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What is a remortgage?
Wondering what does it mean when you remortgage your property?
When you remortgage you are essentially taking out a new mortgage on your property, this can be with your current lender or a different one. The reasons people choose to remortgage can vary, typical reasons include finding a better interest rate, wanting to release equity on your property or simply wanting to switch lenders.
You will usually need to go through the same process as with your original mortgage. This means your credit history, financial statements and other relevant information will be evaluated by the lender before an approval is made.
If you are remortgaging with the same lender then much of this information will already be accessible. Due to this you can expect a more speedy processing of your application compared to a new lender however you may still need to provide some additional info.
If you are approved for a remortgage by a new lender then they will pay off the remaining balance to your current lender before issuing you a new mortgage. You will then start making your repayments to the new lender in accordance with your obligations under your new loan.
What is the difference between a mortgage and a remortgage?
A mortgage is essentially a loan you take out to purchase a property. This is a product that many home buyers will take out for their first property in order to be able to secure the funds needed to successfully get on the product ladder.
A remortgage is essentially the replacement of an existing mortgage with another. If you remortgage with a new lender then they will pay off the outstanding amount to your current lender, this is called “redemption”.
When the old mortgage is paid off by your new lender, the title of the property will be transferred to the new lender. With this the new lender will register your remortgage with the appropriate authorities as well as receiving a certificate of redemption.
Once this is complete you will no longer owe anything to your old lender and will instead start making repayments to the new lender under the obligations of your new loan.
If you remortgage with your existing lender then the terms and conditions around your current mortgage will be adjusted to reflect the new deal, for example your new interest rate or repayment period. If you change to a new mortgage product entirely then the obligations and terms for this loan will take effect at the agreed upon time after acceptance. You will still need to go through the original application process as you did with your original mortgage however as the lender will essentially treat your remortgage as a new mortgage request.
How long does a remortgage take?
The time it takes to get your remortgage from the time of initial application really depends on how much of the relevant documentation you already have on hand. The total length of time also depends on how long the lender takes to process these documents and if there is anything they are unsure of or require more information on.
In all you should allow for several months to complete the remortgage process whilst the lender evaluates your credit history, financial situation, property valuation and your overall income.
When can i remortgage?
Many mortgages have a lock-in period which prevents you from remortgaging within a certain time frame. This time frame can typically vary between 2 to 5 years depending on the deal you have secured. You could end up paying a hefty penalty for switching within this time frame.
If you are coming to the end of a fixed rate deal on your current mortgage then it may be wise to start looking at other deals to remortgage to.
Ultimately if you decide that remortgaging is the best financial move for you and you are outside your lock-in period or can afford the penalty to switch, then comparing remortgage options will likely be the best move for you.