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Why we need
remortgage? |
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Remortgaging, or changing the terms
or lender of a current mortgage, may be considered for any number of
reasons. The most conventional motive would be in order to terminate a
mortgage, which is found to be unsatisfactory because the interest rates
or repayments may be too high, or because the terms and conditions no
longer meet the requirements of the home-buyer. Remortgaging can also be
a means of raising immediate cash for home improvement projects, or
indeed for any unrelated substantial purchases the mortgage borrower may
wish to make. But the borrower should be aware that in increasing the
amount of the loan, the equity, or expected profit after the sale of the
house and full repayment of the outstanding mortgage had been affected,
would inevitably be reduced.
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Existing lender's
terms and conditions |
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However, the
homebuyer should always be aware of any special terms and conditions,
which are tied to the existing mortgage. Should the mortgage be
relatively new, that is to say into the first or second year, there are
liable to be certain penalties built into changing any part of the
agreement, especially if short-term beneficial rates or offers had been
taken up initially. If the borrower decided to switch mortgage companies
altogether, then redemption must first be completed. Redemption simply
means that the outstanding mortgage must be paid off in full before a
mortgage with a different company can be secured. The new mortgage
company usually makes this final payment, but there will generally be an
additional redemption fee as a penalty for early completion and the
inevitable loss of long-term interest to the lender. Many mortgage
lenders may also charge an additional fee for standard closure as well
as the redemption penalties.
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Same lender also work |
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It is possible, and quite often
most favorable to Remortgage with the same lender. This can be done by
extending the life of the existing mortgage in order to reduce the
amount of the monthly outgoings, or for raising additional finance with
the extra cost being absorbed into the monthly repayments over the long
term.
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