Owning a home is a great comfort, primarily as a place to live with your loved ones, but also as an asset. Of course, there are times when you don’t necessarily need to move home, but you might be able to do more with this asset or save money while continuing to pay off a mortgage.
In the current economic and financial climate, everyone should consider their finances and make decisions that help them save money and plan for the future. With this in mind, refinancing your property is a sensible idea, and all homeowners should look into how and why they should refinance their home mortgage.
This guide aims to take you through the home refinance process, helping you determine if this is the ideal time to make changes to your current mortgage.
What is a refinance mortgage?
When you refinance your mortgage, you swap your existing mortgage for a new mortgage. Your lender pays off the existing mortgage with the new mortgage, which means you have one mortgage, and a single monthly payment.
Why do people refinance their home mortgage?
There are many reasons why people refinance their home mortgage, including:
- You are looking to benefit from a more attractive interest rate
- You are keen to lower your monthly mortgage payments
- You may want to make better use of the equity of your property
- A change in circ*mstances leading to removing or adding someone to the mortgage
- You may want to raise money to carry out some much needed home improvements
- You may want to reduce your overall outgoings and are looking to consolidate your debts.
These are all valid reasons for people to look into home refinance options.
Applying for refinance mortgage
As you’d expect, the steps when you refinance a house are similar to the steps you take in initially arranging a mortgage. Given you have already undertaken that process, you should be familiar with the process, but it is important to approach mortgage refinancing as professionally as possible.
Steps associated with refinancing your house
The following steps detail the timeline of the refinancing the mortgage on your home process:
- Your lender will write to you to inform you your introductory deal is finishing or you decide to refinance your current mortgage
- You should confirm the outstanding balance from your lender, which informs you of the total amount required to pay off the mortgage, and any fees
- Review and get advice from a mortgage broker of the new mortgage deals available and the remortgage costs
- Prepare your application documents and apply for a refinance mortgage with your broker
- At this stage, the lender decides whether to issue a mortgage in principle or not
- Submit a refinance mortgage application where also your home needs to be valued
- Once the lender has completed their underwriting checks and if everything is okay, your lender will issue a mortgage offer
- If you are changing lenders, enlist the services of a conveyancer
- Once completed, the existing mortgage is paid off
- The new mortgage is registered at Land Registry
When laid out in a step-by-step format, refinancing a home mortgage seems straightforward, but there are many issues to overcome. It is best to work closely with skilled and experienced professionals, such as mortgage brokers. The more help you receive when applying to refinance your mortgage, the more likely it is your application will be successful.
If you are considering refinancing your home or a buy to let (HMO mortgage) property the process is the same.
What documents do you need when you refinance a home mortgage?
Understandably, you need paperwork and documents to support your refinance application. The lender will consider your income, assets, debt and credit score to determine whether they are happy to provide a mortgage.
When you apply to refinance, your lender will ask for the same information you gave them or another lender when you initially bought the home. They’ll look at your income, assets, debt and credit score to determine whether you meet the requirements to refinance and can repay the loan.
Prepare the following documents to ensure you have them when applying:
- At least three months of bank statements
- Income – If employed at least three months of payslips & P60 or if self employed 2 years accounts, tax calculations and tax overviews.
- Recent utility bills
- Documents stating your addresses over the past three years
- Photographic identification, such a driving licence or passport
- Credit Report from either Checkmyfile, Experian or Equifax
Once the application is made, the underwriting process begins. This is when the mortgage lender reviews and verifies your application. This is also when the property is surveyed to determine a suitable value.
Do I need to refinance with my current lender?
No, there is no obligation to refinance with your current lender. You should look around the market with the help of a broker for the best rates and deal. If you switch lenders, your new lender pays off the existing loan, and this concludes the relationship with the previous lender.
Is it worth it to refinance?
When you refinance a mortgage, there is work to do, and the process will involve additional fees. However, refinancing your current mortgage is a good idea if you can save money or free up money to do something worthwhile.
Knowing whether it is worth your while to refinance a mortgage is a personal decision, but you should speak with a specialist broker, who will provide you with guidance and advice. This input should help determine if refinancing property is the right choice.
Does refinancing hurt your credit profile?
Refinancing can improve your credit score in the long term, and with on-time and in-full payments. If you refinance to lower your debt levels this can be reflected positively in your credit rating, because having credit cards near their limit can impact on your score.
Whether you have a good credit rating or a low score due to bad credit being registered, exploring your refinancing options is always a good idea.
How to explore your refinance mortgage options with The Money Hub
If you are looking to refinance the mortgage on your current home, help is available.
Call The Moneyhub Limited on 0203 725 5830 and speak to one of our highly specialised and dedicated Mortgage Advisors or you can complete an enquiry form which will allow you to schedule a call time.
I'm an expert in real estate and personal finance with a deep understanding of mortgage refinancing. My expertise in this field stems from years of experience working in the real estate industry, advising clients on various aspects of property ownership, including mortgage options, refinancing strategies, and financial planning.
Now, let's delve into the concepts mentioned in the article you provided:
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Mortgage Refinancing: This is the process of replacing an existing mortgage with a new one, usually to benefit from better terms, lower interest rates, or to access equity in the property.
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Reasons for Refinancing: People refinance their mortgages for several reasons, including:
- Securing a more attractive interest rate.
- Lowering monthly mortgage payments.
- Leveraging the equity in the property for various purposes.
- Changing circ*mstances such as adding or removing someone from the mortgage.
- Accessing funds for home improvements or debt consolidation.
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Steps in Refinancing: The process of refinancing a mortgage typically involves the following steps:
- Notification from the lender about the end of an introductory deal or decision to refinance.
- Confirmation of outstanding balance and fees.
- Reviewing new mortgage deals with a broker.
- Preparing application documents and applying for a refinance mortgage.
- Underwriting checks and valuation of the property.
- Issuance of a mortgage offer.
- Completion of legal processes if changing lenders.
- Registration of the new mortgage.
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Required Documents: When applying for mortgage refinancing, individuals need to provide various documents, including:
- Bank statements.
- Income documents such as payslips, tax documents (for self-employed individuals), and P60 forms.
- Utility bills.
- Proof of addresses.
- Photographic identification.
- Credit reports from relevant agencies.
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Options for Refinancing: There's no obligation to refinance with the current lender, and individuals are encouraged to explore the market for the best rates and deals with the help of a mortgage broker.
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Assessment of Worth: Whether refinancing is worth it depends on individual circ*mstances, financial goals, and guidance from a specialist broker who can provide personalized advice based on the situation.
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Impact on Credit Profile: Refinancing can have both short-term and long-term effects on credit profiles. It can potentially improve credit scores by reducing debt levels and demonstrating responsible financial management through on-time payments.
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Exploring Refinance Options: Individuals interested in exploring their refinance mortgage options can seek assistance from specialized mortgage advisors or financial institutions like The Moneyhub Limited, which provide tailored guidance and support throughout the process.
By understanding these key concepts and following the outlined steps, homeowners can make informed decisions about whether mortgage refinancing is the right choice for them, considering their financial objectives and current economic conditions.
