There are many different meanings that people use when talking about remortgages, but a true remortgage is the process of completely replacing and existing mortgage with a new mortgage from a different lender. The brand new mortgage provider pays off the existing loan with the old lender, and then holds the mortgage which is now payable by the borrower. The terms "refinance" and "remortgage" are very similar, but there is a difference. A refinance loan can be made with either the current lender or a new lender, while a remortgage is always with a new lender.
There are many different reasons that people decide to remortgage their properties. Frequently, the reason involves saving money. Getting a brand new mortgage with a lower interest rate will reduce the monthly payment. Having a lower interest rate could also decrease the actual total interest amount paid by the borrower over the lifetime of the mortgage.
Sometimes it can be financially wise to use a remortgage loan to consolidate multiple debts (including credit cards and second mortgages) into a single loan. In general, a mortgage loan offers a lower interest rate as compared to an unsecured loan. Therefore the monthly payments can be reduced. However, it must be taken into consideration that the longer term debt might increase overall interest payments because of the extended term of the loan.
It is not difficult to find remortgages, even bad credit remortgages, when you have sufficient equity in the house. The process is often easier than obtaining the initial mortgage. Normally, the process will be similar to obtaining any mortgage loan. The new loan provider will review the application and examine certain personal and financial documents. Remortgage documentation generally includes proof of income, a list of debts owed, and information about recurring monthly expenses.
Remortgages, like regular mortgages, have many fees and costs associated with them. It is normal for borrowers to pay appraisal or valuation fees and loan processing fees. A lower interest rate might be offset by the upfront fees that a lender adds to the package, so be sure to carefully include all fees when comparing remortgage deals. The amounts charged for a remortgage are different from lender to lender, but the list of extra fees and charges can add up quickly.
An appraisal for a remortgage is usually required, however it may be less rigorous compared to one needed for the initial mortgage. Depending upon the amount of the loan and the policies of the individual lender, it is possible that a full appraisal may be required. However, other times the appraiser might simply photograph the exterior of the house and ask a few detailed questions, and rely on public records for the rest of the information.