How to Remortgage Your House: The Step-by-Step Process

Remortgaging replaces an existing mortgage with a new one, often from a different lender or under new terms. It is distinct from securing a second mortgage, which would be an additional loan, or from purchasing a new home entirely. Understanding the steps helps homeowners navigate this financial decision.

Preparing for a Remortgage

Before initiating a remortgage application, review your current mortgage details. Gather your outstanding balance, remaining term, and current interest rate from your existing lender. Also identify any early repayment charges or exit fees associated with your current mortgage, as these impact cost-effectiveness.

Define your objectives for remortgaging. Common reasons include seeking a lower interest rate to reduce monthly payments or adjusting the loan term to pay off the mortgage faster or slower. Homeowners also remortgage to consolidate debts or access equity for home improvements. Aligning your financial goals with a new mortgage ensures a strategic approach.

Lenders assess eligibility by reviewing credit history and score. Lenders prefer a credit score of 620 or higher for a conventional remortgage, with scores above 760 securing better terms. Lenders also evaluate your income stability and existing debts, calculating your debt-to-income (DTI) ratio. A DTI ratio of 36% or lower is preferred by lenders, though some may accept up to 43-50% depending on the loan type.

Collect necessary documentation in advance. Lenders require proof of identity and address. Income verification documents (recent pay stubs or tax returns for self-employed individuals). Recent bank statements, other asset statements, and information on existing long-term debts are also requested.

Understand the potential costs associated with remortgaging. Costs include new lender arrangement or origination fees, ranging from 0.5% to 3% of the loan amount. Valuation fees are between $300 and $500, and legal fees for conveyancing range from $500 to $1,500. These fees contribute to the overall closing costs, which range from 2% to 5% of the loan amount.

The Remortgage Application Journey

After completing preparatory steps, the formal remortgage application begins. Homeowners can apply directly to a bank or building society, or use a mortgage broker. A broker can compare various mortgage products from different lenders to find options and guide the process.

Submit your remortgage application with detailed information to the chosen lender. This step is done through an online portal, in-person meetings, or via your mortgage broker. Ensure accurate and complete submission of all gathered documents and information.

After submission, the application moves into the underwriting and assessment phase. The lender conducts an in-depth review of credit and financial background to determine eligibility. Underwriters examine your credit history, income, assets, and existing debts to assess lending risk. This process can take anywhere from a few days to several weeks, with an average timeframe of 30 to 45 days.

A property valuation is a standard requirement. The lender arranges for a licensed appraiser to assess the property’s market value. The appraiser inspects the home’s condition, features, and comparable sales. This valuation helps ensure that the loan amount aligns with the property’s current value.

Upon successful completion of underwriting and valuation, the lender will issue a mortgage offer. This document outlines the specific terms of the new mortgage, including the loan amount and interest rate. Review the mortgage offer to ensure all details match your expectations and financial plans before proceeding.

Finalizing Your Remortgage

After receiving your mortgage offer, the process moves into the legal phase, known as conveyancing. A solicitor or conveyancer handles all legal aspects of the mortgage transfer. Their responsibilities include checking the property’s title and managing communications between your existing and new lenders.

The solicitor also prepares all legal documents required for the remortgage. Review these documents, detailing the terms of your new mortgage agreement, before signing them.

Arrange the completion date with your new lender, existing lender, and solicitors. This date marks the mortgage transfer, when new mortgage funds are released to pay off your previous loan.

On completion day, the new lender transfers approved funds. These funds clear the outstanding balance of your old mortgage. Simultaneously, your new mortgage becomes active, securing your property.

Following completion, manage a few post-completion steps. You will receive final confirmation from your new lender. Set up new direct debits for mortgage payments according to your new loan terms. You will also receive regular statements from your new lender detailing your mortgage balance and payment history.