HOW REMORTGAGING WORKS IN 2022? 5 Tips You Must Know

Could Remortgaging Be the Answer to Ease Some of Your Unwanted Debt?
Contributors: Nicola Date, Katherine Read. Reviewed by Francis Hui
Are You Considering Remortgaging? Learn About the Dos, Don’t & Why’s of Remortgaging. It Could Be the Solution for You. Find Out Now.

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Are you considering your options to free up some money and wondering how remortgaging works?

Life can be challenging when you don’t have money to care for your basic needs.

As things currently stand in the UK, 38% of people can’t pay for necessities, with COVID-19 lockdowns putting a strain on finances.

If you have ever been concerned about money after retirement, keep reading!

What You’ll Learn in This Article:

    With thorough research, our team at SovereignBoss has developed a comprehensive guide on how remortgaging can improve your lifestyle after retirement. 

    Let’s take a look at how it all works.

    What’s Remortgaging? 

    Remortgaging is when you refinance your existing home or property using the same financial provider or moving to a new one. 

    Ideally, you could save a lot of money by comparing the interest rates first.  

    You can avoid high repayments against low property value by comparing interest rates with a broker. 

    How Does Remortgaging Work?

    Remortgaging works by applying for a new mortgage on an existing property. 

    You can either replace your current mortgage or use the money for other things. 

    A 3rd of the loans taken out by people in the UK between the age of 50-65 are remortgaging plans. 

    With lower interest rates and protection against rate increases, it’s more accessible to remortgage at a lower cost than to continue on a current plan. 

    How Do You Remortgage Your House?

    To remortgage your house, you must consult a financial advisor. 

    You’ll need to budget and determine how much cash you’ll need. 

    Once you have your list of needs and have decided on the amount you would like to unlock, you can apply for an Agreement in Principle. 

    Is It Time to Remortgage?

    It’s time to remortgage when your current mortgage has switched to a standard variable rate, and you have at least 6 months left to pay. 

    The loan-to-value ratio could have improved by 90% if your property value had increased.

    With a higher loan-to-value ratio, you could have more options and avoid higher interest rates. 

    How Could Remortgaging Benefit You?

    Remortgaging could benefit you if you require additional education funds, to pay off old debt, or wants to renovate your home. 

    You can reduce the repayments on your mortgage if your mortgage is at a lower fixed rate. 

    Why Are Most People Remortgaging?

    Most people are remortgaging to avoid standard variable rates that could see them paying more than the current 2.20% on interest rates.

    By switching to a better remortgaging rate, you can move from interest-only to repayments, enabling you to make overpayments. 

    The extra money can be used for something special or to line up your savings. 

    What Will It Cost to Leave Your Current Mortgage?

    To leave your current mortgage will cost you a deeds release fee between 1% and 5% of the total value of your mortgage.

    Depending on the lender, the cost may be high, and you may want to consider an equity release plan instead. 

    How Many Remortgage Deals Are Available?

    These are 5 remortgaging deals available to choose from. 

    Let’s take a look:

    • Rates are set and fixed for life with a fixed rate mortgage.
    • Tracker deal mortgage rates are based off the Bank of England’s base rate.
    • Capped rate mortgage work by the interest rates being built into the loan.
    • Discounted mortgages use variable rates, so the interest goes up or down.
    • Offset mortgages work with your mortgage rate being higher than your savings.

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    How Does Remortgaging Work at HSBC?

    Remortgaging with HSBC works the same as applying for a first-time mortgage. 

    You need to apply for a Decision in Principle, and once successful, you may apply for your mortgage. 

    The HSBC will then replace your old mortgage with your new mortgage.

    How Does the Remortgage Process Work?

    The remortgaging process works by contacting a broker and finding the right lender. 

    Your broker will help you with an AIP (Agreement In Principle).

    An Agreement in Principle (AIP) through a soft credit check can give you a rough idea of how much you can borrow. 

    Consider the costs for property evaluation, conveyancing, repayment charges, and booking fees from a new lender. 

    You can apply for remortgaging when considering your options and sorting out the legal work. 

    You will need the correct documentation:

    • ID 
    • Proof of income 
    • Summary of your financial obligations and records

    Who Is the Remortgaging Guide For?

    The remortgaging guide is for anyone who already has a mortgage.

    You will need to use the first-time buyer’s guide if you are a first-time buyer. 

    How Long Does Remortgaging Take? 

    The remortgaging process can take between 4 and 8 weeks.

    The application process can go through quickly, but the payout can take some time. 

    Approval time is affected by your current circumstances and the amount of money you want to take. 

    What Happens When You Default on Your Mortgage Loan? 

    When you default on your mortgage loan, you risk foreclosure. 

    You will be notified when you have missed your payments, and after 30 days of the bill being overdue, your credit score will be affected.  

    If you’ve remortgaged using any other property or a car as collateral, you could have it repossessed and sold to cover the outstanding costs. 

    Getting Ready to Remortgage

    To get ready to remortgage, you should start by getting your financial status in a good shape.

    The better your credit score, the more likely you will remortgage your home successfully.  

    How Can You Improve Your Credit Score?

    You can improve your credit score by cutting back on spending.

    Consider paying off as much of your old debt if you have credit with more than one institution in an overdraft or a credit card. 

    Don’t apply for new credit. Add additional payments onto existing credit channels to bring down any balances.

    Lower your loan-to-value by reducing the percentage you want to remortgage. You might even find cheaper mortgage deals.  

    How Do You Check If Your Credit Score is in Good Shape?

    You can check if your credit score is in good shape using the online Transunion Equifax Experion credit score checks.

    Common Questions

    Can You Remortgage a Property You Have Inherited?

    Can You Sell a Property You Have Remortgaged?

    What Should I Look For When Remortgaging?

    Who Are the FCA & ERC?

    In Conclusion

    There are many benefits to remortgaging your home. 

    The important thing for any decision will always be research. The more you look into what works for you, the easier your decision is. 

    Get the help of a professional. It can save you money in the long run. 

    Remortgaging can be costly if you qualify but can no longer afford it. 

    Seek out as much information about how remortgaging works to find out if this is for you before committing.

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