How Long Does It Take To Remortgage?
Introduction
There are numerous reasons why you might want to remortgage your existing home, but typical reasons include moving to a better interest rate – instead of reverting to the (typically uncompetitive) SVR, or "Standard Variable Rate", offered by your existing mortgage lender – at the end of a fixed rate deal, debt consolidation, or equity release. It may also be, of course, that plummeting interest rates have left you "high and dry" on a higher rate, so that remortgaging to a more competitive deal could save you a significant amount on monthly repayments. The cut in the Bank Rate from 1.5% to 1.0% in February, 2009, for example, represented the fifth cut in interest rates in as many months by the Bank of England, and, although this drastically low rate is unlikely to be passed on to mortgage borrowers, in full – at the time of writing, the lowest fixed rate mortgage available charged interest at 2.29% – it is easy to see why borrowers on fixed rate deals might want to remortgage.
Remortgaging Considerations
Unfortunately, there are no hard and fast rules regarding how long remortgaging should take. The remortgaging process is similar to that when you buy a house, but application forms, etc., are much more straightforward, and the process overall is typically far quicker, barring complications. Indeed, with interest rates having tumbled over the past few months, many mainstream lenders are focussed on remortgaging quickly, and are offering "fast track" remortgaging services, with the promise of completing the entire remortgaging process within a week, or 14 days.
Exactly how long your own remortgage takes, however, depends on your individual circumstances, and the complexity of the transaction. While 7 days may be a realistic expectation in the simplest cases, between 4 and 6 weeks, or even several months, may be more realistic depending on access to your property and the time taken to complete the legal work required. A mortgage lender also needs to assess the equity in your home – that is, the difference between its market value and any amounts owed on it in mortgages, claims, etc. – and your ability to make repayments. It may speed up the application process, therefore, if all your necessary paperwork – proof of identity, proof of income, existing mortgage statements, etc. – is in order before you start. Bear in mind, too, that remortgaging is becoming increasingly popular in the current economic climate, so the total amount of work that a lender is required to do – not only on your behalf, but on behalf of similar customers – may lengthen the time taken to complete the remortgaging process.
On the whole, however, remortgaging is a much less arduous, and time-consuming task than it once was. If you are using a mortgage broker, he, or she, should be able to give you a realistic estimate of the timescales involved – if you are looking to remortgage quickly, make sure that your broker is aware of this fact – but, failing that, you may need to rely on an estimate from your mortgage lender.
The "credit crunch" – which began with problems in the so-called "sub prime", or "bad credit", sector of the U.S. mortgage market in 2007 – has, of course, transformed the mortgage market, and created several problems for those looking to remortgage their properties.
High LTV ("Loan To Value") mortgage loans – that is, 100%, or even 125%, loans – disappeared early in 2008, meaning not only that first-time buyers were required to find larger deposits, but that existing borrowers were unable to find loans at a similarly high LTV when they came to remortgage. The maximum LTV – that is, the loan amount expressed as a percentage of the property value – that is typically offered by mortgage lenders, nowadays, is 85%. Lenders have also tightened their lending criteria, so if you were offered a competitive mortgage deal a few years ago it does not, necessarily, follow that you will be offered a similarly competitive deal when you try to remortgage your home. It is easy enough to say that borrowers may need to build up more equity in their homes before they can remortgage, but, with housing prices in the United Kingdom having falling 15%, or more, in 2008 – and the spectre of "negative equity" looming large for many homeowners – this may be easier said than done.
If you are in a position to remortgage, however, you should consider not only the interest rate(s) of the mortgage product(s) on offer, but also the length of time that you intend to remain in your existing home. An interest rate cut of 1.5%, compared with your current mortgage, for example, would typically still require you to stay in your home for a further 3 years, or more, in order to recoup the fees and charges associated with remortgaging.