Remortgaging

Lenders have a maximum LTV that they are willing to offer in any given scenario, depending on how well you meet the other lending criteria and how much you need to borrow.

As lower LTV borrowing is less of a risk to the lender, the interest rates offered tend to be more competitive.

The LTV is the percentage of the total cost of the property that you need to borrow. To calculate it, find out the total outstanding value of your mortgage, your property’s current value and then divide your outstanding mortgage balance by your property’s value:

Example:

You have £100,000 left to pay on your mortgage

Your property is worth £200,000

Divide £100,000 by £200,000

= 0.50.5 x 100 = 50 (or 50% LTV)

When you remortgage, the LTV will depend on:

• How much of the original loan you have repaid

• Whether your property has increased in value and;

• Whether you need to borrow more money or are simply remortgaging for a better interest rate

When you remortgage your house, you can either borrow the remaining outstanding balance on your mortgage - usually if you're just changing deals for a cheaper rate or to switch to a new fixed remortgage deal because your previous term has ended.

You may also be able to borrow more when you remortgage, but this will depend on your circumstances. Having more equity in your home can make it easier to borrow additional money when you remortgage, but you'll also need to prove you can afford to repay the larger amount.

Remortgaging usually takes about a month, which is the time you need to complete all the paperwork and have a valuation carried out on your home. When the process is over, you’ll be notified with a completion statement from your lender.

If you choose to remortgage with the same lender, this is known as a product transfer. Because the lender already has all your details, product transfers tend to be quicker than remortgaging with a new lender. Some lenders offer digital product transfers which can be completed online very quickly.

If you remortgage with a new lender, you will need to have a property valuation. Much like you did when you took out the original mortgage.

If you use a product transfer to remortgage with your current lender, you won’t usually need to have a valuation, however, you may need to if your house has changed significantly in value.

Historically older borrowers have had a harder time remortgaging, especially if they are nearing retirement age, due to the maximum age limits imposed by many lenders.

However, in recent years there has been a noticeable increase in flexibility in this area, with some lenders extending their maximum age of borrower and maximum age by which the mortgage needs to be repaid.

When nearing retirement age, many people reassess their finances, and a large part of this is likely to be looking at their remaining mortgage balance, and how they can live more comfortably in their later years. 

People in these circumstances may consider more specialist products, such as:

• Remortgaging onto a retirement interest-only mortgage (RIO) - often a helpful option for homeowners likely to fall short of repaying the final lump sum balance on an interest-only mortgage.

• Remortgage onto an equity release product - always take qualified financial advice from an equity release specialist before considering this type of remortgage.

Yes, it’s certainly possible, depending on the level of your credit issue. There are bad credit lenders specifically intended to help people in these circumstances, although the remortgage rates tend to be higher.

If you’re concerned about your credit score, another option is to consider a product transfer. Your existing lender is unlikely to check your credit rating or affordability unless you’re increasing your loan amount or extending the term of your mortgage, so a product transfer can be an easier option. 

Choosing between a product transfer with your current lender or remortgaging to a new lender depends on lots of factors including interest rates, fees and your financial goals.

Switching lenders

• You may be able to access more competitive interest rates from a new lender

• A new lender may offer different features, such as the ability to overpay

• You’ll be able to borrow more if you choose to

Product transfer

• Often quicker and simpler, with no legal work involved or property valuation needed

• Avoids potential exit fees from your current lender

• May be a better option if your financial situation has changed and switching lenders would be difficult