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Remortgaging: What Is It All About, Anyway? |
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Submitted by Collette Royal
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Remortgaging is a fancy term. The fact is that a remortgage is the same thing as refinancing; it's just a different term. Like with other jargon, there is some confusion about what it entails.
These terms are those that many people have heard, but most don't have all of the details that they need to make an informed decision about this process. So if you want to gain a deeper understanding of these terms and get the jargon the people keep throwing around, read on.
Understanding the Remortgaging Process
A remortgage is basically the process of paying off an existing mortgage with the proceeds from a new mortgage, but the same property is used for both. There is no purchase of new home involved in remortgaging. Instead most people are simply transferring their mortgage from one lender to another.
While remortgaging is an option, others find that when they look into it that there is a better product or service that they can take advantage of with the same lender, but this isn't technically remortgaging. This becomes one of those regional stories. Remortgage is to the Auk as refinance is to the US.
This serves a wide variety of purposes. Each homeowner needs to determine if their circumstances warrant the process. Many people remortgage or refinance to decrease the amount of their monthly payment, to take advantage of lower interest rates, to pay off a mortgage earlier than expected, to increase capital, and even to consolidate debts.
Depending on how long you have been in your home you can walk away from the refinancing process with thousands of dollars in hand that you can put toward other uses such as paying off debt.
If there is an interest rate spread in your favor, then it might be time to remortgage. For instance, if you bought your home 10 years ago and you have an interest rate of 10.1% you could remortgage the amount that is still owed on the loan and get an interest rate of 6%.
Not only are you lowering your interest rate, you are also lowering the amount of money that you are paying interest on, so you could effectively lower your monthly mortgage payment by hundreds of dollars. That saving can be handy
You are the sole judge of this form of financing. But for people who have just purchased their home and have a good interest rate, it really doesn't make all that much sense. Saving money is the primary objective of remortgaging.
Many lenders are willing to consult with you free of charge. They allow you to approach the process slowly and determine if you are a candidate for the remortgage process now. There might also be the option of postponing the option to remortgage.
This process of remortgaging is a little tough for many to understand. The plain vanilla first time mortgage for 30 years is what is deeply embedded in the home buyers psyche. All the same, read around and you will find a lot of good information that will guide you.
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