To remortgage means to pay off an existing mortgage with a new mortgage from a different lender. A remortgage is different than a refinance, which replaces an existing mortgage with a new mortgage from the same lender. However, these terms are often used interchangeably.
Change the mortgage terms
A common reason to remortgage is to change the terms of the loan. A lower interest rate will reduce monthly mortgage payments, which will also reduce the borrower's monthly expenses. A remortgage with a shorter loan period, such as 15 years instead of 30 years, will allow the mortgage to be paid off more quickly and save thousands of pounds over the life of the loan.
Use the home equity
If a home has increased in value, a remortgage can allow the equity to be used to consolidate other debt that carries a higher interest rate, such as car loans or credit card debt. Equity can also be used to pay for university expenses, weddings, home improvements or other large expenditures.
The remortgage process
The process for remortgaging is similar to the process for obtaining the original mortgage on a home purchase. The lender will require that the borrower have a good credit rating, proof of steady income and a low debt-to-income ratio. A property appraisal is usually required.