Do You Need A Deposit To Remortgage?
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No, in most cases, you do not need a deposit to remortgage your home. It is the equity of your property that matters when you remortgage.
Mortgage borrowers often think that remortgaging their property is like buying a new house. This makes them think that they need a deposit. However, this is not the case.
Let us quickly go through the basics of remortgaging to answer the deposit question in detail.
What Is A Remortgage?
A remortgage is the process of switching from one mortgage rate to another one at the time of your fixed mortgage term ends. You close your current mortgage deal and move on to the next one on same property.
You can remortgage with the same lender or choose a new one. It all depends on your reason for remortgage and your circumstances.
Does Deposit Play A Role In Remortgaging?
In most cases, a deposit does not play a role in remortgaging. You do not need to put down a deposit again when you switch to a new mortgage deal. For remortgaging, your equity you have over time living in your home use as a deposit.
Leveraging The Equity For Remortgaging
Equity is made of your deposit and the mortgage amount which is paid off. When you buy a property on a mortgage, your equity increases over time by paying off mortgage or any home improvement you do. This becomes an important factor when you remortgage your property.
Let’s say you purchased a property valued at £400,000. Your remaining mortgage balance is £100,000. This means that your equity in this property is worth £300,000 which is made of mortgage repayment, deposit and price appreciation over the time. Higher the equity gets you a better remortgage deal.
How Loan-To-Value Ratio In Remortgaging Work?
Instead of a deposit, remortgaging focuses more on your loan-to-value (LTV) ratio. This is the ratio between the current value of your property and the amount you want to borrow. Most existing homeowners aim for deals with low LTVs while remortgaging as it can help to secure better remortgage rates.
When May You Need A Deposit For Remortgaging?
While most remortgaging cases do not require deposits, there are exceptions. Here are the situations where you may need to pay a deposit to remortgage your property:
Credit history problems
All lenders want financial security while lending to borrowers for remortgage. If your credit score has taken a hit after your first mortgage and your credit history seems problematic, lenders may restrict the loan amount. This means you will have to cover the difference by reducing mortgage amount by deposit when you remortgage with bad credit.
Decline in property value
If the value of a property reduces since purchase which means you may be in negative equity. If its value is less when you remortgage your property, your LTV increases beyond remortgage limit.
In such cases, you will have to pay towards reducing your mortgage amount. This will require you to pay an additional deposit to qualify for a new remortgage.
Can You Add A Deposit Voluntarily when remortgage?
As a homeowner you may want to reduce mortgage amount to get a better remortgage deal. If you want to do this, you can add more deposit in form of reducing mortgage amount.
Adding a deposit voluntarily can give you these benefits:
- It reduces your monthly mortgage repayments
- Help to secure better rate and total interest paid is reduce.
Compare best remortgage rates from whole of market to see your saving.
Consider These Costs While Remortgaging
While remortgaging generally does not required a deposit, you will still need to incur additional expenses along the way.
Here are the most important costs and saving you should know of before you remortgage your property:
- Arrangement fees (to set up a new mortgage)
- Valuation fees (to confirm your property’s value
- Conveyancing fees
- Early repayment charges (if needed)
Homeowners also need to pay a brokerage if they work with mortgage brokers. MariannaFS saves you from these expenses. Our fee-free mortgage brokers help you remortgage your property and get you suitable remortgage without charging you a broker fees.
What Is The Best Time To Remortgage?
It is always better to wait for the fixed-rate period of your mortgage deal to end. Start looking for suitable deals at least 3 to 6 months before your deal ends. This saves you from paying early repayment charges.
Take your time to compare remortgage deals offered by different mortgage lenders. Our independent mortgage brokers will help you analyse the market and remortgage deals that best suit your circumstances.
Tips To Get The Ideal Remortgage Deal
Consider these strategies to get best remortgage deals:
- Improve your credit score. Pay your bills on time and do not add to your existing credit.
- Increasing your equity reduces your LTV which can help for better rates.
- Always compare different lenders to know you are not missing anything.
- Gather all the documents needed for remortgage keep them ready in advance.
- Work with a Fee Free Mortgage Broker to make the process faster and more efficient.
It is important to talk to Expert Remortgage Advisor who will assess your financial situation carefully and explore your mortgage options to secure the right remortgage deal suitable to your circumstances. Best part is you do not pay broker fees when remortgaging with MariannaFS.
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