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How You Can Remortgage Today And Lower Your Payments Tomorrow

Aug 17, 2007
Remortgage can happen in two different ways depending upon the ultimate goal of the home owner. The first type of remortgage is when a homeowner takes out a loan, using their property or the equity in their property as collateral, when they already have a loan on the property. The second type of remortgage is when a homeowner changes their current loan to a new lender.

The type of remortgage where the home owner takes a loan out on existing property is usually referred to as a home equity loan. The homeowner really does not own their home, the bank they have their mortgage with owns the home, and therefore the home owner can not actually use their home as collateral.

In this case though it is based on something else. Homes and property go up in value over time, so the home has equity that is building all the time. Equity is when the home and property is worth more than the amount of the original loan. For example, a person buys a home for 300,000 but it appraises at 450,000.

This person would then have 150,000 in home equity or money that belongs to them and that they do not owe the bank. They can then remortgage by using that equity amount and get a loan for the amount of their equity.

The type of remortgage that involves changing lenders is actually quite common and beneficial. It may seem useless but it really has a major payoff. Some home owners get their first loan that may have high interest or fees because they could not get a better loan due to their credit or even the current interest rates.

After a couple of years their credit is better or the interest rates have gone down and they want to lower their fees and interest. This is when a home owner would remortgage.

Usually a remortgage can not be done until the home owner has carried a mortgage two years with the current lender. This is because most mortgage agreements include early pay off penalties which allow the lender to guarantee a certain amount of income they earn off the loan.

The lender is in the business of making money and they do not make as much as they would like when a person ends their loan early. Usually, though, after two years the penalties are no longer valid and the homeowner can find a different lender with which to remortgage.

Remortgaging to get better rates can save a homeowner a lot of money. Especially if the original loan carried high interest due to bad credit.

By remortgaging a person can find a loan with lower interest which translates into not only, lower monthly payments now but less money paid in the long run. It is a great option for the homeowner who is trying to save a little on their home purchase.

Many home owners take advantage of remortgaging options. It is not hard to remortgage, which makes it an even better opportunity.
About the Author
James Copper is a Financial Advisor. He helps people remortgage and he also offers a adverse remortgage service.
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