First-time remortgage in the East Midlands - what to do when your deal ends

If you bought your home across the East Midlands, Burton upon Trent, Belper, Nottingham or the wider East Midlands two or five years ago and took out a fixed rate mortgage, there is a good chance your initial deal is coming to an end soon. For many homeowners this is the first time they have been through the remortgage process and it can feel uncertain, particularly if you are not sure what happens next or whether you will get a good rate.

This guide walks you through exactly what to expect, what to do and how to make sure your first remortgage goes smoothly.

What happens when your initial mortgage deal ends?

When the fixed rate period on your mortgage finishes, your lender does not automatically find you a new deal. Instead, they move you onto something called the Standard Variable Rate, or SVR. This is the lender's default rate and it is almost always significantly higher than the rate you were paying during your fixed term.

SVRs currently sit somewhere between 7 and 8.5 per cent with most high street lenders. If your fixed rate was 4 or 5 per cent, the difference in your monthly payment can be substantial. On a mortgage of £180,000, moving from a 4.5 per cent fixed rate to a 7.5 per cent SVR could add £270 or more to your monthly payment.

The good news is that you do not have to accept the SVR. You can remortgage to a new deal, either with your existing lender or a different one, and get back onto a competitive rate.

Should I stay with my current lender or switch?

This is the question most first-time remortgagers ask first. The honest answer is that you should always check the wider market before accepting your lender's renewal offer.

Your existing lender will typically write to you a few months before your deal ends with a product transfer offer. These are quick and simple to arrange because there is no full affordability assessment and no new solicitor involved. However, the rate on offer is rarely the most competitive available and lenders know that many customers will take the path of least resistance rather than shop around.

A whole-of-market broker like Remortgage Arena searches across 90 or more lenders, including rates that are not available directly from lenders or on comparison sites. In most cases, switching lender saves homeowners across the East Midlands more than staying put, though the difference varies depending on your circumstances.

Where a product transfer with your existing lender does make sense, we will tell you that too. Our advice is always based on what is right for you, not on generating a switch for its own sake.

What does the remortgage process involve?

If this is your first remortgage, you may be expecting something as involved as your original mortgage application. In practice, remortgaging is usually simpler and quicker, particularly if your circumstances have not changed significantly since you bought.

Here is what the process typically looks like for a Derby homeowner remortgaging for the first time.

1. You contact us. We talk through your situation, your current mortgage, your income and what you are looking for from a new deal.
2. We search the market. We compare rates from 90 or more lenders and identify the best options for your circumstances.
3. We recommend a deal. We explain the options clearly, including total costs, monthly payments and any fees, so you can make an informed decision.
4. We submit the application. We handle the paperwork and liaise with the lender on your behalf.
5. The lender assesses your application. They will check your income, your credit file and the value of your property. A valuation is usually required, though many lenders use automated valuations for straightforward remortgages.
6. Legal work is completed. A solicitor handles the transfer of the mortgage. Many lenders offer a free legal service for remortgages so this often costs you nothing.
7. Your new rate begins. From your completion date your new monthly payment applies.

From application to completion, a typical first remortgage across the East Midlands takes between four and eight weeks.

How much could you borrow on a remortgage?

As a first-time remortgager, you may simply be looking to replace your existing mortgage with a new deal at a lower rate. In that case your borrowing stays roughly the same.

However, if your property has increased in value since you bought it, you may have built up equity that you could release. Some homeowners use a remortgage to raise additional funds for home improvements, to consolidate debts or for other purposes. If that is something you are considering, our affordability calculator gives you an indicative figure based on your income.

What will lenders look at?

Lenders assess remortgage applications in much the same way as purchase applications, though the process is usually faster because there is no property chain involved. The key things they check are:

• Your income. Employed applicants will need payslips and a P60. Self-employed applicants typically need two years of accounts or tax returns.
• Your credit file. Most lenders run a credit check. Any missed payments, defaults or CCJs on your file will affect which lenders are available to you, though specialist lenders exist for adverse credit cases.
• Your loan-to-value ratio. This is the size of your mortgage as a percentage of your property's value. The lower your LTV, the better the rates available to you. If your property has risen in value since you bought it, your LTV will have improved.
• Affordability. Lenders check that your new monthly payment is affordable given your income and existing financial commitments.

What if my circumstances have changed since I bought?

Life changes between buying and remortgaging are very common. You may have changed jobs, gone self-employed, had children, taken on new financial commitments or seen your income change. None of these necessarily prevents you from remortgaging, but they do affect which lenders are most appropriate for your application.

Speaking to a whole-of-market broker before making any application is particularly important if your circumstances have changed. Applying directly to a lender who turns out to be unsuitable leaves a hard search on your credit file, which can make subsequent applications harder. A broker identifies the right lender first, based on your full picture, before any application is submitted.

When should you start the process?

Start looking at your options three to six months before your current deal ends. Most lenders allow you to secure a rate offer up to six months in advance without committing to it, which means you can lock in a competitive rate now and still benefit if rates fall before your completion date with some lenders.

If you are already on the SVR because your deal has already ended, you can remortgage straight away. There is no penalty and no waiting period. The sooner you act the sooner you start saving.

Frequently asked questions

What happens when my first mortgage deal ends across the East Midlands?

Your lender moves you automatically onto their Standard Variable Rate, which is almost always higher than your fixed rate. You avoid this by arranging a new deal before your current one expires.

How soon should I start looking to remortgage across Derby, Staffordshire and Nottinghamshire?

Three to six months before your deal ends. This gives you time to find the best rate, submit an application and complete before your existing deal finishes.

Do I have to stay with my current lender when I remortgage?

No. You are free to switch to any lender when your deal ends. In most cases, searching the whole market finds a better rate than your current lender will offer on renewal.

Will I need a solicitor for my first remortgage?

In most cases, yes. However, many lenders offer a free legal service for straightforward remortgages, so it often costs you nothing extra.

Call us on 01332 300300 or complete our quick enquiry form and one of our advisers will be in touch soon to talk through your options.