Remortgages and Remortgaging

Remortgage Products

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.

It is possible, and quite often most favourable 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. Conversely the homebuyer may be in an improved financial position and wish to reduce the capital more quickly and over a shorter period of time. It may also be that the borrower chooses to redeem, or pay off the outstanding mortgage altogether, before considering an entirely new mortgage. All these options can be easily negotiated.

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.

It is imperative the borrower is fully aware of all the terms and conditions of the existing mortgage before deciding to move companies. Most reputable mortgage companies will give a redemption figure on request so that the borrower will be aware of the exact figure required at the stipulated time that redemption takes place. And, of course, there may be other initial fees should a transfer to another mortgage lender appear the best long-term option. This is because the new mortgage lender will insist on all the usual checks, including a survey, legal fees and searches, though many may be prepared to absorb these costs and add them to the overall lending to be recouped through slightly increased monthly repayments over an agreed term. But these are one-time only costs and may well be considered very reasonable if the links to a very expensive, restrictive mortgage, which may cost very much more throughout its lifetime, can be severed.