Remortgage Definition

Remortgaging is a term used to define a process in which the borrower transfers its mortgage from one lender to another to get better deal and to save some money. Say for example you are having a mortgage from ABC financial institution and want to remortgage it to another financial institution XYZ just because they are giving you a better deal which helps you save some money. For most of the people the main reason for remortgaging is saving however, there are many other reasons for remortgaging as well:

  • To reduce the monthly repayment
  • By remortgaging you can gain some cash if your property has increased in value
  • If you are paying a variable interest rate to your current lender, you can look for a mortgage deal that will give you fixed interest rate even if it is for 2-3 years. This is best done if you know that the interest rates will increase in near future.
  • If your current mortgage does not have the facility of underpayment, overpayment or payment holidays then you can look for the one which will give you these facilities.
  • If you want money for home improvements and want money for it you can remortgage your property to release the equity.
  • If in the beginning you took an expensive mortgage deal say for bad credit file or because you were self-employed, you can remortgage your property for a better deal that will give you much more savings.

Do your calculations correct to check if remortgaging your property is beneficial? Say for example your property is for GBP 100,000 and have an SVR of 6.5%. The monthly installment that you need to pay would be around GBP 1010. If you get a new deal where SVR is 4.3% fixed to a term of 2 years then your monthly installment would be GBP 820 giving you a saving of GBP 190 per month. This would add up to GBP 4560 in 2 years’ time. Now even if the fee for remortgaging your property was GBP1000, you can make a net saving of GBP3500 which is a good amount. Hence, remortgaging can be a good way of saving your money but will have to make a wise decision. It is said the best and the cheapest way of getting a good deal and finding right financial institution to remortgage your property is through a broker.