Remortgages are used for a variety of purposes
Remortgaging is usually the process of switching from one mortgage provider to another however it is also possible to remortgage with the same lender. A remortgage involves the raising of funds from the equity held in your property, similar to that of a secured loan. Remortgaging often occurs when house prices increase quickly of a relatively short period of time, leaving the borrower with a low LTV and lots of equity that can be used for many reasons. It is also a very popular financing method because it is often the cheapest way of raising funds.
Better deals than your current lender
Reasons to remortgage:
- Obtain a better interest rate
- Debt consolidate. Clients may have high interest rate secured or unsecured loans, credit cards etc that they want to repay via a much lower rate remortgage. Caution however should be taken as this could mean transferring unsecured debt onto your home that if you subsequently fail to repay could ultimately mean your house being repossessed.
- Home Improvements
- School Fees
- Divorce settlement
- To buy a second property i.e.
Current property value – GBP 100,000
Current mortgage amount – GBP 30,000
Remortgage amount – GBP 70,000
In the above example the borrower raises GBP 70,000 (subject to criteria), GBP 30,000 of which will repay the current mortgage and GBP 40,000 can be used as a deposit to purchase another property, probably for investment or BTL. Lenders generally have differing reasons for why they will allow a remortgage, for instance some lenders will allow borrowing for debt consolidation whilst others don’t. Others will allow say a maximum remortgage of up to 75% LTV whereas others will go to a maximum of 60%.
Remortgaging and mortgaging basically uses the same products and has the same criteria. The length of the mortgage or the term is determined in the same way whether it is a mortgage or remortgage. The maximum LTV however is normally lower with a remortgage and the maximum loan size currently available is 85% of the value of the property albeit the majority of choice is available at 70/75%.
Compare remortgage rates to the high street banks with UK Property Finance
Does a poor credit rating affect a remortgage?
This will depend on what has caused a poor credit score. You or a broker would need to check your credit report and if the poor credit is not due to missed payments or is from a while back, it is possible that the lender will ignore it or they may be able to offer you a slightly higher priced product.
Can I remortgage with bad credit?
This will depend on whether the poor or bad credit is due to mortgage arrears or any other adverse/bad credit. If it is due to mortgage arrears and they are in the last 3 months you will need a legitimate, easily explainable reason and there to be no other or minimal history of arrears in the past. If there are missed payments on the mortgage within 6-12 months there are lenders out there who will consider lending. If the bad credit is a result of missed payments on other type of credit again depending on when the arrears happened and how much the arrears amount to, they can be ignored. If one is looking to remortgage as they are at eviction stage, you might be able to access alternative finance options such as bridging loans.
How to remortgage with bad credit?
If it is due to mortgage arrears and they are in the last 3 months you will be unable to refinance unless there is a legitimate, easily explainable reason and there is no other history of arrears. If there are missed payments on the mortgage within 6-12 months there are lenders out there who will consider lending. If the bad credit is a result of missed payments on other type of credit again depending on when the arrears happened and how much the arrears amount to, they can be ignored. If one is looking to remortgage as they are at eviction stage, you might be able to access alternative finance options such as bridging loans. It best to contact a mortgage broker who has a range of lender on their panel and will be able to find you a lender based on your level of adverse.
Case Study – Residential remortgage completed in 2 weeks
Client: Mr J – The case
Our client was looking to re-mortgage by way of a first charge residential mortgage his property valued at £390,000. He required a mortgage of £300,000, plus fees to repay an existing mortgage of £202,000 and to consolidate debt. The existing mortgage had recently reverted from a competitive fixed rate to a high level standard variable rate mortgage with his current lender who was unable to offer the additional borrowing requested to consolidate credit card and loan debts and repay funds owed to family members.
The new lender was able to offer a market leading first charge mortgage rate on the terms desired by the client.
The client received all the finance documents by email, printed them out, signed, scanned and return emailed them to UKPF. UKPF then submitted the scanned copies to the lender for underwriting.
The case came to UKPF during the lockdown with many lenders and brokers lamenting slow and difficult processing. The loan documentation and our letter of requirements were emailed to the client directly following our first conversation. Turnaround was fast and the client provided us with a full suite of documents and background information enabling us to submit the case to the new lender via their dedicated intermediary portal. All the supporting documentation was also uploaded at this time, enabling the lender to immediately begin their underwriting process. Any resulting queries were dealt with on receipt by UKPF’s assigned case worker and information requested from the client as required, without delay.
Throughout the process UKPF updated the case multiple times daily and logged this via our cloud-based case management software ensuring that everyone was kept in the loop. As this case was being processed during the lockdown, most of our staff were working remotely but the scenario proved a great test for the robustness of UKPF’s procedures and systems, which came through with flying colours.
UKPF were aware from the outset that this case hinged on the need to collect solid information on the outstanding debts which was provided by the client enabling the individual amounts to be satisfied by the lender on completion. Full statements, including BACS details were supplied to the lender on initial submission to ensure that no hold ups occurred.
The case proceeded quickly to offer, and our proactive approach ensured that the legal phase of the application went as smoothly as possible. The case completed and a very happy customer was soon leaving a 5-star review on the quality of our service.