How to remortgage your house and what you need

Remortgaging your house can generate huge savings. But it’s important to know what you’re doing before you get into the remortgaging process so that you’re making the most of the opportunity.
If your mortgage is coming to the end of its fixed term it’s time to start thinking about what you need in order to remortgage. It’s time to start doing your research and thinking about how you can be best prepared to apply for a new mortgage.
Before you start looking at what’s on the market, and the rates you might be able to secure, it’s a good idea to polish up your credit report and learn a bit about how to find the best mortgage rate.
Remortgaging does require some effort, and we would always advise speaking to an expert, but it could save you a fortune over the years.
1. Start the process early – you can secure a deal six months in advance
Did you know that you can secure a mortgage rate with a lender up to six months in advance? If you still have six months to go on our current mortgage then you will probably come up against a set of fees if you want to get out early. But if you want to take advantage of a great deal you’ve found then it’s worth asking the lender if you can secure it and start paying it back in six months time.
Please be aware that this means if rates go down even further it may have been beneficial to wait but you will likely have to pay fees to cancel your agreement.
2. Check your credit report before lenders do and make sure everything is looking its best
To secure a mortgage, at any point in time, you will need to convince your lenders that you are prepared financially to pay back the loan. One way that lenders will investigate is to check your credit report(s).
It’s worth checking over your credit report to make sure they’re all up to scratch.
3. Don’t settle for the first good deal you find
It’s easy to jump at the first good deal you come across, especially if the lender convinces you it won’t be around forever, but it’s always worth scouring the market.
4. Use an online calculator to get an idea of how much you should be able to borrow
Each lender has a different formula for working out how much they’re willing to lend you but it’s good to get a rough idea of how much you should be entitled to.
A lender will look at your outgoings such as maintenance payments, school fees, utilities, food shopping and debt repayments. Your income needs to cover your current mortgage payment as well as the mortgage payment if there was a 6 or 7 per cent rise on your rate.
5. Pick your remortgage date to avoid fees
The majority of mortgages will have an early repayment fee. If you remortgage during the initial incentive period you will have to pay this fee. It can be thousands of pounds.
If your mortgage doesn’t have an early repayment fee you can remortgage whenever you like. If your mortgage does have an early repayment fee it makes sense to start your new mortgage the day after your current mortgage ends.
If you are working with an adviser they can often help you arrange this so that you can avoid unnecessary fees.
6. Ask the right questions and make sure you know exactly what you’re getting and the costs involved
Ask about the specific details of the deal you’re getting, the costs involved for getting out of your existing deal and about the admin fees that may be involved.
It’s vital that you understand what you need to pay and how that’s going to affect your financial situation.
If you’re self-employed, you will likely have to jump through more hoops than those who are employed. Getting accepted for a mortgage can be harder but it’s not impossible.
You will need to provide things such as your business accounts and tax returns for the past 3 years so that lenders can see you are reliable.
You will be assessed on net profits, not turnover.
In this situation, using a mortgage broker could be highly advantageous and help you get everything in place for a successful application.
8. Estimate your property’s value
When you apply for a mortgage, the lender will send out an independent valuer to confirm the valuation. Before you start looking at rates, you need to understand what your property is worth.
9. Calculate how much of your home you own, you may be able to release equity
Once you know how much your home is worth you will be able to work out how much you still have left to pay and how much you own.
Mortgages come in different LTV (loan-to-value) bands and if you have paid off a significant amount you may have moved LTV bands and therefore able to find better deals.
Just divide the amount you still owe on your mortgage by your home’s current value. Times the figure you get by 100, and that’s your LTV as a percentage.
So, if you owe £150,000 on a £200,000 house, that’s a 75% LTV.
LTV is important because the more equity you have in your property the lower the mortgage rate you’ll be able to get.
If you want to use this time to release some of that equity for home renovations or other large payments then you can do this too. But you will end up paying more again each month because your LTV will be lower.
10. Sort out your finances and make sure you’re ready to go so that lenders have no fears over whether you’re ready
Your lender will be looking carefully at the way you spend and your current activity so make sure not to:
Apply for credit just before you apply for a mortgage
Spend heavily during the weeks before you apply
Go into your overdraft
If you manage your money well, and lenders can see that, you’re much more likely to be successful when applying for a mortgage.
11. Get all of your paperwork sorted and ready to go
You will need all of the paperwork for a remortgage that you needed for the first mortgage. It makes sense to get it all together and send it off in one organised batch so that the process can be faster and uncomplicated.
Lenders are likely to want to see:
Your last three months’ bank statements
Your last three months’ payslips
If self-employed: your last three years’ accounts/tax returns
Proof of bonuses/commission
Your latest P60 tax form (showing income and tax paid from each tax year)
ID documents (usually a passport)
Proof of address (eg, utility bills or credit card bills)
12. STOP. If you are rejected from your first application don’t try again straight away
If it’s time to remortgage your house it’s time to start thinking about what you need to have in place to make sure you get the deal you deserve.
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