A remortgage, also known as a second mortgage, lets you move your mortgage to another lender or negotiate a new deal with your own in order to reduce your monthly repayments, while you remain living in the property.
The reason most people choose to remortgage is that it can save you quite a lot of money, especially when interest rates are low. To explain this more clearly, consider the situation of a person with a £100,000 mortgage paying their lender's Standard Variable Rate of 7.5%. Their monthly repayment (on a 25 year mortgage) will be around £735. If they were to remortgage with another lender, they might benefit from an introductory offer (perhaps at a capped rate) of 5%. This means that their monthly repayment would drop to £580. Over the course of a year, this would save around £1,860. Multiply that over the entire length of the loan and you can see why remortgaging might be worthwhile.
The processes involved in remortgaging are essentially the same as what you may have experienced organising your original mortgage, with the exceptions that you aren't moving house and so you won't need to organise a survey. Your new lender will, however, perform a valuation of your home in order to assess your remortgage application. As with any mortgage, you will have many options open to you. You can choose between fixed, capped or discounted rates of interest and also whether you want an interest only mortgage or a repayment mortgage.
Finally, before you take the plunge, work out whether remortgaging is financially viable in your current situation. Lenders charge redemption penalties on early repayment of home loans. If you are considering switching while you're still in an introductory period, you may find that you will be out of pocket by hundreds of pounds. Make sure that any potential savings you may make by switching aren't cancelled out by the fees you may be liable for.
For more information about Remortgaging, please see our Remortgages Guide.
