How to remortgage your house: Legal considerations
Remortgaging is like renegotiating the terms of your mortgage. If you remortgage your house, it means you get a new agreement that replaces your old mortgage.
If you’re looking into remortgaging, this handy guide will explain how to ensure everything goes smoothly, help you on the legal aspects, and cover when and why you might want to speak to a lawyer.
If you want independent remortgaging advice, the specialist property solicitors on our team can help you along the way, and take some of the pressure off you during the application process.
Why remortgage?
The main purpose of thinking about remortgaging is to save money. Maybe you’ve found a better rate, or want to be able to pay larger instalments to reduce the debt more quickly.
Either way, a new deal could help you to lead a better financial life.
Remortgaging can also allow you to raise money without having to release equity from your home.
Lenders are cautious about offering a mortgage for this reason, and you’re most likely to be granted this if you’re looking to remodel or improve the property.
Finally, some people may choose to remortgage in order to pay off other debts. If you find a particularly good mortgage deal, this can be a wise move, but it is highly recommended that you consider other options first, as a mortgage could leave you paying back thousands more over time.
Consider debt settlement before this option, and speak with an expert before deciding what to do.
Check your current mortgage fees
Before you consider remortgaging, it’s essential to check certain fees that may be attached to changing or leaving your current mortgage. If these fees add up to more or as much as you might save with remortgaging, it might be worth reconsidering if it’s right for you.
Early repayment charges are often one of the biggest fees you may face. While you might think remortgaging should mean this charge won’t apply, it often does, and it can be thousands of pounds.
When arranging your original mortgage, you should have been told if there would be a ‘deeds release fee’ as a result of switching.
This isn’t a huge sum of money (£50 to £200 is standard), but in order to have the house deeds released to your solicitor, you’ll need to pay the charge.
Finally, you need to be absolutely certain of the amount you owe on your current mortgage, otherwise you could end up with a more expensive remortgage than you actually need.
Contact your current lender to find out.
How to be approved for a remortgage
You need to be in a stable financial position when applying to remortgage, just like when applying for your first deal.
A good way to improve your chances is tackling issues with your credit report.
Check it and do what you can to improve it – such as correcting any false marks with a ‘notice of correction’, having old joint finances adjusted, and using credit wisely every month – to show lenders that you take full responsibility with your credit.
You’ll also want to show a clean slate wherever possible. Don’t miss repayments, don’t apply for lots of other types of loans, and don’t repeatedly reapply after rejection, as your lenders will be able to see how often you’ve applied.
Finally, as proof of income is an absolute necessity, cutting back on luxury and non-essential spending will highlight the amount of disposable income you have every month.
Lenders want to be assured you can make the repayments comfortably, with money to spare in case of increased rates or loss of regular income.
Remortgaging legal fees
Remortgaging has a number of fees attached, which can increase the overall cost of the mortgage.
Many of these can be paid upfront, which will reduce your overall payments, while some can be added to the mortgage and be paid back with your regular instalments, with added interest.
- The ‘arrangement fee’, which is essentially the cost of the mortgage product, can be one of the biggest expenses. It may be a set amount or a percentage of the mortgage. Covering it up front will help you avoid paying any interest, but should the deal fall through it might be non-refundable. Expect to pay anything from several hundred pounds to several thousand.
- There may be a booking fee, which is used to reserve or secure the mortgage. This cost is usually around £100 to £200.
- The valuation fee is used to pay a surveyor to visit your home to check its value and look for any structural or other serious issues. This is to ensure that, should you be unable to make repayments, your home can be sold to cover the costs. Sometimes this is free with a remortgage, but if it is charged, expect anything from £150 to £1,500.
- A conveyancing fee will also be applied, as this covers the costs of the solicitor’s work when remortgaging. While many lenders offer their preferred solicitors, it’s recommended that you choose your own to ensure they’re working with your best interests at heart. Choosing a solicitor through First4lawyers will guarantee you a professional and speedy service.
Everything so far might seem a little daunting, but with the help of a specialist solicitor or a good advisor it doesn’t have to be.
Things to consider
There are a few other aspects you should think about:
Ensure you can make the repayments
This is the big one, and it’s worth thinking seriously about. If you can’t afford to make the repayments, your house could be repossessed to cover the cost.
When considering taking on a new mortgage, you need to be certain you can afford it.
Tell solicitors any additional details at the start of the process
If you’re remortgaging to add an additional person to the mortgage, or to remove someone and buy them out, you should tell your solicitor from the start. Additional processes may need to be executed, and withholding this information could cost you time and money in the long run.
Check every detail of the new mortgage before you agree to anything
Does the mortgage offer a payment holiday?
Will you be charged for overpayment or early repayment?
Scrutinise every mortgage before you sign anything, to make sure you’re not agreeing to something that doesn’t suit your situation.
Want to learn more?
Read our guide on transferring property ownership if you’re looking to transfer the rights to your property to someone else, or consider learning about equity release if you’d like to release cash from your home.
If you’d like personalised advice about remortgaging, or you’re looking for an experienced conveyancing solicitor, contact First4Lawyers.
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Note: First4Lawyers offers this information as guidance, not advice. Before taking any action, you should seek professional assistance tailored to your personal circumstances and not rely on First4Lawyers’ online information alone.
