A `remortgage` is exactly what it sounds like - it`s a new mortgage which a homeowner can take out. This will pay off their current one, leaving them to start repaying the new one instead.
Remortgaging is an important matter for homeowners, especially in today`s market, where a remortgage can be a great idea - if it`s an option:
* on the one hand, it`s often possible to remortgage to a much better deal than those that were available a few years ago, thanks to today`s record-low base rate;
* on the other hand, due to the credit crunch and falling house prices, remortgage deals can be harder to come by than they were a few years ago.
Of course, that`s not to say that it`s impossible to get a remortgage. And as the mortgage market begins to recover - as many economists believe it is doing - we may begin to see more deals available.
Why do people remortgage?
There are many reasons why people remortgage. Here are some of the most common reasons:
Coming to the end of an existing deal
If you`re coming to the end of your existing mortgage term, you`ll probably need to choose between finding a new deal or reverting to your lender`s SVR (Standard Variable Rate). If you can`t find a new deal, you may have no choice but to revert to the SVR.
Getting a lower rate
Even if you aren`t at the end of your current deal, it can sometimes make financial sense to switch to a mortgage deal with a lower interest rate.
For example, if you`re currently paying 6% interest on a mortgage you took on three years ago but you can now get a deal charging only 4%, you could save a lot of money on a month-to-month basis by switching.
However, be aware that there may be an `exit fee` or `early repayment charge` on your current deal that could make switching a very expensive option in the short term. You`d need to compare how much you`d save and how much it`d cost you.
Source : http://www.thinkmoney.com
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