The reasons that people tend to remortgage are varied, but common reasons are:
A lender is offering a better deal
To increase your loan amount to pay off your Help to Buy Loan
You have experienced a change of circumstances (such as a divorce or a bereavement)
You would like to release equity in the property
Very often, when you are remortgaging with the same lender, the process is very simple. Some lenders will give you a new deal without the involvement of a solicitor.
If you are switching lenders, however, the requirements are likely to be more complicated. The process will feel similar to when you first purchased the property. For example, the lender will require a valuation and searches.
The importance of clear unambiguous drafting of overage payments
The term ‘overage’ refers to an increase in value of a property either during or after the sale subject to certain ‘trigger events’. The classic example is for a developer to buy a plot of land, following which, the developer will then apply for planning permission to build say 50 houses. If the developer gets planning permission for more than 50 houses, the Seller will be entitled to an ‘overage payment’ i.e. an increase in the sale price.
In the case of London and Ilford Ltd (the Developer) v Sovereign Property Holdings Ltd (the Seller), the ‘trigger event’ was the developer receiving prior approval from the local authority for Permitted Development to convert the property into a minimum of 60 residential units. When the ‘trigger event’ occurred, the Seller claimed the £750,000 overage payment.
The developer however disagreed and stated that the payment was to provide a commercially valuable benefit and therefore Prior Approval was only valuable if the 60 residential units could lawfully be built.