Remortgaging can be a complicated process, full of hidden challenges. The ongoing pandemic, the housing boom and the recently ended stamp duty holiday have all combined, greatly increasing demand on lenders. This increased pressure on the industry has resulted in mortgage and remortgage applications taking longer than usual and delays are common.

 

Start Early

Start the remortgage process at least three months ahead of the end of your current deal, six months ahead is optimal. Getting the ball rolling early allows time for any delays to work themselves through before you are moved onto a more expensive standard variable rate.

 

If you’re currently on a fixed or discounted rate you should be aware that when this ends you will usually be bumped up to the lender’s generally much higher standard variable rate (SVR). This can come as quite a shock when you’re used to the repayments agreed under the initial mortgage deal.

To avoid this SVR rise, it helps to start looking around for a new deal a good three to six months before your current deal ends. This is doubly important for the self-employed or those with other complex circumstances.

The majority of lenders will allow you to agree a deal with them three, and in some cases up to six, months before you start making repayments. For example, if your current deal expires between March and June 2022, you could look around in January, find a favourable deal and lock in that January rate with a new lender to begin repayments in March – June. You then continue to the end of your current plan with your old mortgage provider, before embarking on repaying your new plan.

This is not without risk as, having agreed to that early deal, more favourable offers might emerge in the meantime. It may therefore benefit you to wait and see what emerges closer to the end of your current deal. If you decide against your new deal in favour of an even more competitive one before you begin repayments, you’ll almost definitely be liable for some fees payable to the lender you first agreed a new deal with. It’s key to weigh up the pros and cons of each choice.

To give yourself peace of mind and help you navigate this complex process, it’s always advisable to seek expert advice and support from brokers who know the industry inside out and have a strong understanding of where the markets could be heading in both the short and long term.

If you haven’t got six, or even three, months before your current mortgage deal ends, you needn’t worry, just start the process as soon as you can. There’s no need for brand loyalty here. Unless your current lender can offer you the most competitive deal on the market, you have no obligation to stay with them. Again, this is where an expert broker can really help, they have access to more lenders and deals than you’ll easily find in a google search.

Landmark has built strong relationships with key personnel at many mortgage providers. We can often find exceptional deals and deals for those with specialist requirements.

 

Be a Responsible Borrower

Lenders like borrowers with a clear understanding of their financial status and a keen awareness of their borrowing capacity and, above all, of their repayment capabilities. Do you know how much you can borrow and how you can repay it, how much you have borrowed in the past and how well you paid off those loans? In short, do you know your credit history?

It’s a good idea to check your credit report before lenders do it for you. You must convince your potential mortgage provider that you are a good risk, that you have the financial capacity and discipline to make the repayments on your re/mortgage.

The most common means of checking your credit history is to use credit reference agencies. The lender will use the same means as you and have access to the same information. You can do this just as easily as a lender can and it’s as well to be prepared. It’s important that you know what they will find out about your credit history.

The biggest credit reference agencies are Experian, Equifax and TransUnion. They look at and list your past credit cards, loans, overdrafts, mortgages and even mobile phone and utility bills over the last six years. All credit reports are now free so it’s certainly worth checking all three to make sure you have checked the same one/s as your potential lender.

Our experienced and knowledgeable expert brokers can help you make sense of your credit score findings as well as advising you of ways to improve your credit profile before you apply for any future loans.

 

Do Your Research

An early start gives you the best chance of securing the most favourable deal possible. You’ll have time to do your homework and really shop around, comparing not only repayment and interest rates, but also terms and conditions, and any added bonuses available such as free conveyancing or legal fees. You can choose one lender and reserve a “safety net rate” as you continue your search for an even more competitive offer but, there are a few things to be aware of.

If you pay any upfront fees to lock in a good rate, you are very unlikely to see any of it returned if you change your mind and go with a different lender. The good news is that not all lenders charge fees to reserve an early deal.

When you reserve a good deal, don’t tell the lenders you are shopping around. You many think that a little competition will encourage them to give you an even better deal, but this might backfire on you as the lenders may not take you seriously. Above all, don’t ditch your reserve deal until you have a definite formal offer from your chosen lender. You probably won’t get a second chance at the first deal.

 

Don’t apply for all the mortgages. Ultimately, you can only accept and be accepted for one re/mortgage deal, you don’t want to become known as a timewaster. Three applications are enough to give you an advantage regarding favourable terms but not too many to make you seem irresponsible. Every application you make appears on your credit report, multiple applications without completion will make you appear to be a bad credit risk.

Shopping around takes a lot of effort and can be confusing, weighing up the pros and cons, repayments vs terms, rates vs “extras” etc. Landmark Private finance has a bank of specialist expert brokers who can do the hard work for you, we will clearly explain the many aspects of each deal, and help you make the best choice for you. We always check the market immediately before you commit to a deal just in case there’s something better out there.

 

Make Sure You Can Borrow What You Need

In the past your principal income was multiplied by anything up to five times to calculate your maximum remortgage value. These days it’s more complicated, the lender will take many other outgoings – loans, household expenses, council tax, etc ­– into account when calculating what they think you can afford to repay. Every mortgage provider uses a different formula but they all rest on the same basic foundations.

Your basic salary will be added to some or all any other types of income you may have, such as bonuses, commission, benefits, other jobs. The majority of lenders don’t take past furlough pay or self-employed income support grants (both schemes having been recently discontinued) into account when calculating what you can afford to repay.

Regular outgoings, such as any other loans, household expenses, utility and maintenance costs, school fees, credit cards, will all be considered against your income to calculate your disposable income. This disposable income must be able to cover the new mortgage payments even if the rate were to rise to 6 or 7%. This builds in a buffer against a future rise in rates.

At Landmark we can help you understand how the affordability of your repayments has been or is likely to be calculated. Our expert advisors can help you find the most affordable scheme for your circumstances.

If you are in mortgage arrears, arranging a remortgage could be more challenging. If you are already in arrears or are concerned that you might very soon run into arrears, it’s vital that you talk to your lender immediately. Landmark can offer advice and support you through this process.

 

Timing is Crucial

Most mortgages will incur early repayment fess for the initial discount period. If you change your mortgage provider during this time, you’re liable for these fees. This charge is likely to be in the thousands of pounds, amounting to anything up to 5% of the outstanding mortgage balance.

It’s vital to find out whether your mortgage carries an early repayment penalty, and how much that is likely to be. To avoid such a penalty fee, you must make sure your remortgage starts on the next working day after the end of your current mortgage fixed rate/discount period.

If you need to remortgage before the end of your fixed rate period, you must find out how much of an early repayment charge you face in order to decide whether or not it makes financial sense to change mortgage providers. Will you save more with a new deal than you’ll pay for early repayment?

If no such penalty exists (which is highly unlikely) then you’re free to remortgage at a time that suits you.

At Landmark our experts can help you balance your early repayment fees against your new deal rates.

 

Get Your Facts and Figures Straight

You will need to know the precise amount you owe on your mortgage at the end of your current fixed/discounted rate period. Ask your lender to confirm the exact figure you will owe on a specific date, The lender will then take account of any future repayments due between the time of enquiry and the date given, thus giving you an accurate picture of your borrowing needs for remortgage.

If you work, it out yourself and make an error you could end up in deficit which can incur further complications and expense. Finding yourself in deficit could result in taking out a larger mortgage or facing higher repayments than necessary.

Make sure to ask about any early repayment charges, the exact amount you owe and the date on which the charge will no longer apply. If possible, you should arrange for your remortgage to start the next working day after these charges expire.

Don’t forget to ask about any other fees or admin charges, sometimes referred to as exit fees or deeds release fees. Find out how much these will be and check your original mortgage offer documents and key facts illustration to make sure you were told about them before agreeing to your original mortgage. If they are not there, you are not liable to pay them.

This is where a brokerage expert can help you pick through the paperwork and find the relevant clauses.

 

If You’re Self Employed, There Will Be More Hurdles in Your Path

But that’s nothing new, right? Being your own boss is rewarding and liberating but often brings challenges to any financial situation. Being self employed or having worked abroad, working on short term contracts, sub-contracting etc, can present problems in proving your long term income, which makes obtaining a mortgage somewhat difficult.

If you received any of the now defunct self-employed income support grants during the pandemic, or if your business struggled during that time, it won’t necessarily stop you from gaining a remortgage, but lenders might take this as an indication that your business lacks long term sustainability.

 

Whatever your circumstances, you must provide watertight proof of your long term income and viability as a borrower. It’s imperative that you can demonstrate how well your business is doing with up to the minute business accounts covering the last two to three years. These will normally need to be signed off by a chartered accountant. If you don’t have your business accounts to hand then the last two to three years’ tax returns will usually be an acceptable substitute.

 

Lenders will assess you not on turnover but on net profit. This can be very helpful for established businesses. However, for those who may have become self-employed since taking out their current mortgage, particularly if this is a recent change, it may be practically impossible to remortgage. Most lenders won’t accept Covid-19 support as part of your ongoing business profitability forecast.

 

As this situation is often a complex one, it is highly recommended to seek the advice of a specialist broker, one who knows just what lenders want to see. At Landmark we are highly experienced in obtaining mortgages for the self-employed, sub-contractors and others in similar circumstances.

 

 

Valuation. Valuation. Valuation.

 

You need to get a realistic picture of what your property is worth before you can even think about rates and repayments. This must be a reasonable estimation as lenders will get an independent valuation to compare with yours.

Don’t try to guestimate this, do your research, look at similar properties in your area that are for sale. Better still, speak to a professional, it’s worth getting a qualified, experienced opinion.

 

Calculation. Calculation. Calculation.

 

Once you have a realistic idea of your property’s worth, you can work out what percentage of it you already own (equity) and how much you have left to pay off. The percentage difference between these two values is called loan to value (LTV), and it will greatly influence the mortgage rate you will be offered.

 

It’s a simple calculation; divide the amount you still owe on your current mortgage by your property’s current market worth. Multiply that figure by 100 and you have your LTV as a percentage. For example, if you owe £150,000 on a £200,000 house your LTV is 75% (150,000/200,000 = 0.75, 0.75×100 = 75, =75%).

 

You should be aware that your LTV has probably changed a great deal since you last applied for a mortgage on the property. If the value of your house has increased, you will have almost certainly dropped down an LTV band, or even two. If it has decreased in value, you are likely to have risen a band or two.

 

Your LTV is vital. The greater the amount of equity you have built up in your property, the lower your LTV will be. The lower your LTV, the lower the interest rate you’ll be offered when you remortgage that property.

 

Should you need to release some of that equity you have built up, for home improvements, for example, you can always remortgage and borrow a greater amount than you currently owe. If you do this, you must be aware that you’ll make larger repayments each month and take longer to pay off the debt.

 

Landmark’s expert brokers will be happy to talk you through your remortgage options and clarify the process for you.

 

 

Lower Your LTV Band

 

If you can drop down an LTV band you will find your mortgage offers become more favourable. If you still have 60% or more of the value of your mortgage still to pay off, the further you can drop down an LTV band, the more competitive your mortgage rate will be. Interest rates drop most markedly in the 60%, 75%, 80% and 90% LTV bands.

 

You can move into a lower LTV by one of two ways. Firstly, you could add some more capital – personal savings or liquidated investments – to the remortgage pot to reduce the amount you need to repay. This is certainly worth the effort if you’re very near the next LTV band down, eg, 57%, 73%, 88% etc.

 

Alternatively, you can try to improve the value of your house, with very minimal outlay, of course. Sometimes all it takes is an extra couple of thousand pounds on the value to push you into the next band. This can be a rather hit or miss process though, depending on the property and the valuers. It will take some effort on your part, but nothing ventured, nothing gained.

Always use the highest value you think you can get for your property on the remortgage application. Step back and take a critical look at your property. What can you do to make it look its absolute best? A tidy up, a clear out, a lick of paint here and there, some “set dressing” can go a long way to lifting a home up to a higher value bracket.

 

If you can, attend the valuation, point out your homes plus points, good storage, off road parking, proximity to transport links, anything that makes it more desirable than others at a similar price point. Make the valuer see it as a home, not just a property unit. Sometimes the valuers won’t be there in person, preferring to use databases and internet comparisons.

 

Show the valuer examples (websites, screen shots) of properties, like your own, that have sold for your top valuation figure or more. Valuers use such comparisons to make their valuations and build their databases. Properties under offer or merely for sale at such prices carry far less weight.

 

You might find that the valuer disagrees with your valuation. If this raises you into a less favourable LTV band you might find that you are no longer offered the best rates for your new LTV because the lender is unconvinced by the figure you have put on your home. In this case it might be better to apply to a different lender but weigh the costs of any fees you have already paid, potential delays and the effect on your credit score against any benefit you could get from a better offer you might not have secured yet.

 

 

Get All Your Financial Ducks in a Row

 

Lenders want borrowers to demonstrate sound money management skills; borrowers who know how much money they have coming in and going out each month, who rarely use their overdraft and who don’t struggle to repay loans promptly. They want to know they can rely on you to honour the remortgage repayments.

 

To make the best impression, in the short term before you apply for the remortgage, you should avoid applying for other loans or credit, avoid using, especially relying on, your overdraft, and don’t show evidence of high spending on frivolous or unnecessary purchases.

 

 

Admin

 

To avoid any unnecessary delays, collect all the relevant paperwork, keep it together and have it ready to present to your lender. Everything you had to produce last time you applied for a mortgage, the new lender will want to see for a remortgage, even if you’re staying with the same lender. It’s best to get this all together early on as you won’t know when your new mortgage provider will want to see some or all of it. Having it all together can speed up the process as fewer people will need to review it if it can all be checked over at once.

Make sure you have:

• ID documents (passport for preference, or birth certificates, picture driving licence)
• Proof of address (utility bills, credit card and/or bank statements)
• Your last three months’ pay slips/proof of salary
• Your last three months’ bank statements
• Your last three years’ accounts/tax returns if self employed
• Your latest P60 tax form (showing income and tax paid from the latest tax year)
• Proof of bonuses and/or commission
• If you were furloughed during the pandemic, you will need a letter from your employer stating that they intend to retain you now that the scheme has ended

 

 

If at First You Don’t Succeed…

 

Don’t panic if you’re rejected at first. And don’t give up. Don’t immediately reapply with a different lender because the chances are you will get the same response. Too many applications and rejections will have a terrible effect on your credit report, resulting in a bad credit score. Ultimately you will be rejected on a credit search alone, based on the number of applications you have made.

Instead, take a step back, a deep breath and reassess your application. Check your credit report once more, look at the details. Is there something you have missed? Something you could have tightened up? Make sure all your finances are in good order and that you submitted all the necessary paperwork. If you can’t find any holes in your application, it could be that this particular lender has a specific reason for tuning down your application. Ask them what it is, where you can improve. This will also let you know if your credit score is to blame.

 

Alternatively, ask the professionals. At Landmark we have a bank of professional specialist mortgage brokers, with years of experience, and broad diverse knowledge of the industry who have built strong relationships with key personnel in many of the main mortgage providers. We have access to lenders from boutique banks to big high street names, we can find deals for the most complex of cases. We are ready and waiting to put all our expertise at your disposal, to help you find the best remortgage deal for you, your property, and your future.

0203 773 7299
info@landmarkprivatefinance.com

 

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.