How to Remortgage during COVID- 19 Pandemic

How to Remortgage during COVID- 19 Pandemic

The mortgage industry is going through a challenging period due to the current pandemic. Therefore, it is critical to identify key features in terms of dealing with remortgage applications.

Mortgage Product Transfer

If your current fixed deal is coming to an end and it is time for a remortgage, the perfect solution for you during the current pandemic is to do a product switch with the existing lender. You will not have to face valuations, legal requirements, and lengthy application process except you wish to raise extra cash while remortgaging. Lenders have reduced product switch rates and online applications for this purpose have not been affected or delayed due to the pandemic. However, it is ideal to enter in to 2 years deal with the existing lender rather than agreeing to 5 years deal because you can simply review the mortgage in two years and move into a cheaper rate. 

On top of the above reasons, lenders have restricted their product portfolio to 60%, 70% or 75% Max LTV brackets, and introduced maximum loan caps as well. These developments limit your chances of finding a cheaper remortgage rate with a new lender during the current pandemic. Therefore, I suggest you proceed with a product transfer with the existing lender which would be straight forward. Fin-tech mortgage advisors would be helpful in locating a suitable mortgage deal in time.  

Desktop Mortgage Valuations

If you are determined to find a cheaper deal from a new lender, one important factor to watch out is whether your new lender will be conducting a desktop valuation or hold up the valuation until they can carry out a physical one. This is likely to depend on the comments of the valuer and your Loan to value. If your property is a Buy To let with high Loan to value, the new lender will need to wait for a physical valuation once the social distancing rules are taken off. However, in case you submit an application to a lender who is not using desktop valuations, there is a high risk of you being charged with high monthly payments due to the delay caused by valuation and not completing the remortgage on time. Even if you are a first-time buyer, this could determine the speed of your application.  

Mortgage Tracker Rates

The Bank of England has recently reduced the base rate, which could make you a path towards cheaper tracker deals when considering your new remortgage. As per the review tracker rates have been relatively cheaper than the fixed deals most recently. However, the tracker rates are very volatile. It will subject to changes depending on the economic situation of the country and government decisions. Therefore, you need to be careful when selecting a tracker deal because this might go up and down significantly which will be overall less beneficial compared to a fixed deal. 

Deals without Early Repayment Charge 

When there is high uncertainty associated with your mortgage and property due to the pandemic, it is always advisable to consider a product without an early repayment charge. For instance, if you decide to move out of the fixed deal, you will have to pay early repayment charges if you are in a standard fixed deal. The learning point is that the above-mentioned tracker deals do not have early repayment charges which could be your effective strategy to break the deal in a scenario where interest rates climb up. Further, some lenders have flexed fixed deals which also do not have early repayment charges. Therefore, if you are concerned about the uncertainty of being on a fixed deal in this difficult period, your ideal option would be a deal without early repayment charges. 

Employer Reference/proof of income not older than one week!

Several lenders including HSBC have updated their policies on income assessments for new mortgage applications. This is mainly due to the implications of the regular income of both employed and self-employed customers. Self-employed applicants including limited company directors with more than 20% shareholding are requested to provide proof of income not older than one week by lenders. Further, for employed applicants, employer reference letters are requested about future income. 

It is evident that this is a challenging period for both lenders and borrowers. Therefore, the above-listed points would be helpful for mortgage customers when determining a new mortgage deal.

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