Shared Ownership: Remortgages
How do you remortgage a Shared Ownership home?
Your mortgage is one of the largest financial commitments you will ever make. In the same way that you might search for best deals for car insurance, it makes sense to review your mortgage on a regular basis, to ensure that it is still the right option for you and not just to stay with your original lender.
A remortgage is a change of the mortgage deal on your property, either by switching it to a new lender, or by moving to a different rate with your existing lender known as a product transfer. It can be a good way to find lower interest rates and better mortgage terms.
When your current mortgage deal ends, you will be put on to your lenders Standard Variable Rate (SVR), which tends to be higher than the rate you have been paying. If you are on a SVR or have less than six to eight months remaining on your mortgage product, then now is the time to review your mortgage and get some expert advice.
Remortgaging a Shared Ownership home
It is worthwhile speaking to an Independent Financial Advisor (IFA) or mortgage broker as they have access to all of the Shared Ownership lenders, likely saving you time and money. While remortgaging to a new lender may take some time to complete, it can often be worth the effort to secure a better deal on your loan, review your monthly mortgage payments, or to staircase and buy more shares in your home.
In a rising property market, remortgaging can see that your property has increased in value which could give you more equity in your home. As lenders price their interest rate on the perceived risk in lending, the more equity the lower the interest rate.
If your income has risen, then you may be able to access mortgage lenders that offer competitive rates but may not be very generous on their affordability calculations. Remortgaging to a new lender will be based on a surveyors valuation whereas staying with the same lender will generally be based on a desktop valuation using existing data and automated valuations.
The process can also go much more smoothly if you know what to expect. The following are the key steps to applying for a new remortgage. The steps may change slightly based on your specific situation and the requirements of your lender.
Finding a mortgage deal
First, talk to your current lender to get a redemption quote and find out what your options might be with that lender. Many banks and building societies offer better deals to current customers that are considering leaving, however remortgaging to a new lender could still be cheaper, so check both using an IFA/mortgage broker before deciding.
If you can keep your mortgage with the same company, it may save you both time and money in the remortgaging process. If your current lender doesn’t offer you the deal you want, you may want to discuss your options with an IFA/mortgage broker.
Even if you like the deal your current lender offers, it still pays to shop around to see what else might be available. When you begin to collect the rates at different institutions, be sure you are comparing like for like products. For example, if you are looking at a tracker mortgage, find out how the rate is calculated according to the Bank of England base rate and what the term is.
You will also want to compare Loan to Value ratios (LTV) and fees associated with the loans to ensure you’re getting the best deal overall. You will need to get a quote from your solicitor for the legal work involved, with some lenders offering ‘free legal fees’ for remortgages or sometimes a ‘cash back’ incentive. Please be aware that as more legal work is involved with Shared Ownership, you may well be asked to pay a supplement by the lenders legal advisors on the ‘free legal fees’ option. They should not do any work on your behalf until you have agreed. Alternatively, you may be better taking the ‘cash back’ and having your own solicitor do the legal work.
Once you have all the information in terms of rates, monthly payments and fees, you can work out the calculations to determine if remortgaging to a new lender or doing a product transfer with your existing lender is worth the time, effort and expense.
The application process
The mortgage application process, when changing lender, is very similar to that of a new mortgage. You will need a mortgage statement for your current loan, pay slips and full details of your monthly credit repayments. You will also need to authorise the bank or building society to carry out a credit search to make sure you don’t have any late payments, defaults, or CCJ’s on your credit record. A valuation will be done on your property to ensure you have enough equity to qualify for the mortgage loan. Once the bank has all the paperwork and documentation it needs, the approval and underwriting process can begin.
You should advise your housing association that you are intending to remortgage, as they will need to agree and they may make a small administration charge.
Your remortgage application can take approximately four to eight weeks to secure. Your housing association will need to approve the new mortgage and ensure it meets their requirements too. Your solicitor should arrange for completion to take place on the day your current product expires and that you are free of any early redemption penalty charges.
Once legal completion has taken place, your mortgage will continue with your new lender. Make a note of your new product expiry date and six months’ prior to this ending, the process can generally start again!