Remortgaging and coronavirus

The Bank of England cut the base rate from 0.75% to 0.25% on 11 March 2020 due to coronavirus. 

The Bank of England base rate is now at a new low of 0.1%. This second cut was on 19 March 2020.

Mortgage rates might drop because of the lower base rate. This could be good news for those looking to remortgage. 

See how coronavirus could affect you in our coronavirus guide.

You can still remortgage if you’ve been furloughed, but it may be harder.

Remortgaging with the same lender

You may be able to remortgage with your current lender. 

If you can, you may not have to go through more affordability checks. 

If you want to remortgage for a higher amount, your lender will need to check if you can afford the larger payments.

Remortgaging with a new lender

You'll need affordability checks if you're remortgaging with a new lender. 

If this happens, the lender will use your furlough income instead of your usual income to decide. 

Many lenders also will not accept bonus or overtime pay if you’re furloughed. This’ll affect how much you can borrow. 

More about furlough in our coronavirus guidance.

You're still able to remortgage even if you're on a payment holiday.

Taking a payment holiday shouldn't affect your credit score.

Find out more in our coronavirus guide.

Remortgaging if you're unemployed

If you're unemployed you may still be able to remortgage to a new deal. But you will have fewer mortgages to choose from.

In most cases, you will not be able to change mortgage lenders if you're unemployed.

You may be able to switch to a new mortgage with your current mortgage lender. This is a product transfer. 

In June, Trussle research found you could save £326 a month on average on your mortgage repayments. This is if you transfer your product to your lender's best deal.

You can always get personalised advice by talking to a mortgage broker.

If you're going to lose your job you can speak to your lender about your options. You may be able to get a mortgage payment holiday.

Or find a mortgage with a lower interest rate using our mortgage comparison tool.

There are other ways to reduce how much you spend a month. You could check you're not paying too much for utilities such as broadband and energy.

What is a remortgage?

A remortgage is when you swap your current mortgage for another one. You can remortgage with your current lender or choose a different one.

You might want to remortgage to:

  • get a better rate

  • buy another property 

  • pay off other debts

  • make home improvements

Learn all about remortgaging with Eva, a Trussle mortgage adviser

How to remortgage

It can take a few weeks to several months to remortgage, depending on your situation. 

It’s a good idea to start looking for a new deal about three months before you need one.

If you find a good deal, the lender may reserve it for you until your current deal ends.

See how long it takes our customers to remortgage with different lenders in our lender guide.

4 steps to remortgaging

Step 1 - Check for charges

You may have to pay an early repayment charge if you remortgage before the end of your initial period. 

This could be up to 5% of your mortgage balance. The percentage is set out in the terms and conditions of your mortgage.

Speak to your lender if you do not know how much you’d have to pay.

It may be best financially to wait until your deal is about to end before you remortgage.

More about remortgage fees.

Step 2 - Look at your credit report

If you remortgage with your current lender, they may not check your credit history. This is as long as you’re not borrowing more or making big changes such as changing the mortgage length or type.

Otherwise, a lender will look at your credit report. Your credit report or file is a detailed record of your credit and debt history.

It includes things such as missed debt repayments, and how much credit card and loan debt you may have. 

Your credit report helps a lender decide whether to give you a mortgage. 

It’s a good idea to look at your credit report before you remortgage. If you apply and the lender turns you down it will affect your credit history. This could make it harder to get a loan in the future.

Learn more about credit reports and scores in our credit score guide

You can check your credit report for free by contacting a credit reference agency (CRA).

CRAs include:

  • Experian

  • Equifax

  • TransUnion

If your credit report does not look good, consider improving it before you remortgage.

Find out how to improve it in our bad credit mortgage guide.

Step 3 - Find out how much your home is worth at the moment

You’ll get a better mortgage deal the more equity you have in your home.

Equity is the value of your home minus how much you owe on your mortgage.

Your home might have gone up or down in price since you bought it. Ask an estate agent to value your home, or check a house price website like Zoopla.

This will give you a more accurate figure to use when you look for deals.

Step 4 - Get a new mortgage

You can find remortgage deals by:

  • asking your current lender

  • using a comparison website

  • speaking to a mortgage broker

Remortgaging with your current lender

It can be quicker to remortgage with your current lender, but you could miss out on a better deal elsewhere.

Using comparison sites

A comparison site can give you a good idea of what deals are on the market.

You may not be able to get one if your situation does not match the rules the lender attaches to their mortgages.

The benefits of brokers

Brokers help you decide what type of mortgage you need, then find the deal that suits you best.

Some brokers work with lots of lenders so they're able to choose from lots of different deals. At Trussle, we deal with more than 90 lenders.

Brokers are useful if your situation is more complicated. For example if you have bad credit or are self employed. 

Few lenders, like First Direct, do not offer mortgages through brokers.

Some brokers charge a fee. Trussle is fee free.

Do you need a solicitor

You do not need a solicitor or a conveyance for the legal side if you remortgage with your current lender.

You will need a solicitor if you move to a different lender.

Your savings will depend on personal circumstances

Reasons to remortgage

By shopping around, you might find a mortgage deal that reduces the amount you pay each month.

For more stable monthly payments, you could switch from a variable rate to a fixed rate mortgage.

Some mortgage deals offer a lower-interest introductory period.

When that period ends, you may be able to get a better deal by remortgaging.

Some mortgage types are a bit more flexible, and this may suit your current needs. An offset mortgage lets you offset any savings interest against mortgage interest.

Interest rates on mortgages are usually lower than those on credit cards and other loans. So it may be worth combining other debts into your mortgage.

This is not always a good idea, so before you do discuss your options with a mortgage broker.

If you’re considering home improvements, remortgaging can help you get extra funds.

Making improvements that add value to your home could also be a good investment in the long run.

If you need to free up some capital, remortgaging your home can release some equity.

You can then use the funds for things such as helping your children with a house deposit of their own.

If you get a pay rise or need more money remortgaging could help you find a deal that's better suited to your new needs.

If you want to get a second home or a buy-to-let property, you could remortgage to raise the money for the deposit.

How much you could save from remortgaging

Our research found that the average saving is almost £5,000 a year when you remortgage instead of staying on your lender's standard variable rate (SVR).

See how much you could save.

Compare remortgage deals

You can compare remortgage deals to find one that's right for you.

Remortgaging to improve your home instead of moving house

In June we surveyed over 2,000 adults in the UK to see if coronavirus had affected their plans to buy, sell or own a home.

Since the coronavirus lockdown:

  • 82% of homeowners in the UK are not considering a larger home with more space when moving home

  • 68% are more interested in improving their situation at home

  • 1 in 7 homeowners are considering remortgaging for home improvements

The numbers are different across the country. They rise to 22% in the South East and 37% in London. They drop to 4% in the North West and 2% in Northern Ireland. 

Younger people seem keener to remortgage to improve their home. 29% of 18 to 34 year olds said they'd consider it.

The number drops to 19% for 35 to 54 year olds and only 3% for people aged 55 or more. 

The top 6 home improvements across the country were:

  • A new kitchen (26%)

  • Redoing the bathroom (23%)

  • Landscaping the garden (22%)

  • Building an extension (16%)

  • Having a larger garden (9%)

  • Creating a home office (8%)

See what improvements you could make with your mortgage savings with our remortgage calculator.

See what the top 6 home improvements are for different age groups in the UK.

We asked people in the UK aged 18 to 34 years old what home improvements they would make if they were possible.

  1. A new kitchen (25%)

  2. Landscaping the garden (19%)

  3. Building an extension (16%)

  4. Having a large garden (16%)

  5. Redoing the bathroom (16%)

  6. Converting a room into a home gym (11%)

We asked people in the UK aged 35 to 55 years old what home improvements they would make if they were possible.

  1. Landscaping the garden (29%)

  2. A new kitchen (28%)

  3. Redoing the bathroom (25%)

  4. Building an extension (23%)

  5. Creating a home office (14%)

  6. Having a large garden (13%)

We asked people in the UK aged 55 years or more what home improvements they would make if they were possible.

  1. A new kitchen (25%)

  2. Redoing the bathroom (24%)

  3. Landscaping the garden (18%)

  4. Building an extension (11%)

  5. Building a garage (4%)

  6. Building a swimming pool (4%)

Types of remortgages

Some reasons to remortgage your buy to let property include to:

  • get a better rate

  • buy another property

  • improve your home

  • pay off other debts

  • set up a business

  • switch to a residential mortgage

Remortgaging a buy to let property generally works in the same way as remortgaging your home.

Buy to let mortgages usually have a higher interest rate and fees than a normal residential mortgage.

Lenders will have certain conditions that you’ll have to meet, so it’s a good idea to speak to a mortgage broker.

If you’ve got bad credit you could have fewer mortgages to choose from. This means you might not be able to get the best rate. 

It’s a good idea to improve your credit report as a lender will look at it before deciding whether to give you a mortgage. 

Your credit report, also known as your credit file, is a record of your credit and debt history.

See how to improve your credit score in our credit score guide.

Equity is the value of your home minus how much you owe on your mortgage. 

When you remortgage to release equity, you switch to a new mortgage to get money from your property.

You might want some money to:

  • build an extension

  • pay for a wedding

  • put down a deposit to buy another property

  • start a new business

The amount you take out of your property will be added to your mortgage balance so you can pay it back. 

How much you can borrow will depend on your own personal situation. 

Before you remortgage to release equity make sure it’s the best thing for you in the long run. 

Speak to a mortgage broker if you’re not sure about how much remortgaging to release equity will cost you.

If you want to buy another property, for yourself or to rent out, you may be able to by remortgaging your current home.

You can switch to another mortgage to take out some of the money in your home. This can help you pay for the deposit for another one. 

Your mortgage repayments will go up as you’ll be borrowing more. 

If you’re planning to buy a home to rent out, you’ll need a buy to let mortgage. 

More about buy to let mortgages.

Remortgaging for debt consolidation is when you take out some equity from your home to pay your debt.

Equity is the amount your home is worth minus what you still owe on it. 

The money you take out of your home is then added to your mortgage.

Moving your debt could cost less than using a balance transfer credit card or debt consolidation loan. 

It will depend on things such as when you plan to pay off your mortgage. 

Speak to a mortgage broker or a financial adviser to make sure you’re making the right decision.

If you have a shared ownership home you may want to remortgage at some stage.

The two most common reasons to remortgage are to:

  • get a better interest rate

  • own more shares

When you buy a shared ownership home, you buy between 25% and 75% of its value and pay rent on the rest of it.

If you remortgage and take out a larger loan you could buy more shares until you own your home completely. This is known as ‘staircasing’.

Remortgages for shared ownership can be more expensive than a normal residential remortgage. This is because few lenders offer shared ownership mortgages so there are less available.

If you want to improve your home you may be able to use your mortgage to pay for it.

The money comes from the equity in your home. Equity is the amount your home is worth minus what you still owe on it.

You borrow the money from your home and add it to your mortgage. This means your monthly payments go up.

When home improvements increase the value of your home

Remortgaging for home improvements can be a good idea. For example, having an extension built can be cheaper than buying a bigger house. Especially when you consider stamp duty

If you want to take out a loan for home improvements, remortgaging is usually the cheapest way to do it. 

Some improvements could also make your house worth more. A loft conversion may cost £30,000 but could increase the value of your home more than that.

Some home improvements will not increase the value of your home and could make it harder to sell. 

You might also not get the money back when you sell your home. 

It could be harder to sell a property if you add:

  • a swimming pool as not everyone wants to look after one

  • another bedroom to a three bedroom house without adding space downstairs as it be too small for a family of 6

Ask a local estate agent if your plans might increase the value of your home.

The best time to remortgage for home improvements

The best time to put the cost of home improvements on your mortgage is when:

  • interest rates are low

  • house prices are high, so it could be cheaper to extend rather than move

How to remortgage for home improvements

Speak to your lender or mortgage broker if you want to remortgage for home improvements.

Your lender will want to know what you need to borrow more for.

They’ll see if you can afford it. They might do this by doing a hard or soft credit check, depending on their rules. 

Learn the difference between a hard and soft credit check in our credit score guide

You may be increasing your mortgage repayments for a long time, so make sure you can afford to.

If you need some money, you may be able to remortgage your home if you own it outright. 

You might need some cash for home improvements or to help a child get on the housing ladder.

Is it a mortgage or remortgage?

If you’ve paid off your mortgage and do not have any other loans on it it is ‘unencumbered’. 

Some lenders offer remortgages if your home is unencumbered. Others offer new purchase products.

Lenders look at your mortgage application in the same way for both cases.

If your home is unencumbered it may affect:

  • the rate you’re offered

  • incentives such as free valuations

Plenty of lenders

You’re likely to have more lenders and products to choose from if you remortgage and own your house outright. 

This is because the risk is lower for the lender. And paying off your previous mortgage shows them you’re a responsible borrower.

Your lender will still look at your finances and credit record to make sure you can afford the mortgage.

An interest only mortgage is when you only pay interest in your monthly repayments. This means monthly payments can be quite low.

You also must have a plan in place to pay the loan at the end of your mortgage term. It could be:

  • the sale of another property

  • savings

  • an endowment

  • investments

Often with mortgages you pay some of the interest and the loan in your monthly repayments.

If you remortgage, you can either get a better interest only deal, or switch to a repayment mortgage.

You’ll have a big choice of lenders if you’ve got an endowment policy. They often make an offer based on the middle projected figure in your endowment statement.

If you plan to pay off the capital with savings, or by selling your home, you’ll have a much smaller choice of deals.

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Your home could be repossessed if you don't keep up repayments on your mortgage.

You may have to pay an early repayment charge to your existing lender if you remortgage.

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