Maria Richards, Consultant for Setfords Solicitors Residential Property team explains why now is a good time to Remortgage.
What is a remortgage:
A remortgage is when you change your current lending which is against your property either by way of changing product with your existing lender or switching your deal with a new lender entirely. If you have no current borrowings against your property, you may also hear the term ‘remortgage’ when taking out a brand new mortgage without paying off any existing one.
Why do people remortgage and is it right for me?
There are many reason why people change their product or lender.
Interest Rates: It may be that your current deal is coming to an end and the fixed rate that you signed up to will change to a variable rate. You may wish to secure your payments so that you know exactly what you are paying or the variable rate may be higher than the fixed rate you were on. The Bank of England increased the base rate by 0.25% on the 16th December 2021 and a further 0.25% on the 2nd February 2022. With the uncertainty of how the war between Ukraine and Russia will impact upon the cost of living (rising fuel and energy prices) and economists predicting the base rate predicted to increase 2 more times in 2022, now is a good time to ensure you do not have any surprises when it comes to your mortgage payments.
Increasing your borrowing: Often homeowners will seek to borrow extra so that they can complete home repairs or improvements. If you took out a high loan to value when you first took out the mortgage, you may have been limited as to how much you can borrow. If your house has increased in value, provided your earnings are sufficient, you may be able to borrow more money than you could previously.
Switching Mortgage Type: There are many different products available on either an interest only or repayment basis. Whilst one might suit your circumstances when you purchase a property, as your situation changes you may wish to change to a product that suits your needs better.
Change in circumstances: You may have found a partner that you wish to invest with and add them to the title, or you may be separating form a partner or spouse and need to remove one of their names from the title. This will involve a Transfer of Equity of the title and at the same time the lender may remove the other party form the mortgage. If the lender doesn’t consent for the existing mortgage then you may need to remortgage with either the same lender with a different product or a new lender.
What about my early redemption penalty?
You should calculate the difference between continuing with your monthly payments until your fixed rate ends and the amount of the penalty due. It may be that remortgaging into a lower rate might still save you money in the long run.
What Legal Advice do I need?
Many lenders offer free legal services for a remortgage. However, with the increase in demand, we are seeing more incentives where lenders will offer money towards your legal fees or cash back as an alternative. Either way, you have a choice as to who advises you. If you select your own solicitor, they will also act for your lender so only one lawyer will be in involved.
We will advise you upon the conditions of the mortgage and what the legal implications of signing the Mortgage Deed. We will have to check the title on behalf of the lender and they may ask for searches (although they often accept insurance as an alternative).
How long will it take?
When you receive your formal Mortgage Offer from your lender, we will receive a duplicate along with a solicitor’s pack. We will report to you on these and once you have signed the necessary documentation we can request drawdown of the funds which will take approximately 5 working days depending on the lender’s requirements. Whilst we are waiting for the Offer we can check the title and put in hand the searches. If searches are required they take on average 7-10 days depending upon the location of the property but some local authorities can take a few weeks. Insurance can be put in place instantly and doesn’t cause delays and around 90% of the time we can use insurance rather than searches.
With the demand of re-mortgages predicted to be high in 2022, delays could occur just as we saw with the demand following the housing market reopening following the first lockdown.
How can I and my Conveyancer speed up the process?
Digital ID: In any conveyancing instruction, your lawyer will need to check your identity. You can either provide the original documentation, however we offer a digital version where you can upload your documents from the comfort of your own home without having to part with your documents.
Redemption statements: if you are redeeming an existing mortgage, we will need to obtain a redemption statement from your lender. This has to be a copy sent to the firm rather than one you have received. Whilst some lenders are quick with providing these, others can take a week or two. We will always endeavour to obtain a copy as soon as possible to avoid delays.
Electronic Conveyancing: By using the Land Registry’s Portal, online portals provided by Lenders and our own sophisticated case management system, we are able to avoid delays that can be seen by using the postal method.