A quick guide to remortgage

Summary: Remortgage is the process of exchanging your current mortgage for a new one. The dropping interest rates on mortgages entice the borrowers to take advantage of this situation. Online application processes have facilitated the ease of getting such loans. A carefully chosen remortgage deal can provide additional funds and give a better deal than existing mortgages.

Remortgaging means that we are taking a new mortgage to repay an existing one. As time passes, the appreciation in property rates raises the home equity available at the disposal of the homeowner. Remortgaging utilizes this increase in property valuation to get a better deal on debt, or some extra money. Remortgaging does not involve selling or changing homes, but the debt may be transferred from one lender to another. There are instances, when we require funds for some new construction, such as an extra bathroom, new kitchen, additional bedroom etc. Many times we find that some of our existing borrowings, charge higher rates of interest than those charged by our mortgage lender. In such cases, we can use the additional home equity available with us to provide funds and ease the repayment burden by remortgaging. UK, in recent times has seen a sharp decline in mortgage rates. Therefore, more and more homeowners having existing mortgages, are applying for a remortgage to take advantages of the lower rates. Remortgaging has become an easy process due to the increasing use of information technology in the lending process. People can now apply online for a remortgage right from the comfort of their home or office. This has significantly reduced the time and effort for getting a property remortgaged. Considering the reduced interest rates and easier repayment options, the homeowners often see remortgaging as good source for generating capital. Changing high interest debts into low interest remortgage with easy repayment terms is often, quite lucrative for the debtors. By changing their debt type they can significantly reduce the repayment burden. There are many lenders in the UK market, which provide competitive remortgage offers. Since, remortgages are used to move debts; it should be seriously considered that the cost of moving debts should not offset the savings in any such process. The redemption fees, is the biggest cost to be incurred while taking a remortgage. A redemption fee is what a person has to pay when he ends an existing mortgage contract and applies for a remortgage. There are early redemption penalties, which escalate the overall costs of remortgage. These penalties are the largest when the debt is still new. Generally, remortgaging is not advised when such penalties are very high, but if you have a particularly good offer, which offsets the loss due to the early redemption penalty, you should consider it. In addition to the redemption fee, there are many other costs involved with remortgaging. Some of which are discussed below: