Published in Debt Solutions Guide on Friday, November 19 2004

A remortgage involves taking out a new mortgage and repaying your existing one in order to realise equity and sometimes to reduce monthly debt repayments.

Why choose a remortgage as a solution to your debt problems?

Usually, a remortgage is recommended where debt is relatively small and you have equity in your home.

A Remortgage advisor will not only advise on whether a remortgage is the best option for you, but a Remortgage advisor will also recommend the best remortgage for you, taking into account all the available offers in the mortgage market.

What is a remortgage?

A remortgage is the process of taking out a new mortgage and repaying your existing one in order to realise equity and sometimes to reduce monthly payments.

This equity can then be used to pay off all or part of your debt. If your remortgage leads to a lower monthly payment it may also mean that the remaining debt is easier to budget for.

What factors need to be considered when planning to remortgage?

The remortgage market, just like the new mortgage market, is filled with complexities if you don’t have a thorough understanding of how a remortgage is ‘sold’. Specialist remortgage experts have this thorough understanding, and can talk you through the remortgage selection process and advise on the most suitable deal considering your circumstances.

When selecting a remortgage, these factors must be taken into account:

• Possible charges for leaving your current mortgage provider. You may need to pay a ‘Redemption Charge’ to leave your current lender if you have agreed to stay with your current mortgage for an agreed number of years.
• Charges incurred in moving to the new mortgage provider. Your new mortgage provider will need a surveyor’s valuation on the property. Quite often your remortgage provider will pay for the surveyor’s valuation and sometimes will cover all your remortgage costs.
• Variable, Fixed and Introductory Rates. Each remortgage offer will differ in the Interest Rates on offer and the way in which the Interest Rate is calculated. A Variable Rate remortgage tends to be the most common, with this type of remortgage the rate will vary from time to time. Fixed Rate remortgages offer a fixed rate, but you will normally be tied into the deal for a number of years or need to pay a Redemption Penalty if you wish to switch lenders. Introductory Rates must also be taken into consideration, these are reduced rates for an introductory period.
• Adverse credit status. It is possible that your current debt problem may have impaired your credit rating, therefore certain remortgage deals may not be available. However, in almost all cases a Remortgage advisor can advise on remortgage options tailored to those with a less than perfect credit rating.

How long will it take to remortgage?

The remortgage process is relatively simple, and the process from start to finish normally lasts between 4-6 weeks. If the matter is particularly urgent then it is possible that the lender can speed up the process.