You can reduce your costs and save money by remortgaging. Read on to find out how much you might be able to borrow.
We’re living in difficult times, and the skyrocketing cost of living means many people are looking to save money where they can. From loans to credit cards, plenty of borrowing solutions are available, but remortgaging remains one of the best.
Remortgaging is switching from your existing mortgage to a new one. Some people might do this to reduce their monthly payments, while others want to release equity to pay for their debts or fund home improvements.
Moving onto a new mortgage helps you improve your financial future, but there are numerous things to consider, and the process can be stressful. At Believe Loans, we support our clients to find the best deal for their needs and partner with highly professional mortgage providers.
With a complex economy, it’s difficult for anyone to find a new mortgage deal, but when you work with our professional brokers, you can take advantage of a fully bespoke service to your requirements.
How does remortgaging work?
Every homeowner will know that their mortgage is their most significant monthly outgoing payment. According to Money Nerd, the average mortgage debt in the UK is £137,934, and The Guardian states that in 2021, the average number of households with large debts increased by one-third.
With rising energy bills causing problems, more households are looking to reduce their monthly outgoings, and finding a new mortgage provider or deal could be the best way to do it.
If you’re out of your fixed-rate mortgage, you might look for a better agreement, as the payments can significantly dent your bank balance.
Some people ask their existing mortgage provider for a different deal, but you can also choose a new company that might be willing to offer you a fixed-rate mortgage and save on repayments.
Most people remortgage a residential property, but you can also find a solution for commercial and buy-to-let properties. However, some providers only offer residential mortgages, while others might specialise in commercial buildings.
Why searching for different mortgage lenders might make sense
Remortgaging isn’t a decision anyone should take lightly, and there are plenty of factors to consider before making the switch. If you rush into a decision, you could end up paying more and dealing with debts.
However, remortgaging can be an excellent solution if the following factors apply to you.
The fixed-rate agreement is coming to an end
If you’re currently on a discount, tracker or fixed-rate mortgage agreement, you’ll usually benefit from reduced payments for two to five years before moving onto the lender’s standard variable rate.
When people move onto standard rates, they often find they pay out a lot more than before, which can impact their finances. However, moving onto a different deal could reduce the interest rates and save you a lot of money each month.
The loan-to-value ratio on your property has reduced
Homeowners with a mortgage may want to consider remortgaging when their property loan-to-value (LTV) ratio falls. The LTV ratio is the percentage of the value of the mortgaged property.
For example, if a property is valued at £100,000 and the mortgage balance is £80,000, the LTV ratio would be 80%. However, some properties increase in value, so your LTV ratio will decrease.
If your property increases in value to £120,000, then the ratio will decrease, which means you might be able to find a mortgage agreement with lower rates.
The Bank Of England interest rates are increasing
Some people’s mortgage rates are subject to the Bank Of England, so you’ll pay more when they increase the interest amount. Providers that offer a non-fixed agreement, such as a discount mortgage, often use the Bank of England’s rates, so there can be some instability.
Moving onto a fixed rate gives you more security as there’s a set amount of time when your rates won’t rise.
You want to choose a repayment mortgage
Many lenders offer an interest-only deal, which means you only pay the interest on your mortgage loan each month instead of making payments to increase your ownership percentage of the property.
While these deals are great for first-time buyers or people with low incomes, paying only the interest means that the provider will always own the property.
If your income increases or you feel in a position to start making repayments on the loan, you might have to switch to another provider.
Your existing lender doesn’t allow large mortgage payments
It’s important to remember that mortgage providers operate a business, meaning their main priority is making money. So, if you’re on a fixed-rate mortgage, your lender might refuse overpayments or charge a fee.
For many people, this isn’t a problem – but if you come into some money through an inheritance or a windfall, they won’t let you pay off a chunk of the mortgage.
Many providers also have early repayment charges because they want to recover any money they’ll lose through interest, but it ultimately depends on the provider.
You want to release equity
Homeowners with equity in their property may be considering a remortgage to release funds for home improvement projects, debt consolidation, or other purposes. When you remortgage, you take out a new loan against your property and use the additional funds to pay off your existing mortgage.
It’s an excellent way to access the equity you’ve built up in your home without selling the property.
How much money can you borrow when you remortgage?
As you probably know, there’s no simple answer to how much money you can borrow when remortgaging your property. It entirely depends on your circumstances and the lender you choose, but some factors will contribute to the amount you receive.
Are you looking for better rates?
If your main concern with applying for a different mortgage is to lower your payments, you’ll most likely apply for the outstanding amount. Doing this enables you to save money by securing lower interest rates or a more extended repayment period.
Do you want to release equity?
If you want to remortgage to release equity from your home and pay for renovations or anything else, you can remortgage for a higher amount. But it depends on whether a lender will offer you the money.
What’s your loan-to-value ratio?
The loan-to-value ratio is one of the biggest factors defining how much money you can borrow. Lenders will look at how much equity you actually own in the property and use that number to decide how much you can borrow.
The credit rating
Your credit report is also important – especially if you want to borrow more money. All mortgage providers will look at how you’ve handled your current mortgage and if you’ve missed any payments on credit cards and personal loans.
If you struggle to manage other debts, you’ll have fewer choices with lenders, and the ones that offer a mortgage will introduce higher interest rates.
The value of the property
All lenders want to look at the property’s value before offering a mortgage. Properties are always subject to increases or decreases in value due to the economy or the area they’re in.
When a property increases in value, you can borrow more money, but decreases in value make a mortgage provider warier.
However, it’s subject to a lender’s valuation, and a decrease in value doesn’t necessarily mean you won’t get a good deal.
Use mortgage calculators to see how much you can borrow
The best way to get an idea of how much you can borrow is by using a mortgage calculator. While they won’t be able to give you a concrete amount, it’s good to get some clarity and understand the factors that might stand in your way.
Believe Loans has a free remortgage calculator to help you plan for your future. You can also talk to our team of specialists and find out whether you’re eligible for a low-interest mortgage.
What to consider before remortgaging your property
Applying for a new mortgage deal isn’t a decision you should take lightly, and there are many things to consider. However, if you feel it’s the best solution for your financial future, it makes sense to take the leap and find a deal that benefits you.
Have your circumstances changed?
In 2014, the new mortgage rules came into force, which required lenders to look at an applicant’s financial history, income and how they’ll manage the mortgage payments.
While this shouldn’t be a problem, in theory, it does mean there are more factors lenders look at before granting an application.
A change in circumstances doesn’t necessarily mean you’ll be turned down, but your payments could change, and you might not be able to borrow as much as you’d like.
Changes to your work
If you find a new job that pays less or become self-employed, your options will be more limited, as affordability is a significant factor for lenders. Some lenders will increase the interest rates or let you borrow but with stricter terms.
Outstanding debts
You might have an outstanding loan or other debts, and lenders will look at them to see if you can commit to the mortgage repayments. If you have poor credit, you can still find a lender, but the interest on these remortgage deals will be much higher.
Relationship changes
One of the changes you might encounter is when your relationship status changes. For example, if two people enter into a joint mortgage but then get divorced, each person’s affordability criteria will change.
Mortgage providers won’t turn you down if you apply as a single person, but you might need to accept that you won’t be able to borrow as much.
The costs
One of the biggest mistakes people make when remortgaging their property is forgetting to look at the costs involved. It’s not just the monthly repayments you have to consider but also how to navigate out of your current mortgage.
Exit fees and early repayment charges
Your current mortgage provider might charge a fee if you leave the agreement while still in the tie-in period. Also, lenders can add an exit fee for people who want to change providers, so it’s worth looking at your contract before making a decision.
Property valuation
Your current or new lender will also want to check the value of the property before they offer you a mortgage in principle. If your value increases, you might be able to borrow more money, but decreases in property value could limit your options.
Arrangement fee
Most new lenders charge a fee that covers all of the administrative work involved in the mortgage application. However, if you go with the same lender, you could find more favourable terms and reduce the fee.
Broker fee
All brokers have a fee, which covers the cost of us finding you a new deal. However, while some charge money upfront, we add our fees to your outstanding mortgage payments, so you won’t have to worry.
Believe Loans will help you find the best mortgage deal for your needs
Remortgaging doesn’t have to be a headache, and when you work with a professional mortgage broker, you get the most affordable deal. Our team of brokers can help you improve your financial future and find stability in a challenging mortgage market.
Choosing us gives you the following:
Access to a wide range of lenders
While there are plenty of mortgage lenders around, brokers like Believe Loans have access to specialist providers, including mortgage brokers that specialise in poor credit. Some lenders only work directly with brokers, so choosing us gives you more flexibility.
No upfront fees
When we arrange a mortgage for you, there’s no upfront charge. The fee is added to your mortgage agreement, so you won’t need to worry about a thing.
Support from an award-winning team
We’re proud of our fully bespoke service, and we recently won an award for our mortgage broker services. That doesn’t mean we’re happy to sit back and relax, though – each member works hard to carry on our fantastic reputation.
Arrange a free no-obligation consultation today
With so many mortgages available, we’re confident we’ll find you the best remortgage deals, so you can relax and enjoy life. Please contact us for a free consultation, and we’ll get back to you ASAP.