When you remortgage your property, you are switching your mortgage arrangement to another deal with the same or another lender. Remortgages can be used for various purposes, however, most people simply switch mortgage because it will work out cheaper for them then their current mortgage repayment.
If for example the introductory discounted interest rate period has come to an end with your current lender and therefore you could get a discount, or a lower APR, by switching to another lender.
Others may use a re-mortgage to consolidate their debts if they take out their remortgage for a larger amount than owed on the existing mortgage.
It is possible to remortgage up to 95% of your property subject to meeting the lender’s affordability criteria. If your mortgage is already fully paid or a large proportion of it is paid off then it may be beneficial for you to consider an equity release plan rather than remortgaging.
Getting a remortgage is generally something that the majority of mortgage borrowers will have to do at some stage of there life. Apart from those that are fortunate enough to generate enough income to pay off all of their entire loan at once or those rare borrowers who have a long-term fixed-rate mortgage.
Why remortgage?
As an expat considering remortgaging a UK property that is principally used for either residential use or for rental purposes as a buy to let (BTL), there will be many things to consider. The first consideration will be your reason for re-mortgaging which could simply be to obtain a better lender rate or you could be looking to raise capital from the property for other purposes. Listed below are some of the common reasons which can equally apply to both residential or BTLs.
- Interest Rate – Most mortgages are taken out on a fixed interest rate which will typically last for between two to five years after which the mortgage will revert to the lenders variable rate which is usually high. Most people will look to keep their costs low so will re-mortgage to obtain a lower rate of interest.
- Repayment method – In the past, many residential mortgages and most BTL mortgages were taken out on the basis of interest only repayments. Since the financial crash, many lenders have withdrawn interest only mortgage products meaning that re-mortgaging may need to be on a repayment basis at a higher monthly cost.
- Debt repayment – Where people have owned their property for some time, they have usually built up a good level of equity in the property which they sometimes need to access to repay other outstanding debts that they may have. Provided there is sufficient equity, re-mortgaging can be a way to solve their problem. There are obviously dangers associated with this so proper advice is needed.
- Portfolio building – Where people own a property but want to purchase additional properties and need to raise capital for their deposit, re-mortgaging is a common way to achieve that.
- Home improvement – Lenders will often allow a property to be remortgaged to raise funds for home improvements provided the lenders loan to value criteria continues to be met.
These are just a few of the usual considerations but every case will be different and lenders will consider them on a case by case basis.
How does an Expat remortgage work?
Mortgage holders normally search for the most competitive rate and period possible when choosing which lender to to remortgage from. Depending on the market conditions different mortgage products will represent a better or worse value, and it is up to the consumer to try and predict this or rely on the expertise and experience of an independent financial adviser.
For instance, if interest rates are likely to rise during the special deal period, choosing a fixed-rate mortgage will protect the borrower from the rise and ensure a guaranteed level of repayments. However, if interest rates are going to fall, then a tracker mortgage which follows the Bank of England base rate will potentially provide a cheaper mortgage repayment option. Other special rate deals such as variable and discounted may also represent better value for some borrowers.
Obtaining finance from Lenders
Lenders come in all shapes and sizes from the large high street lenders through to some smaller building societies to private niche lenders. In recent times, many of the high street lenders have for the moment, pulled out of the expat market and this is severely restricting access to suitable finance. Today there are approximately 25 lenders available including some off shore lenders but each one will have its own criteria for lending to expats. This is usually quite strict and can involve a lot of paperwork. Because of this it is difficult to set out a standard set of lending criteria but we have given some general guidelines on what to expect which can be accessed by clicking on the link.
Should you require commercial financing and would like to see what that might entail, please read our commercial mortgages guide.
Other sources of finance
- Secured lending – Where remortgaging is being considered to release equity from property for some special purpose such as home improvements, where the loan required is only needed for a relatively short term, often a secured loan could be used. Interest rates will usually be higher than on a mortgage but it may suit you better if it is not desirable to lose your current mortgage product or if you are unable re-mortgage due to lender criteria. For more information on secured lending please read our extensive guide on bridging loans.
- Equity Release – If you are remortgaging in preparation for retiring but perhaps have not made sufficient provision for your security in old age, equity release can be a way forward. Essentially where you own a property usually outright, instead of re-mortgaging to release funds which may be impossible, you borrow from an equity release lender who will advance you a certain proportion of the property value, depending on your age and health. This money attracts interest which accumulates until you die. At that time the amount owing is taken from the sale of the property and the remainder is added to your estate. However, while the scheme is in operation, you don’t have to make any mortgage payments but you will still be responsible for maintaining the building. For more information on this please click on the link.
At expatriates.co.uk we can put you in touch with specialist mortgage brokers in the UK who have contact with all of the appropriate lenders and who can provide you with clear information on your available options.
What is the Expat remortgage process?
1. First considerations for obtaining an expat remortgage
The first thing to consider is what you want to achieve by remortgaging your property. This may appear to be a silly question as most people will simply assume that it is to obtain a good rate of interest for a period of time. However, there are a number of possible things to consider as shown below.
- Fixed period ending – where your existing mortgage is about to move to the lenders variable rate you may simply want to obtain a further fixed rate product.
- Raise capital – you may have sufficient equity within the property to allow you to withdraw some of it for home improvements or for a particular personal need.
- Raise deposit funding – you may be considering purchasing a second property and need to gather money for the deposit.
- Debt consolidation – you may have debt accumulated through credit cards and other devt forms and want to raise capital through a remortgage to clear them.
Depending on your requirement, the process of arranging your remortgage can be complicated and it is for this reason that most expats will turn to an experienced expat mortgage broker to handle things for them rather than attempt to deal directly with a lender. An expat mortgage broker with proven experience will understand the market and will have contact with lenders who offer these types of loans.
It should be noted that expat mortgage brokers with the right experience to obtain expat remortgages are thin on the ground. Although there are many regulated mortgage brokers operating within the UK, you will find in practice that very few actually handle expat mortgages on a regular basis.
Also be aware that if you are seeking to remortgage an investment property such as a buy to let (BTL) property or an house of multiple occupancy (HMO) property then the mortgage processes are currently unregulated and should something go badly wrong you will not have access to the same protections that would apply to UK residential property remortgages.
Expats remortgaging residential property in the UK to live in will be fully protected in the same was as a UK resident would be.
The procedure steps shown assume that you will be using an experienced expat mortgage broker to handle the process on your behalf.
2. First contact with your expat remortgage broker
Whether you are communicating with your mortgage broker by telephone or email or meeting face to face your expat remortgage broker should provide you with certain information about themselves and how they operate:
- Identity – Who they are and how to contact them
- Regulation – Explain how they are regulated to carry out mortgage business. All mortgage advisers in the UK are required to hold permissions to do so from the financial conduct authority (FCA) which they obtain through being either directly authorised by the FCA or by being an appointed representative of a network who is authorised by the FCA.
- Terms of business – Provide you with their terms of business. This will include information on how they will charge you for their time and explain your rights in the event something goes wrong.
Having got that out of the way your remortgage broker will gather comprehensive information on your circumstances. This process is called fact finding and it is absolutely essential that it is carried out thoroughly as the information gathered will form the basis for deciding on the remortgage product most suited to your needs.
If the expat remortgage you seek is a regulated product then should there be a dispute at a later stage the information you provided at fact find will be taken into consideration and may affect the outcome.
3. Obtaining an agreement in principle for your expat remortgage
With the fact find information to hand your remortgage broker will research the market and identify a lender and product that he or she believes would best suit your needs. Many people think this is simply a question of finding an expat remortgage provider offering the lowest rates of interest or low arrangement fees but in fact many other factors can come into play. Some such situations could be:
- Time constraints – if a lender is known to be slow to consider a case or is known to complicate the process and you need a decision quickly then you may be prepared to accept a slightly higher interest rate if it lets you complete the remortgage within your fixed timeframe.
- Lender criteria – lenders all have different criteria under which they will lend and it may be that the lender with the best rates may place you just outside their accepted criteria. You would then have to make the best deal possible with a lender who is prepared to accept you.
- Credit rating – the best rates and terms are usually only available to those with a clean credit rating. Where this is not the case lenders will take account of this in the terms they offer and may even refuse to accept your application.
Having decided on one or two suitable products your remortgage adviser will discuss them with you and when you agree on the most suitable one for your circumstances, your mortgage broker will obtain a decision in principle from the lender. This is not a binding agreement but is only an indication that if the supporting remortgage information you provide with the formal application confirms what has been indicated for the decision in principle then there is a strong possibility that the lender will accept you.
Please note that the lender may carry out a credit check on you to assess your credit rating.
4. Submit the full expat remortgage application
With a decision in principle acceptance you will be clear to make your formal application for your expat remortgage. Your expat remortgage broker will do this in conjunction with you as the application form needs to be accurate and will require a number of supporting documents, such as:
- Proof of identity – documents such as passports and driving licences are normal.
- Permanent address – Normally utility bills and bank statement type documents will be accepted.
- Expat employment – Proof of income from employment or business will be required. Payslips and business accounts are usually used for this.
- Affordability – Bank statements let the lender see your income going through but they also allow the lender to see how you spend that income. Today lenders look at a borrowers lifestyle to ensure that any expat mortgage offer they make will be affordable to their client if the clients lifestyle is maintained.
5. Lender reviews your expat remortgage application
On receipt of the formal expat remortgage application the lender will review the information provided. In all likelihood the lender will ask for further information or documents to be provided and this process may be repeated several times until the lenders application processing team becomes satisfied that the case is sufficiently compliant to go to underwriting.
As part of this process the lender will instruct a valuation on the property. You will be expected to pay for this but will have no rights to see the valuation report. The lender will use that valuation report to decide how much they would be prepared to lend against that property. Some expat remortgage applications can fail at this point if the property is valued below that which has been expected.
At this point and if the valuation given in the report meets the lenders requirement the remortgage application review team will take a final review of the case and decide whether to send the case for underwriting or reject the application.
6. Lender conducts final review of your expat mortgage application
The underwriter is the lenders final decision maker and will review the whole case and check it carefully against the lenders lending criteria. If the underwriter is satisfied an offer for a remortgage will be issued. Copies are usually sent to your solicitor and to your remortgage adviser who will check the offer and alert you to anything that is not as agreed.
Note that by this time your expat remortgage broker should have issued you with a letter outlining his or her reasons for advising you to accept that particular offer.
7. Lender issues your expat remortgage offer
If the lender issues a mortgage offer it will be sent to your solicitor with a copy to your remortgage broker who will check the offer and alert you to anything that is not as agreed. This is a formal document and it will show the amount of loan that is available and the monthly repayments. It will also provide the term of the remortgage and the terms and conditions under which the offer is made. Note that in remortgage cases, the solicitor will usually be appointed by the lender under their free legal arrangements.
8. Solicitor receives your expat remortgage offer
Once the solicitor has received the offer they should complete any checks and searches on the property and arrange draw down on the loan and pay the outstanding debt to the previous lender.
This whole process from first contact with your mortgage broker to concluding the remortgage on the property can often be completed in a very space of short time, often in a matter of a few days if there are no complications.
What Expats should consider when re-mortgaging?
If you are simply remortgaging with the same lender via a product transfer arrangement then the process can be quick and fairly painless. The lender knows your credit history and if there has been no problems repaying the mortgage and you still fall within your lenders criteria, particularly age or debts, then everything should be fairly straightforward.
If however you are changing lender for any of the reasons mentioned above then there are certainly things to be aware of. Below are some of the things to consider.
- Tie in period – If you need to re-mortgage while you current loan is still within its tied in penalty period, usually between two and five years then you will most likely have to pay an early repayment fee. This should be shown on your current mortgage paperwork and dependant on the size of your outstanding loan and the conditions attached, can be a sizeable sum.
- Lenders fees – Usually when changing products lenders will charge an arrangement fee and may seek a valuation report on the property which will be charged to you. Often these charges can be added to the loan relieving you from having to find that funding but you must always remember that as part of the loan, it will attract interest for the duration of the loan.
- If you are remortgaging to raise money for the deposit on a second UK property, that second property purchase will attract additional stamp duty, currently 3% of the property value over and above the standard stamp duty.
- Employment – as the rules for lending to expats have significantly changed in recent times, your employment will be a key factor in establishing whether a lender will accept you. Ideally, they prefer expats to be employed with international companies and will have restrictions on the countries that they will accept you living in.
Remortgage costs and fees
What are the Lender Requirements for Expat Remortgages?
If you are re-mortgaging for the first time since you left the UK, you may need to make some preparations for things a lender will need before you make an application to a lender.
- Credit Scoring – You will have passed this with your current lender so if nothing has changed in the meantime this should be straightforward. You can check your score for free through Equifax and other credit scoring organisations.
- Correspondence address – If you are remortgaging your residential property then you will already be registered at the address. However if you are remortgaging a BTL property or other, you may not have a current UK address. Having a correspondence address is important as it makes you traceable for lenders. This will usually be your parents address or a close family members address but always make sure it is someone that you trust as some of your post will inevitably end up going there.
- Credit footprint – Again, if you have previously closed you UK bank account it may be worth opening one and having a credit card but make sure that the bank will allow the account to remain open while you live abroad.
- Employment – If you have changed your employment since you took out your mortgage it is worth checking if your current employment will meet your lenders criteria. Many expat lenders have restrictions on the type of employment they will accept and just because your salary is high does not mean that you will be accepted. If you have changed employment you will need to show that you have held the position for three to six months depending on the lender.
Although taking out a remortgage can be a good for the consumer for a number of reasons, there are also several costs and fees applied to remortgages.
It is the mortgage holders responsibility to weigh up the costs and fees associated when seeking a lower cost or rate deal.
In some instances, the costs and fees for switching a mortgage loan will be worth paying in order to take advantage of better rates being offered.
Most remortgages will have fees and costs such as valuation fees, legal costs and stipulate an early repayment charge or redemption penalty.
What are redemption penalties or early repayment charge on Expat Remortgages?
Mortgage redemption penalties or early repayment charges (ERCs) will be one of the most expensive aspects of any remortgage. Special mortgage offers will usually only last for a set period of time and trying remortgage or pay off your mortgage during this set period will normally attract a high redemption penalty.
The aim of redemption penalties is to discourage customers leaving the lender for a certain period of time. Redemption penalties can be particularly high during the first year or two of a term for those borrowers that seek a remortgage.
it is always worth assessing how much your redemption penalties will be on your current loan, and also how much it will cost when you want to remortgage again a few years down the line when looking to remortgage. In the competitive UK mortgage marketplace, many lenders choose not to charge early redemption charges.
The redemption charges and early repayment penalties are usually found in the small print of the remortgage agreement and consumers should check with both their old and new lender how much these penalties are in relation to their remortgage.
What are the Legal considerations for Expats when remortgaging
Having found your property and sorted out your finances there are a few other things to consider, some of which are shown below.
- Solicitor and conveyancing – Many lenders offer free legal services so for remortgaging you probably wont need a solicitor. For more information legal assistance read our extensive residential conveyancing guide.
Insurance considerations when remortgaging
- Buildings insurance – This is always a good time to check your buildings insurance to make sure that it provides the cover you need.
- Personal insurance – You will have considered you personal insurance requirements when you took out the original mortgage and these arrangements may well be sufficient today. However, many people tend to see insurance premiums as something to avoid but often live to regret that decision. If you have nothing in place then this is a good time to look at your options. A short list of the things to consider are:
- Death – if you were to die, would your family be able to remain in the property. Mortgage protection insurance can protect against this risk. Read our mortgage protection insurance guide for more information
- Critical Illness insurance – it is now more likely that people with mortgages are more likely to suffer a critical illness that leaves them financially insecure than they are to die. A suitable critical illness insurance policy can protect against this. Read our mortgage life insurance guide for more information
- Accident sickness and unemployment insurance – this is another area that can cause a financial difficulty but one which can be protected against through a suitable insurance policy.
Finally, it is important to note that within the UK, most mortgages and financial services products are regulated by the financial conduct authority (FCA) who are empowered to issue fines and or reimburse people who suffer a loss through no fault of their own. If you receive poor service you can complain in the first instance to the product provider and if that doesn’t resolve the problem you can take the matter to the financial ombudsman service, where it will be investigated and resolved.
Where there is an exception to this is with BTL or commercial lending as currently these products are not regulated in the way residential lending is. However, most mortgage intermediaries will tend to handle these mortgages as if they were regulated but this wouldn’t protect you in the event of a loss.