How Does Remortgaging Work? The Remortgage Process Explained

Remortgaging is a great way to save your home from financial ruin and grow your equity. Remortgaging involves repackaging an existing mortgage so that it can be sold again to another lender.

This means you can sell your existing loan once again, usually for a higher price than the original amount. Banks view remortgaging as a positive because they make more money from fees and interest on the new loan than on the old one. The goals of remortgage are different than regular refinancing.

Here’s how the process works: You find a bank willing to pay more for your home than they did before. You then refinance with this lender, taking out a new loan at the same interest rate but at a higher price per square foot value of your house.

Once the refinance is complete, you’re free to sell again or keep living in your home until you retire or move into an assisted living community later in life. However, contact AP Morgan which is the best Estate Agent Redditch, UK.

What Is Remortgaging?

Remortgage is the process of “re-financing” your home loan and selling the original loan to a new lender. In other words, you take out a new loan and then refinance the existing one. This way, you can save on interest payments and have more cash flow each month.

You can also save on closing costs, increase your equity and improve your credit score. Every year, millions of homeowners decide to do a remortgage in order to save money, improve their credit score and reduce their monthly payments.

How Does Remortgaging Work?

This step is as simple as applying for a new loan. You contact a new lender about refinancing your home and explain your situation. The lender will evaluate your loan, determine how much they’re willing to lend you, and then offer you a new loan amount. The new loan amount should be higher than the current amount you currently owe. This way, you’ll be able to pay off your home sooner and save on interest.

Once you’re approved, the new lender sends your existing lender a “Notice of Termination” or NOD. Your lender then sends a NOD to the new lender, meaning they terminate your existing loan. This means you now have a new, higher-interest loan.

The Benefits of Remortgaging

Saves Money – Assuming the rates on remortgaged home loans are at historic lows, you’ll see significant savings by refinancing. The total amount of interest you’ll save depends on your loan amount and the rate you’re offered. Even if you’re offered a low rate, you’ll still see savings of money every month.

Improves Credit Score – The biggest benefit of a remortgage is the impact it has on your credit score. With a new loan and monthly payments, your score will go up and you’ll be able to get a lower interest rate on everything from credit cards to other loans.

Faster Home Sale – The final benefit of a remortgage is having the cash flow to quickly sell your home. Once you sell your home, you don’t have to pay the mortgage anymore and you have extra cash in your pocket. You can use this cash to take a vacation or invest in a new business opportunity.

Disadvantages of Remortgaging

Higher Interest Rate – The biggest disadvantage of a remortgage is the interest you’ll be paying on the new loan. The higher the rate, the higher your monthly payment will be. This means you’ll have to make even more monthly payments and pay off your loan sooner.

Higher Down Payment – Another possible disadvantage of a remortgage is that you’ll have to pay a higher down payment. This is because you now have a higher interest rate loan, which means you have to pay the loan off a little bit sooner.

Higher Insurance Bill – Another disadvantage of a remortgage is that your insurance will most likely go up. Your lender will most likely require higher insurance premiums in order to cover the risk of loaning you a much higher amount of money.

Final Words: Should You Do a Remortgage?

Weigh the pros and cons of remortgaging carefully. It’s important to remember that a remortgage isn’t for everyone. If you can’t improve your credit score, don’t have enough cash flow to save for retirement, or need to free up some cash for a major purchase, don’t do a remortgage. You should also consider the tax consequences of a remortgage.

Depending on your tax bracket, doing a remortgage could trigger a tax penalty. If you decide to do a remortgage, make sure to keep track of your finances so that you don’t end up in financial trouble down the road. If you decide to do a remortgage, remember:

• Know your loan amount and rate. If you don’t, you could be making an expensive mistake.
• Keep track of your monthly payments and interest rate so that you know exactly where you stand.
• Make sure you have a plan in place for paying off your loan as soon as you can.

Should You Do a Remortgage?

There are many reasons and situations why remortgaging is a good idea. It could be a way to solve a home equity crisis, improve your credit score or simply improve your cash flow. You may be considering a remortgage if:

You want to refinance your mortgage – Even though it is a positive credit move, it isn’t for everybody. A loan refinance is only beneficial if you have a low FICO score and no cash flow.

You want to improve your credit score – If you can’t pay off your current loan and have a low credit score, a loan refinance could help.

You want to save money – If you have a low cash flow and don’t have enough money saved up to buy a new car or house, a loan refinance could help you get back on track.

You want to sell your home sooner – If you want to sell your home sooner and your current mortgage is costly, a loan refinance could help you get out of debt more quickly.

Conclusion

Remortgaging is a great way to grow your equity and save some money on interest. It’s best to do thorough research on the different rates, rates, and terms before making the decision to remortgage.