What is a Remortgage?
A remortgage is where people with an existing mortgage loan wish to replace it with one from a different remortgage lender. In laymen's terms a remortgage is also considered to be where someone wishes to replace their loan with a new one but from the same lender, however this is known in the industry as refinancing rather than remortgaging. The concepts of remortgaging and refinancing are basically the same and they are often confused.
There are a few reasons why a borrower would consider taking a remortgage; often people consider taking out a remortgage to secure a lower interest rate, this is normally done at a time when the borrower's introductory interest rates have passed. Sometimes if you discuss with your current lender that you are considering a remortgage and switching to one of their competitors they may offer you a lower rate in order to keep your custom. In the past mortgage lenders would only offer lower rates to new customers in an attempt to lure customers away from their competitors; this is however changing and some high street lenders will offer the same rates for all customers although you may have to ask.
Another reason why people choose to remortgage their homes is to release some of their equity. Rather than taking out another loan such as a personal bank loan or secured loan it can be more viable to remortgage and release equity in order to obtain a cash lump some. The concept of remortgaging to release equity basically involves taking a larger loan than the amount owed on the current one and using the extra cash. Equity is simply money that you have paid off of your mortgage so far; for instance if you have a mortgage of £200,000 and you have so far paid back £40,000 then you have £40,000 of equity.
Getting a remortgage is a simple enough process assuming that you haven't missed any mortgage repayments in the last few years. As you already have a mortgage and have made regular payments to your creditor you will be considered to be quite creditable and normally it will simply be a matter of showing some paperwork such as your current mortgage documents, proof of income and your expenditures. If you have missed any repayments then you may find remortgaging more difficult although probably not impossible.
Some lenders may require a full or partial evaluation of your home but this depends on the lenders policies and how much you are asking to borrow.
As with any financial product it is advisable to shop around and compare rates from as many companies as you can. Another thing to check for when remortgaging are the fees. Your lender charge you if you leave your mortgage early before a certain term is complete so it may be advisable to wait until this term is complete before choosing to remortgage. Any prospective lenders may also have fees you are liable to pay and these will vary widely depending on the lender; fees are often charged for valuations legal fees, loan processing fees, admin fees, and so on.
If you are in a hurry to remortgage then there are companies that specialise in fast tracking remortgaging applications enabling you to remortgage in just a couple of weeks although heavier charges may be associated with this kind of service. Otherwise remortgaging can take 6 to 8 weeks depending on the lender.
