What happens to my mortgage when I remortgage?

Considering a remortgage? It can be a powerful tool to save money, access extra funds, or simply switch to a more suitable mortgage deal. But with all the excitement, a crucial question often arises: “What exactly happens to my existing mortgage when I remortgage?” Let’s break it down with clear examples to shed light on this process.

Imagine Your Mortgage as a Blanket (But Not the Cozy Kind)

Think of your current mortgage as a warm (but potentially expensive) blanket. It’s been providing you with financial comfort, but maybe since the time you bought that blanket, a new blanket has been put on the market – one with a lower price tag or features that better suit your needs. Your old one is getting raggedy and isn’t keeping you as warm as before. This new blanket represents the remortgage.

The Remortgage Rescue: Replacing the Old Blanket

Here’s what happens to your existing mortgage when you remortgage:

The Application Spree: You apply for a new remortgage deal with a different lender (or potentially your current one). This new deal will have its own interest rate, term length, and features.
Approval and Offer: If your application is successful, the new lender will provide you with a formal remortgage offer outlining the terms and conditions.
The Big Switch (Behind the Scenes): Once you accept the offer, the real work happens behind the scenes. The new lender will contact your existing mortgage lender to sort out the formalities.
Payoff Power: Here’s where the new blanket truly comes into play. The new lender will use the funds from your remortgage to pay off your existing mortgage in full. This essentially extinguishes your old mortgage debt.
New Beginnings: Once the old mortgage is paid off, you’ll start making repayments on your new remortgage deal, hopefully with an interest rate or features that better suit your financial goals.

Example: Swapping Blankets for Savings (Literally!)

Let’s say your current mortgage balance is £200,000, and you’re paying a 5% interest rate. This translates to a monthly repayment of approximately £1,046 (capital and interest).

You find a remortgage deal with a new lender offering a lower interest rate of 3%. With the remortgage, your new monthly repayment could drop to around £898, saving you a significant £148 per month!

Important Note: There might be some fees associated with remortgaging, such as valuation fees, legal fees, and potentially an Early Repayment Charge (ERC) if you’re breaking out of a fixed-term period on your existing mortgage. Always factor in these costs when calculating the overall benefit of remortgaging.

Ready to Explore Remortgaging with Confidence?

If you’re considering remortgaging or want to know your options, we can help! We can:

Explain the impact of remortgaging on your existing mortgage
Review your circumstances to give you real results on your current options, how much they will cost and how they compare to your existing mortgage
Manage the complete remortgage process helping you go from your existing mortgage deal to a more appropriate mortgage deal that better suits your needs and goals.

Contact us today for a no-obligation consultation and discover the possibilities that remortgaging holds!

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