The ‘six-month rule’ is a common requirement for mortgage lenders, necessitating property ownership for over six months from the Land Registry registration date before accepting remortgage applications. This stipulation aims to establish a stable ownership period before considering refinancing options.
Another critical aspect affecting the pace of remortgaging is the cost associated with exiting your current mortgage. If you initially opted for a fixed-rate or discounted-rate mortgage with a specified term, leaving before its conclusion could incur expenses. While this may pose a financial consideration, assessing the overall benefits is crucial in determining whether early remortgaging is the most prudent choice.
The six-month rule
The six-month mortgage rule restricts homeowners from securing a new mortgage on a property owned for less than six months. This regulation addresses a loophole exploited by homebuyers and investors, preventing them from rapidly increasing their borrowing to the full property value shortly after acquisition.
How Quickly Can You Refinance A Mortgage UK?
Typically, lenders allow remortgaging to a new deal six months after your name is on the title deeds. During this period, equity release isn’t feasible. Waiting six months provides a broader selection of remortgage products, including variable or fixed-rate deals. Additionally, your loan-to-value (LTV) improves, considering the property’s current market value.
For those requiring early remortgage, we, as a whole-of-market mortgage broker, have access to lenders open to the option within six months of purchase. While some may require Land Registry registration, others proceed before it. Land Registry may take months to update title deeds, often backdating them to the completion date, establishing you as the property owner.
Can you remortgage within six months?
Certainly, remortgaging within a short period is feasible, although it presents additional challenges compared to waiting. Various circumstances might prompt the need for early remortgaging:
- Inherited Property: Remortgaging may be necessary for an inherited property, requiring a lender not bound by the six-month rule.
- Equity Release: Changes in circumstances may lead to the need for equity release, and finding a suitable lender becomes crucial.
- Variable Rate Mortgage Exit: Escaping a variable rate mortgage post a sudden rise in rates is a common reason for early remortgaging.
- Buy-to-Let Transition: Switching to a buy-to-let mortgage may prompt the exploration of early remortgaging options.
- Property Value Increase: After renovating a property, remortgaging to borrow against its enhanced value is a consideration.
- Financial Requirements: Whether for home improvements, debt consolidation, or buying out a mortgage partner, early remortgaging might serve diverse financial needs.
In these scenarios, identifying a lender without stringent six-month rules is essential. Assessing the exit costs of your current mortgage helps determine if remortgaging is the optimal choice. Additionally, exploring alternative financing options may offer viable alternatives aligned with your specific requirements.
Determining your eligibility for property refinancing involves careful consideration of various factors:
- Property Type Restrictions: Newly built properties may encounter limitations on Loan-to-Value (LTV) ratios due to their often elevated initial costs. It’s crucial to be aware of these restrictions when contemplating refinancing for such properties.
- Remortgaging Intentions: Lenders apply distinct LTV limits based on the purpose of refinancing. Whether you seek to make home improvements, consolidate debts, or pursue other objectives, understanding these limits is essential for informed decision-making.
- Residential vs. Buy-to-Let: The type of property, whether it’s your main residence or a buy-to-let investment, significantly influences refinancing terms. Main residential remortgages generally offer a higher maximum LTV, often around 90%, compared to buy-to-let properties, which typically hover around 75%.
- Personal and Financial Assessment: Your individual circumstances, encompassing personal and financial aspects, play a pivotal role in determining eligibility. Lenders assess affordability, evaluating your capacity to meet monthly mortgage payments. This assessment considers your income, expenses, and overall financial stability.
How Soon Can I Remortgage a Property After Purchase?
In general, most lenders allow remortgaging to a new deal six months after your name appears on the title deeds, restricting equity release within this period. Waiting for this duration opens up diverse remortgage options, including variable or fixed-rate deals, with improved Loan-to-Value (LTV) as lenders consider the current market value post-six months, not the initial purchase price.
However, alternatives exist for those needing to remortgage earlier. As a comprehensive mortgage broker, we collaborate with various lenders willing to entertain remortgage requests within six months of purchase. While some require Land Registry ownership registration, others may proceed before title deed inclusion.
Land Registry processes, often time-consuming, may lead to backdated entries, recognizing you as the property owner from the completion date, easing remortgage considerations before official title deed inclusion.
Why should I remortgage?
When you initially secured your mortgage, you likely secured a favorable deal. However, the mortgage landscape evolves, presenting new and potentially better deals. Exploring current options may reveal opportunities to save hundreds of pounds.
Changing lenders isn’t always necessary. It’s crucial to examine potential new mortgages for arrangement or product fees. If ending your current mortgage deal prematurely, be mindful of any early repayment charges imposed by your existing lender. These fees can impact the overall cost of remortgaging, potentially making it more expensive than maintaining your current arrangement.
When should I remortgage?
Remortgaging is possible at any point, but if you’re not nearing the end of your fixed or discount rate term, there could be an early repayment charge. Typically, individuals opt for remortgaging when approaching the end of these terms, as it often marks the point where the existing mortgage may no longer be a favorable arrangement.
|Mortgage loan amount
|Staying on current deal £175,000
|Option 1: £175,000
|Option 2: £175,000
|Term of loan
|Interest during fixed period
|Arrangement or product fees
|£2,000 arrangement fee added to mortgage
|Total cost of mortgage over 20-year term
|Total interest charged over 20-year term
|Total monthly payment
|Cost of mortgage over five-year fixed period including interest
Changing your mortgage before the deal ends may incur an ‘early repayment charge.’ The overall credit cost considers upfront payment of any mortgage-related fees, excluding them from the loan. These costs vary among providers and can increase repayments if added to the loan. The calculation assumes the initial rate remains constant throughout the deal, reverting to the lender’s standard variable rate (SVR) of 6%. This applies to a repayment mortgage with monthly interest calculations. Results are rounded figures for daily interest with a single monthly payment.