What Does Remortgaging mean?


Homeowners who’re in need of some extra cash can do so by taking out a second mortgage on their property, a process that’s often called a “remortgage”. But what does remortgaging mean for homeowners?


It actually depends on the situation. When a remortgage is sought, two things can possibly happen. One is having an existing mortgage renegotiated with the original lender. The other possibility is shifting altogether to a different lender.


There are several reasons why some homeowners would want to go through the process of a remortgage. One of the appreciable results of undertaking this action is the chance to reduce their monthly mortgage amortization. Housing loans are generally long-term debts, and so by reducing the rate of interest it may be possible to generate substantial savings from such a move.




A better spread in amortization payments is another key desire of many who ask the question, what does remortgaging mean? Home loans are generally long-term transactions, with the repayments spread over a period of up to 20 years. Through a remortgage, the borrower can take up the option to either shorten or lengthen this period of payment, depending on his or her financial standing.


By remortgaging, a homeowner can likewise release the value of what has already been amortized on the property over the years. As a result, lighter payments on the remainder of the housing loan can be negotiated, which should leave the homeowner with greater disposable funds to put towards his or her monthly budget.


Remortgage Choice


Financial institutions usually offer various types of remortgage packages. Thus, homeowners will need to consider their available options carefully. Essentially, those who seek remortgages on their property will have to decide on the terms which would be most suitable to them. The options which their lender may put on the table include variable and fixed rates, as well as capped rate remortgages. The spread of the package can also vary, with choices often set between one to 10 years.


Prior to making a choice, however, several conditions must first be established. The first prerequisite for any remortgage agreement is an accurate presentation of the borrower’s annual income. Lenders are particular about seeing the proper documentation, as they need to ensure that homeowners have the finances to meet the repayments. Specifically, lenders will normally request to see the homeowner’s bank statement and evidence of their annual income, as well as monthly or annual expenditures.


As part of the remortgaging process, lenders will usually demand a valuation of the property involved. The exact equity that the homeowner has already built on it will likewise be considered as part of the basis on the remortgaging terms.




Before going through the remortgage process, homeowners should examine the existing terms of the original housing loan. In some mortgages, there are penalties for an early loan termination in favour of a remortgage. Also, the remortgaging transaction can entail fees that the homeowner is obliged to pay. Knowing what these payments can be very helpful when trying to decide which remortgage package is the most advantageous.



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