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What is a Remortgage?

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  • Written By: N. Madison
  • Edited By: Niki Foster
  • Last Modified Date: 01 April 2014
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A remortgage is a process that replaces an existing mortgage loan with a new loan from a different lender. The new lender repays the existing mortgage debt to the original loan provider. The borrower is then left with just one mortgage loan, repayable to the new lender.

The terms remortgage and refinance are sometimes confused. While the two loan processes can be similar, there is one major difference. A remortgage involves accepting a loan from a new lender, while a refinance loan can be provided by the existing lender or a new mortgage provider.

Borrowers consider remortgaging for various reasons. Often, the purpose involves saving money. Securing a new mortgage, at a lower interest rate than is afforded by the existing loan, may reduce the borrower's monthly repayments. Obtaining a lower rate may also reduce the total amount of money the borrower must repay over the full life of the loan.

Remortgaging can also serve to release equity in the borrower's home. In real estate terms, equity is the difference between the market value of a home and the amount the borrower still owes on it. When an individual's property increases in value, equity is built. Likewise, equity is increased as the borrower repays the mortgage loan. For example, if a borrower's home is worth $150,000 and he or she has repaid $30,000, the borrower has $30,000 in equity. A borrower can obtain this equity money by remortgaging and borrowing an amount that exceeds the current mortgage debt.

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Obtaining a remortgage is fairly simple. Generally, the process is straightforward and similar to obtaining any other mortgage loan. The new lender reviews the borrower's application and asks for certain related paperwork. Remortgage paperwork typically includes proof of income, debts, and expenditures.

A home valuation is usually required as well. In some cases, the valuation may be less intensive than the type required for an initial loan and the surveyor may simply view the outside of the borrower's home and ask a few pertinent questions. In other cases, a full valuation is required.

There are certain fees involved in a remortgage. Often, borrowers are required to pay valuation and legal fees. Many lenders charge loan-processing fees as well. The amounts charged for a remortgage vary from lender to lender.

In general, a remortgage can be accomplished in four to six weeks or less. The length of this process depends on the lender and the specific circumstances surrounding the property being remortgaged. However, there are some lenders who specialize in rapid remortgages and promise to complete the process in a week or less.

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Discuss this Article

anon345890
Post 5

If I move what is the difference between a remortgage and a mortgage for a house purchase?

anon278494
Post 4

Depends. If you remortgage the first property and get enough money to buy the second one, you have one mortgage.

If you remortgage the first property so as to take out just enough to have a down payment on the second one, you will have two mortgages.

anon278233
Post 3

When you remortgage at a lower interest rate, then are the monthly payments lower because less interest is being paid, but is less being paid on the principal?

wisemortgage
Post 2

You can avoid having two mortgages. If the house you want to buy is cheaper than the amount of the mortgage you are going to get, you can pay it off with the mortgage on the old house. You have a mortgage on the old house only.

Example: You can get a 200,000 mortgage on the old house. The new house costs 175,000. You take out cash from old house mortgage, payoff new house, have 25,000 left over.

anon702
Post 1

Hello. What is the situation with remortgaging for people who own their homes outright. When I purchased my property, I paid in full and therefore do not and did not have a mortgage. I am now loking to buy elsewhere but considering remortgaging my current home. Will I end up with two mortgages by doing this? Thank you!

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