A remortgage is simply taking out a brand new mortgage on your current home, replacing your existing mortgage and generally saving money by earning a lower rate, or replacing a variable rate mortgage with a fixed one – or vice versa.
After a considerable time has passed since your initial home purchase, your mortgage payments offer continual increases in your home equity. Due to inflation and other factors your home generally increases in value as well. You are, therefore, later eligible for a new, more cost effective mortgage of that same home. While a remortgage does not involve the sale of your home or any relocation at all, it may be that your debt does leave one financial institution and become the property of a new lender.
There may be times when you need additional money for new additions on your home, or home remodeling. A remortgage may provide these funds at a lower rate of interest than other financial resources.
It can be that all other things being equal the time is just right for a remortgage savings because of the improved state of the economy. Right now we are in the midst of such an upswing in the market activity and a downswing in mortgage rates. Now is a great time for a remortgage.
Thanks to the Internet and other electronic technology a remortgage is not at all complicated. You can actually apply for a remortgage online from the privacy of your own home. Not only does this facilitate the process but it also offers you a quicker turnaround on both your approval and the availability of the remortgage funds or savings.
A remortgage can be a sensible way to accrue needed capital, if interest rates are lower than what you are paying on your current mortgage, thus decreasing your monthly payment. Or, you might choose an early payoff of your remortgage instead which could considerably free up resources down the road once your home remortgage is paid in full early. If your remortgage is going to eliminate your high interest debt payment and replace it with a low interest remortgage payment, you will save money. Usually a great deal. What you have to keep in mind, however, is that there are fees involved in the remortgage. You must make sure that the fees you pay to remortgage are not more than the difference between the total payments of your old mortgage minus the total payments of your remortgage.
The greatest expense in your remortgage will be your redemption fee. This is the upfront cost of the mortgage cancellation and remortgage process. You must learn all you can about early repayment penalties. These can have a hefty impact on your remortgage expenses. In general, the newer your current mortgage, the higher the early payment penalty.
Other remortgage fees could be for appraisal, should the new lender want a professional valuation of your home and property. You may have attorney fees as well. Your lending institution may have various fees attached to the remortgage such as transportation, faxing, long distance and so forth. All these are negotiable and you should ask.
What is very important to keep in mind before you embark on a remortgage is that your repayment of your home ownership debt begins all over again with this remortgage. While you might see a remortgage as a great savings in the short run, you could end up paying more in the long run. While you lower your interest rate in most cases – or why do it? – you will be extending the time it takes to pay back the remortgage, unless you are savvy enough to pay more and get out early.
