24. New mortgage
When remortgaging a property, securing a new mortgage is a key component. This process involves evaluating your current financial situation, finding a suitable lender, and negotiating the terms of the new loan.
Here is how it works:
| Loan application | The remortgager, also known as the borrower, applies for a new mortgage loan. This involves providing personal and financial information, including income, assets, debts, and credit history. The application process can be initiated directly with a lender or through a mortgage broker. |
| Assessment and approval | The lender assesses the remortgager's financial situation and the value of the property to determine the risk associated with lending. This includes a credit check, an appraisal of the property, and verification of income and assets. If the remortgager meets the lender's criteria and the property valuation is satisfactory, the loan may be approved. |
| Loan terms | Once approved, the lender offers the remortgager a mortgage loan with specific terms and conditions. These include the loan amount, interest rate, repayment period (term), repayment schedule, and any associated fees or charges. |
| Mortgage agreement | The remortgager and the lender enter into a legally binding agreement, known as the mortgage deed or mortgage contract. This document outlines the terms of the loan, the rights and responsibilities of both parties, and the conditions under which the loan must be repaid. |
| Security interest | As part of the mortgage agreement, the remortgager pledges the property as collateral for the loan. This means that if the remortgager fails to repay the loan according to the agreed terms, the lender has the right to take possession of the property through a legal process known as foreclosure. |
| Funding and disbursement | Upon signing the mortgage agreement, the lender disburses the loan funds. For remortgagers, this often means paying off the existing mortgage and potentially accessing additional funds if the new loan amount is higher than the remaining balance on the current mortgage. |
| Repayment | The remortgager is required to repay the new mortgage loan according to the agreed-upon terms. This typically involves making regular payments, known as mortgage payments, which consist of both principal and interest components. The repayment schedule may be spread out over several years, depending on the term of the mortgage. |
Mortgage lender
A mortgage lender is a financial institution or entity that provides mortgage loans to individuals or businesses. This includes banks, credit unions, mortgage companies, and other financial institutions that specialise in mortgage lending. The lender assesses the borrower's financial situation, determines the terms of the loan, and disburses the loan funds.
Mortgage amount
The mortgage amount refers to the total sum of money borrowed by the borrower from the lender to purchase a property. This amount is typically based on the purchase price of the property, minus any down payment made by the borrower. It also includes any additional fees or charges associated with the loan, such as closing costs or origination fees.
A mortgage is a loan provided by a lender to enable individuals to purchase a property by borrowing money against the value of the property. The borrower pledges the property as collateral for the loan, and repayment is made through regular mortgage payments over a specified period, with interest. The lender assesses the borrower's financial situation, determines the loan terms, and disburses the loan funds to complete the property purchase.
Mortgage status
- Not started: The remortgager has not yet initiated the mortgage application process.
- In principle: The lender has given an initial approval based on a preliminary assessment of the remortgager’s financial situation, but the formal application process has not been completed.
- Approved: The lender has fully approved the mortgage application, and all necessary checks and valuations have been completed successfully.
Cashback offered
Cashback offers are incentives provided by some lenders where a certain amount of money is given to the borrower upon completion of the mortgage. This can be used to cover various costs associated with remortgaging, such as legal fees, moving expenses, or home improvements.
If cashback is offered, the borrower will receive a specified amount from the lender after the mortgage is finalised. This can be a lump sum or a percentage of the loan amount.
If cashback is not offered, the borrower will not receive any additional funds beyond the mortgage amount.
Mortgage broker
A mortgage broker is a licensed financial professional who acts as an intermediary between borrowers (homebuyers) and mortgage lenders. Their primary role is to help borrowers find and secure suitable mortgage loans that meet their specific needs and financial circumstances.
Here is why you might need a mortgage broker:
| Access to multiple lenders | Mortgage brokers work with a network of different lenders, including banks, credit unions, and mortgage companies. This gives borrowers access to a wide range of mortgage products and interest rates that may not be available through direct channels. |
| Expertise and advice | Mortgage brokers are knowledgeable about the mortgage market and can provide expert advice and guidance to borrowers. They can help you understand the various types of mortgage products available, assess your financial situation, and recommend mortgage options that best suit your needs and goals. |
| Customised solutions | Mortgage brokers work closely with borrowers to understand their unique financial circumstances, goals, and preferences. They can tailor mortgage solutions to fit your specific requirements, whether you are a first-time homebuyer, a seasoned investor, or have special financial considerations. |
| Saves time and effort | Searching for the right mortgage loan can be time-consuming and complex. Mortgage brokers handle the legwork on your behalf, comparing loan options, negotiating terms, and managing the application process from start to finish. This saves you time and effort, allowing you to focus on other aspects of the homebuying process. |
| Negotiation power | Mortgage brokers have relationships with lenders and understand their lending criteria. They can negotiate on your behalf to secure favourable terms, such as lower interest rates, reduced fees, or flexible repayment options, potentially saving you money over the life of the loan. |
| Assistance with paperwork | Mortgage applications involve extensive paperwork and documentation. Mortgage brokers help streamline the application process by gathering and organising the necessary paperwork, ensuring that all requirements are met and submitted accurately and promptly. |
Support throughout the process |
From pre-approval to closing, mortgage brokers provide ongoing support and guidance at every stage of the homebuying process. They can answer your questions, address concerns, and provide updates on the status of your mortgage application, helping to alleviate stress and uncertainty. |
A mortgage broker can offer valuable support and expertise to help you navigate the complexities of the mortgage market and find the right loan for your homebuying needs. Whether you are a first-time buyer or an experienced homeowner, working with a mortgage broker can provide peace of mind and confidence in your mortgage decisions.
Providing mortgage broker’s details to your conveyancer
When remortgaging property, providing your mortgage broker's details to your conveyancer is important for several reasons:
- Communication and coordination: Your conveyancer needs to collaborate with your mortgage broker to ensure a smooth and timely transaction. Sharing the mortgage broker's details allows them to communicate effectively, exchange necessary documentation, and coordinate key aspects of the purchase, such as funding arrangements and completion dates.
- Verification of financing: Your conveyancer may need to verify that your mortgage financing is in place to proceed with the property purchase. By contacting your mortgage broker, they can confirm the status of your mortgage application, ensure that all financing requirements are met, and address any potential issues or delays that may arise.
- Resolution of issues: If there are any discrepancies or concerns related to your mortgage application or financing arrangements, your conveyancer can work with your mortgage broker to resolve them promptly. This may involve providing additional documentation, clarifying terms with the lender, or renegotiating loan conditions to meet the requirements of the property purchase.
- Completion of legal requirements: Certain legal documents and disclosures may be required as part of the mortgage application process. Your conveyancer may need to review these documents to ensure compliance with legal and regulatory requirements. Sharing your mortgage broker's details enables them to obtain the necessary documentation and fulfil their obligations as part of the conveyancing process.
What happens if you do not have a mortgage broker
If you do not have a mortgage broker, you can still proceed with the property remortgage, but you may need to take additional steps to secure mortgage financing:
- Direct communication with lenders: Without a mortgage broker, you will need to communicate directly with mortgage lenders to explore your financing options, obtain pre-approval, and complete the mortgage application process. This may involve researching different lenders, comparing loan products, and negotiating terms on your own.
- Increased time and effort: Searching for suitable mortgage loans without the assistance of a broker can be more time-consuming and challenging. You will need to conduct thorough research, gather documentation, and navigate the mortgage application process independently, which may require additional time and effort on your part.
- Limited access to lender networks: Mortgage brokers often have access to a wide network of lenders and mortgage products, which may not be available to individual borrowers. Without a broker, you may have fewer options and may need to rely on more traditional lending sources, such as banks or credit unions.
While it is possible to proceed with a property remortgage without a mortgage broker, having one can streamline the process, provide access to a broader range of financing options, and offer valuable expertise and support throughout the journey.