’t made them cheaper. Rates are still rising slightly, with two-year deals continuously on the increase. Saying that however, the speed of the increase is slowing down. Lower rates could be on the horizon.

How Much Can I Borrow?

Lenders used to multiply your income to work out how much you could borrow. It’s all about affordability. Lenders look at a detailed assessment of your income compared to your outgoing and work out how much spare cash you have each month. They take everything into account.

They will require you to have a ‘cushion’ in case mortgage rates rise, and leave you unable to pay. 

Remortgaging If You’re Self-Employed

There are several different types of self-employed workers and based on what category you fall into, lenders may have different requirements. Here are the categories you might fall into:

  • Limited Company
    If you own a registered limited company, then you pay your own salary and dividends. When applying for a mortgage, a lender will want to know how much you earn.
  • Business Partner
    If you have one or more business partners, mortgage lenders will ask to see proof of your share of the profits
  • Sole Trader
    If you’re a contractor or a freelancer, you’ll likely be classed as a sole trader. If so, you’ll be asked to fill out a tax self-assessment, which will need to be undersigned by an accountant. To certify your income, you’ll then have to provide your mortgage lender with an SA032 form

You can prove your income in one of two ways.

  • Business Accounts. Preferably three years worth of accounts — though two can sometimes do. They usually need to be signed off by an accountant.
  • Tax Returns. If you can’t show business accounts, two or three years’ tax returns are the next best option. You’ll be assessed on profits, not turnover. 

How long do you have to be self-employed to be accepted for a mortgage?

For self-employed individuals seeking a mortgage, the amount of time you’ve been self-employed is a major factor lenders consider. To ease your concerns, it’s important to keep well-organized financial records and work with a specialized mortgage advisor who can communicate directly with lenders.

Typically, lenders will request to review your complete financial accounts from the past two or three years. They will calculate the average of your earnings from this data to determine the maximum amount they are willing to lend you.

If you haven’t been self-employed for a long time, there’s no need to worry. Your pay slips from previous full-time employment, especially if it was in a similar field, can still be considered acceptable.

However, it’s important to note that lenders may require additional proof of funds and ask more specific questions. This is why it’s crucial to enlist the services of a mortgage broker who understands how self-employed income is evaluated for mortgages in the UK.

Whatever your circumstances, it is always a good idea to keep up with all the latest mortgage information, with Compare Agents, especially if you plan to apply for a mortgage in the near future.