A remortgage is a process that replaces an existing mortgage loan with a new loan from a different lender. The new lender repays the existing mortgage debt to the original loan provider. The borrower is then left with just one mortgage loan, repayable to the new lender.

The terms remortgage and refinance are often used interchangeably and can be confusing. While the two loan processes are often similar, there is one significant difference. A remortgage involves accepting a loan from a new lender, while a refinance loan can be provided by the existing lender or a new mortgage provider.

Borrowers consider remortgaging for various reasons. However, this is often done to save money. For example, if you had secured a fixed term mortgage for 25 years at 6.25%, and then the mortgage rate suddenly dropped to 4.75%, a remortgage will significantly reduce the borrower’s monthly repayments. It will also reduce the total amount of money that the borrower will pay over the full life of the loan.

Remortgaging can also serve to release equity in the borrower’s home. In simple terms, equity is the difference between the current market value of a home and the amount the borrower still owes on it. For example if a borrower purchased a house for £200,000 and the house is now worth £250,000 with £50,000 repaid on the loan, the borrower has £100,000 in equity. A borrower can obtain this equity money by remortgaging and borrowing an amount that exceeds the current mortgage debt.

Obtaining a remortgage is usually straightforward. The process is similar to any other loan application. The new lender reviews the borrower’s application and asks for certain related paperwork. This will typically include proof of income, debts, and expenditures.

It is common practice for the lender to conduct a home valuation. In most cases, the valuation may be less intensive than the type required for an initial loan and the surveyor may simply view the outside of the borrower’s home and ask a few pertinent questions. In other cases, a full valuation is required.

There are certain fees involved in a remortgage. Often, borrowers are required to pay valuation and legal fees. Many lenders charge loan-processing fees as well. The amounts charged for a remortgage will vary from lender to lender.

In general, a remortgage can be accomplished in four to six weeks or less. The length of this process depends on the lender and the specific circumstances surrounding the property being remortgaged. However, there are some lenders who specialize in rapid remortgages and promise to complete the process in a matter of weeks.