What is a remortgage?

16 September2009

A `remortgage` is exactly what it sounds like - it`s a new mortgage which a homeowner can take out. This will pay off their current one, leaving them to start repaying the new one instead.

Remortgaging is an important matter for homeowners, especially in today`s market, where a remortgage can be a great idea - if it`s an option:

  • on the one hand, it`s often possible to remortgage to a much better deal than those that were available a few years ago, thanks to today`s record-low base rate;
  • on the other hand, due to the credit crunch and falling house prices, remortgage deals can be harder to come by than they were a few years ago.

Of course, that`s not to say that it`s impossible to get a remortgage. And as the mortgage market begins to recover - as many economists believe it is doing - we may begin to see more deals available.

Why do people remortgage?

There are many reasons why people remortgage. Here are some of the most common reasons:

Coming to the end of an existing deal

If you`re coming to the end of your existing mortgage term, you`ll probably need to choose between finding a new deal or reverting to your lender`s SVR (Standard Variable Rate). If you can`t find a new deal, you may have no choice but to revert to the SVR.

Getting a lower rate

Even if you aren`t at the end of your current deal, it can sometimes make financial sense to switch to a mortgage deal with a lower interest rate.

For example, if you`re currently paying 6% interest on a mortgage you took on three years ago but you can now get a deal charging only 4%, you could save a lot of money on a month-to-month basis by switching.

However, be aware that there may be an `exit fee` or `early repayment charge` on your current deal that could make switching a very expensive option in the short term. You`d need to compare how much you`d save and how much it`d cost you.

Consolidating debts

In some cases, you may be able to use some of the equity in your home to pay off your unsecured debts (equity is the portion of your home`s value that you owe nothing on - in other words, your deposit, plus the portion of your mortgage you`ve paid off already, plus any increase in the property`s market value).

Once you`d done this, you would have no unsecured debts but a (larger) mortgage, which you`d repay like any other mortgage.

Remortgage with Think Mortgages

Think Mortgages could make it much easier to find the right remortgage deal. We`ll search our panel of lenders for the best deal for your circumstances.

For more information, click here or call 0800 195 2913 today.

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Tags: remortgage, deal, mortgage, getting a remortgage, finding a remortgage, remortgage advice, remortgage information

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