What exactly is ‘remortgaging’?

Remortgaging can sound ominous, though it’s simply switching to a new mortgage deal. Just think of it in the same way as when you switch energy providers.

What's Loan to Value?

LTV or loan-to-value is the amount you will be borrowing on your mortgage as a percentage of the value of your property. For example: Remortgage of £112,500 ÷ Property value of £150,000 (x 100) = Loan to Value of 75%.

Time to think about remortgaging

Homeowners

Our research shows nearly a quarter (23%) of homeowners don’t know when their mortgage is next up for review, do you know when it's time to review yours? Remortgaging could save you money[i] and it pays to get prepared.

Check if you could save money

Find out how much your property is worth

When considering remortgaging it is important to have an idea of the current value of your property. This is because your loan-to-value is likely to have changed since you took out your current mortgage and this will affect the interest rates you are able to get from your remortgage.

You can get an estimated valuation of your property online. These tools use calculations which take into account your property’s features, the area and current market conditions and will give you an idea of what your property is worth but they are only estimates so be aware that your new lender’s valuation may differ.

Find out how much you still owe on your mortgage

This will be the amount that you would be borrowing from the new lender on your remortgage. Ask your current lender for a redemption statement. If you decide to borrow more at this point to ‘release equity’ (to pay for things like home improvements) add this amount on to the redemption figure.

Calculate your ‘new’ LTV and compare products

There are tools available online that will help you calculate your LTV. Our repayment calculator, for example, will give you an idea of what your repayments could be and tell you what your LTV is.

Have a look at what interest rates you could get and compare with your current provider’s SVR – if they’re lower it might mean you could save.

Consider other fees

Since remortgaging means switching mortgage providers, you will need to pay for the administrative costs, just like you’re likely to have done when you took out your current mortgage.

Potential fees

Product fee or Arrangement fee - This is the cost of setting up or ‘arranging’ your mortgage. The product fee can either be paid on application or added to your loan (though adding to your loan will increase the overall cost of your mortgage since you will pay interest on it).

Valuation fee – The valuation report is used by your new lender to calculate what your new LTV is so you can be offered an appropriate product. Some remortgage products offer free valuation as part of the product so it may be worth considering one of those.

Legal fees – you will have to appoint a legal adviser to carry out searches and transfer mortgage money between lenders (and to you in case of ‘equity release’ additional borrowing). Some remortgage products offer free legal fees as part of the product so it may be worth considering one of those.

Exit fee or Redemption fee – You may be charged an exit fee by your current lender when you leave. This fee is to cover the administrative costs of closing your existing mortgage account.

When should I apply?

It will, of course, take time to decide what is right for you and to complete and process your application; so start thinking about remortgaging about six months prior to the end of your current deal. Here, at Yorkshire Building Society, your mortgage offer will be valid for six months so if you apply early you can be safe in the knowledge that you’ve got your mortgage offer and, therefore interest rate, in place and ready to transfer at the end of your mortgage deal (without going on to SVR or leaving your deal too early and being subject to early repayment charges).

Even if you don’t take advantage of the full six months, it is recommended that you apply for your remortgage product at least two months prior to the end of your current deal. That way you should still have time to be able to switch over at the end of your current deal.

For more information on remortgages and how to apply for one with Yorkshire Building Society visit our remortgages page.

[i] Research completed By Emerald for Yorkshire Building Society, research completed online 21st November 2019 to 3rd of December 2019 sample size of 2002
[ii] Full review available at https://www.fca.org.uk/publication/market-studies/ms16-2-3-final-report.pdf

Time to think about remortgaging

When should I apply?

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