Remortgaging is usually the process of switching from one mortgage provider to another however it is also possible to remortgage with the same lender. A remortgage involves the raising of funds from the equity held in your property, similar to that of a secured loan. Remortgaging often occurs when house prices increase quickly of a relatively short period of time, leaving the borrower with a low LTV and lots of equity that can be used for many reasons. It is also a very popular financing method because it is often the cheapest way of raising funds.
Reasons to remortgage:
Current property value – GBP 100,000
Current mortgage amount – GBP 30,000
Remortgage amount – GBP 70,000
In the above example the borrower raises GBP 70,000 (subject to criteria), GBP 30,000 of which will repay the current mortgage and GBP 40,000 can be used as a deposit to purchase another property, probably for investment or BTL. Lenders generally have differing reasons for why they will allow a remortgage, for instance some lenders will allow borrowing for debt consolidation whilst others don’t. Others will allow say a maximum remortgage of up to 75% LTV whereas others will go to a maximum of 60%.
Remortgaging and mortgaging basically uses the same products and has the same criteria. The length of the mortgage or the term is determined in the same way whether it is a mortgage or remortgage. The maximum LTV however is normally lower with a remortgage and the maximum loan size currently available is 85% of the value of the property albeit the majority of choice is available at 70/75%.
Compare remortgage rates to the high street banks with UK Property Finance