Re-mortgaging can be a smart financial move for a number of reasons.
You might need to release equity or consolidate debt, or perhaps you are simply looking for a better interest rate.
Now, with new measures announced by the Financial Conduct Authority (FCA) that are designed to help more people access secure homeownership, it will be easier for borrowers to remortgage.
Key changes to remortgaging
The FCA released the policy statement PS25/11 outlining the key changes (which came into force immediately) being made to simplify the remortgage process for borrowers.
For borrowers seeking to reduce the term of their mortgage, the FCA has removed the requirement for a full affordability assessment, making the process much easier and simpler.
This simplification is designed to lower the total cost of borrowing and reduce the risk of homeowners’ mortgage repayments extending into retirement.
However, mortgage lenders will still be expected to consider affordability in line with their responsible lending policies.
The FCA also aims to make remortgaging with a new lender much easier by introducing simpler affordability assessments, enabling borrowers to access more affordable products.
Mortgage lenders are also mandated to deal fairly with customers whose mortgage terms have expired. This includes the requirement not to take repossession action unless all other reasonable attempts to resolve the position have failed.
Other factors to consider when remortgaging
The FCA’s package of measures will make remortgaging much easier for homeowners, but it is still important to consider a range of factors before making a decision.
Overlooking key legal considerations can lead to unexpected costs, delays, or complications.
If you are still within a fixed-rate or discounted mortgage deal, your lender may charge an early repayment charge (ERC) to exit your current mortgage early. These fees can be substantial (sometimes thousands of pounds) and could outweigh the savings of switching to a new deal.
You should make sure you review your mortgage terms before committing to a re-mortgage and factor in any ERCs when calculating the overall benefit.
Additionally, while remortgaging is generally cheaper than buying a property, it still comes with costs.
You will typically need to pay:
- Legal fees for the conveyancing work.
- A valuation fee (unless covered by your lender).
- Lender arrangement fees for the new mortgage.
- Land Registry fees if changes need to be made to your title.
Remortgaging can provide financial flexibility, but it is important to make sure you have accounted for all the costs incurred in the process.
Remortgaging with confidence
Many homeowners mistakenly believe remortgaging is as straightforward as switching lenders.
The reality is that remortgaging is a legal process.
A solicitor will need to carry out title checks, confirm there are no outstanding charges on the property, and handle the legal transfer of funds between lenders.
If you’ve found a better mortgage deal, our experienced conveyancing team will help you change lenders speedily and efficiently.
Considering a remortgage? Speak to our team today for expert legal advice.