Can I Remortgage My House? The Process Explained

Remortgaging a house involves replacing an existing home loan with a new one, often with different terms or from a new lender. This allows homeowners to adjust interest rates, change loan terms, or access home equity. This article explains the process.

Eligibility for Remortgaging

Lenders assess several financial aspects for remortgage eligibility. A strong credit score is a primary factor. Most conventional remortgages require a minimum score of 620, though scores of 760 or higher often secure more favorable interest rates and loan terms. FHA loans may permit lower credit scores, sometimes as low as 580, while VA loan lenders often require around 620 to 640.

The loan-to-value (LTV) ratio, representing the loan amount compared to the home’s appraised value, also plays a role. For conventional remortgages, lenders prefer homeowners to have at least 20% equity (LTV of 80% or less). A lower LTV can lead to better loan terms and may help avoid private mortgage insurance (PMI) if the LTV exceeds 80%. Lenders also evaluate your debt-to-income (DTI) ratio, which compares total monthly debt payments to gross monthly income. A DTI of 36% or lower is preferred, though some lenders approve applications with a DTI up to 43% or 50%.

Income and employment stability are further considerations, as lenders need assurance of your ability to repay the new loan. They look for a consistent employment history, often at least two years in the same field or with the same employer. The property undergoes an appraisal to determine its current market value and condition. This appraisal ensures the property serves as sufficient collateral for the remortgage.

Information and Documents Needed

Gathering specific information and documents streamlines the remortgage application process. Lenders require personal identification, such as a driver’s license or passport, and your Social Security Number (SSN) to verify identity and comply with federal regulations.

Proof of income demonstrates your capacity to repay the loan. You will need pay stubs covering the most recent 30 days, W-2 forms from the last two years, and federal tax returns for the past two years. For self-employed individuals, lenders request business tax returns, 1099 forms, and profit and loss statements, often spanning two years or more.

Verification of assets requires bank statements from checking and savings accounts for the last two months to confirm funds for closing costs and reserves. Large deposits may require a written explanation and proof of origin. You will also need documents related to your current mortgage and property, including a recent mortgage statement, homeowners insurance policy, and a property tax bill. Details of existing debts, such as statements for auto loans, student loans, and credit cards, are also required.

The Remortgage Application Process

Once all necessary information and documents are compiled, the remortgage application process begins. An initial step involves comparing offers from various lenders to evaluate different interest rates, loan terms, and associated fees. This helps you find the most suitable option and secure advantageous terms.

After selecting a lender, complete the application form using the gathered financial and personal details. This form provides the lender with a detailed snapshot of your financial standing. Submit collected documents, including income verification, bank statements, and current mortgage information, to the chosen lender. Many lenders offer secure online portals for digital document uploads, expediting submission.

Some lenders may require an application fee, which covers initial processing and administrative costs. During this phase, you can lock in an interest rate for your new loan, usually for a set period between application submission and a few days before closing. This rate lock protects against potential interest rate fluctuations while your application is processed.

Post-Application Steps

After a remortgage application is submitted, the lender evaluates and processes the request. The underwriting team reviews the submitted application, including all documents and your credit report. Underwriters assess your creditworthiness, assets, and existing debts to determine loan approval.

A property appraisal is a standard requirement. An independent, licensed appraiser evaluates your home’s current market value and condition. This appraisal ensures the property provides adequate collateral for the new loan and impacts the loan-to-value ratio. Appraisal costs range between $300 and $500. A title company conducts a title search to verify clear ownership and identify any existing liens or judgments against the property.

If approved, the lender will issue a mortgage offer and a Closing Disclosure, which you receive at least three business days before closing. This disclosure outlines the final loan terms, estimated monthly payments, and all associated closing costs. The final stage is the closing process, where you sign legal documents, typically at a title company or attorney’s office. During closing, you finalize the agreement, pay closing costs (2% to 6% of the loan amount), and officially transfer the mortgage. The entire remortgage process, from application to closing, can take 30 to 45 days.