Our Guide to Day 1 Remortgages
There may be times when you want to remortgage your home practically as soon as you’ve bought it – popularly called a day 1 Remortgage, because you are looking to take out a new mortgage on the property on or after the very first day you own it.
Day 1 remortgages are typically more difficult to arrange, with some lenders insisting that you own the property for at least six months – and preferably at least 12 months – before they will consider a remortgage, whilst some more specialist lenders may be comfortable to grant a genuine day One remortgage.
Our Guide to Day 1 Remortgages considers some of the reasons why you might need one, some of the hurdles that may be put in your way, and why you might want to turn to us here at Needing Advice for help in overcoming any obstacles.
Why may I need a Day 1 remortgage?
There are a number of reasons why you might want to mortgage a property almost as soon as you have bought it. Some of the most common are:
- the purchase of a property with cash or the use of a bridging loan – which you might have done to beat off rival bidders in a competitive market, or at auction, for example;
- you were gifted the property or inherited it and now have the opportunity to release at least some of its value through a remortgage; or
- you might need to raise the extra cash through remortgaging the property in order to vary out repairs or improvements.
Why are some lenders reluctant to advance Day 1 remortgages?
The mortgage lending market is competitive, with a variety of different products gaining popularity at various times but falling out of favour as conditions change or more attractive products appear on the market.
Not all borrowers take advantage of the improved mortgage deals that may become available when the original one comes to an end. There are currently some 2 million borrowers, for example, who continue to pay at a standard variable rate, despite better deals being available, according to a report by the Independent newspaper on the 18th of April 2018.
But a marked reaction to changes in the mortgage market has also resulted in a halving of the number of current interest-only mortgages in the past six years, according to a report by UK Finance on the 17th of May 2018.
In some cases, buyers have been able to acquire a property at less than its market value, or by making a cash purchase, and then taking advantage of a remortgage at the full market value. Unsurprisingly, mortgage lenders consider this an abuse of the market and, for that reason, are reluctant when it comes to advancing Day I remortgages.
Considerations when applying for a Day one remortgage
In that climate of extreme caution with respect to advancing a Day one remortgage, therefore, you need to bear in mind that any lender is going to insist on:
A remortgage calculated on the current value of the property;
- if that value has been enhanced by further refurbishment works, evidence of the cost must be provided, or the loan will be based on the value indicated by the initial purchase price;
- valuations are made according to standard pricing indices – with reference not only to the actual selling price, but also reflecting the prices of similar properties recently sold in the same neighbourhood;
- Day 1 remortgages are typically unavailable following the purchase of a new-build property (one that is less than two years from its effective date of construction and has not yet been lived in) – since the true market value of a new-build home may be distorted by various discounts and incentives (such as fitted kitchens and bathrooms included in the price).
What is the maximum LTV I can expect?
Because of the heightened risks and general reluctance on the part of lenders to advance Day 1 remortgages, the maximum loan to value (LTV) you are likely to be offered is 75% – in other words, you are likely to need a deposit of at least 25% of the property’s current market value.
As with any mortgage application, however, the bigger your deposit – and, in this case, a deposit greater than 25% – the wider your choice of remortgage products and the better your chances of success in obtaining the advance.
Can I get a buy to let day one remortgage?
Landlords of buy to let property may have similar reasons to homeowners for seeking a Day one remortgage.
As far as lenders are concerned, the same reservations apply both to homeowners and landlords, but – subject to similar provisions and considerations – there is no reason why you may not seek a day one remortgage in the same way as any other property owner.
Next steps – Day 1 remortgages
Day 1 remortgages may offer a suitable way of raising necessary capital if you have bought property with cash or a bridging loan or have received the property as a gift or by way of inheritance. Such a remortgage may also offer a way of raising the funds you may need to complete the refurbishment of repair of a property you have recently bought.
Although many lenders are reluctant to advance a mortgage in such circumstances – and some refuse to entertain the notion of day 1 remortgages – there are specialist lenders from whom you may obtain the loan you are seeking.
Here at Needing Advice, we are well placed to help you identify these specialist mortgage lenders and assist in your successful application.