What is a Remortgage?

Introduction

A remortgage is a procedure by which a borrower pays off an existing mortgage loan with a new mortgage loan from a different lender. In other words, the borrower replaces a mortgage loan with a new one. The borrower then has to repay only one mortgage loan to the new lender.

There is some difference between the terms remortgage and refinance . The purpose and the procedures of both are the same. However a remortgage always involves a new lender, whereas a refinance scheme can be arranged with either the existing lender or a new lender.

Why Remortgage

There are a number of reasons why a borrower might consider a remortgage. For instance, a borrower with an existing mortgage may find a new loan scheme with a lower interest scheme. This lowers his monthly savings and brings some savings. A lower interest rate can mean either or both lower monthly installments and lower total payment.

A remortgage plan can also help to raise equity in the borrower’s property. In real estate parlance, equity is calculated from the difference between the market value of a property and the amount of money still owed on it. A raise in property value for instance raises equity. Repayment of mortgage loan also raises equity on a property.

How to Get Remortgage

It is quite easy to get a remortgage done. The procedure is similar to a first time mortgage. The new lender has to evaluate the mortgage application and some information such as proof of borrower’s income, existing debts and expenses.

The lender might also require a valuation of the property. In many cases, this is not as intensive as the process in sanctioning a first time loan. The surveyor might simply view the home from the outside and ask a few questions.

Remortgages usually involve certain kinds of fees like valuation and legal fees. Loan processing fees might also be levied by many lenders. The fee amounts vary with each lender.

Remortgage processes are typically completed in four to six weeks. A lot depends on the lender and the specific situation with the property in question. Some remortgage specialist lenders get the work done as fast as within a week.