How To Refinance A UK Property

How To Refinance A UK Property

The mortgage in the UK has historically been around 25 years, but many people today—especially first-time homebuyers—are looking for deals with terms of 30 years or longer. However, keeping the same mortgage for the entire term is getting less and less typical among borrowers. We’ll look at the justifications for and procedures for refinancing a UK property in this article.


In the beginning of a conventional home mortgage, often lasting two to five years, you will typically receive a fixed or discounted interest rate. The interest rate will then return to the lender’s Standard Variable Rate (SVR), which may be considerably higher.


Understand Refinancing A UK Property

Suppose you took out a 25-year capital repayment mortgage two years ago. Your remaining balance is £150,000, your two-year fixed rate at 1.5% is about to end, and the lender’s SVR stands at 3.5%. As a result, your monthly payments are set to increase by £149.07.


A sudden increase in your monthly mortgage payments can come as a shock. However, refinancing to another mortgage product can offer a solution. In the aforementioned instance, the borrower might obtain a new £150,000 mortgage with a term of 23 years in order to pay off the prior mortgage and take advantage of lower payments thanks to a new fixed-rate period. Given the historically low interest rates, it can be a good idea to look into better offers in the market if your fixed or discounted period is coming to an end or if you have already switched to the lender’s SVR.


Raising Additional Funds via Refinancing:

Many refinances are completed on a “like-for-like” basis, which indicates that the amount of the new mortgage is equal to the balance owed on the previous mortgage. Some borrowers, though, decide to refinance in order to raise more cash. Given the surge in property values in a lot of the UK over the past ten years, homeowners may desire to use the capital gain they have experienced to access additional funds. For instance, a borrower with £150,000 left on their mortgage could refinance for £200,000, freeing up £50,000 for other purposes.


Common Reasons for Raising Additional Funds via Refinancing:

  • Home Improvements: Renovations, extensions, or significant alterations often require substantial sums of money. Accessing these cash efficiently may involve mortgaging.
  • Raising a Deposit: When saving may not be an option, refinancing can assist amass the required deposit for a family member’s first house, a buy-to-let property, or a second home.
  • Debt Consolidation: Mortgage loans are often one of the more economical methods of borrowing money for debt consolidation. 


Important Considerations for Expats

If you’re no longer a UK resident, there’s no reason why you can’t consider refinancing when your fixed or discounted rate period concludes. This presents an opportunity to shop around for the best deals and potentially raise funds for various purposes, such as home improvements, debt consolidation, or additional property purchases.


However, there are some crucial factors to consider for expatriates. Seek professional advice to navigate these complexities. Factors to keep in mind include property vacancy issues, insurance policy clauses, the need for a buy-to-let mortgage if you intend to let out the property, and potential differences in interest rates and Loan-to-Value (LTV) levels for expatriates.


Finding the Best Mortgage Offer:

As a specialist mortgage broker, Property Finance Compare possess comprehensive knowledge of the mortgage market. Our goal is to secure the best mortgage offer available to you. Get in touch to schedule an in-depth initial discussion with one of our trusted finance brokers. We’re here to help you make informed financial decisions.