The legal aspects of remortgaging your home

27th February 2024

Remortgaging involves replacing your existing mortgage with a new one – this could be with either with your current lender or a different one who might provide better rates.

You might opt to remortgage for several reasons, such as securing better interest rates, reducing monthly payments, or consolidating your debts into one manageable loan.

It can also be a strategy for releasing equity and providing cash for other projects.

Having said this, remortgaging requires careful consideration of its impact on your financial health and credit score and there are some strict laws that must be adhered to.

The legal framework of remortgaging is designed to balance the interests of both the lender and the borrower.

Legal checks and searches

At the heart of the remortgaging process is the conveyancing procedure, which involves a series of legal checks and searches to ensure the property’s suitability as security for the new mortgage.

These include:

  • Title searches: A fundamental step where solicitors confirm the borrower’s legal ownership of the property. This search verifies that the title is free from restrictions that could affect the new mortgage.
  • Checks for outstanding charges: Solicitors also search for any existing charges against the property. A charge, being a legal claim by a creditor against the property used as security for a debt, must be settled or transferred to the new mortgage arrangement.
  • Legal restrictions: The conveyancer assesses any legal restrictions or covenants on the property that might limit its use or affect the remortgaging process. These could include rights of way, restrictions on alterations, or other conditions imposed by previous owners or local authorities.

Property types and their impact

Certain properties may encounter difficulties during the remortgaging process:

  • Unusual construction: Properties with non-standard construction (e.g., timber-framed buildings, thatched roofs) may be viewed as higher risk by lenders due to potential durability issues or higher maintenance costs.
  • Leasehold properties: Leasehold properties with short leases (typically less than 70 years remaining) can be challenging to remortgage, as their diminishing lease term affects the property’s value and security.

Government regulations

The Government has also implemented several regulations to protect the financial system and ensure borrowers are not overextended:

  • Stress testing: Lenders are required to conduct stress tests on potential borrowers to assess their ability to maintain mortgage payments under adverse conditions, such as higher interest rates. This ensures that borrowers are less likely to face foreclosure if economic conditions worsen.

The legal aspects of conveyancing for remortgaging are designed to protect both parties:

For borrowers, it provides assurance that their rights are safeguarded and that they are not entering into a financial agreement that could become untenable.

For lenders, it ensures that the property is a secure and viable form of collateral for the loan, protecting their financial interests.

When should you engage a solicitor?

You should engage a solicitor or conveyancer early in the remortgaging process, ideally as soon as you decide to explore the option of remortgaging your property.

Engaging a professional at this early stage ensures that you have expert legal advice and support throughout the entire process, from the initial consideration of your options to the completion of the remortgage.

A solicitor will help you understand the legal requirements of remortgaging, conduct the necessary property searches and checks, deal with any legal issues that may arise, and ensure that all your paperwork is in order.

For further information or for help in remortgaging your home, please don’t hesitate to get in touch.