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What Is a Remortgage?

A remortgage replaces your existing loan with a new one -- ideally with better terms.


[Updated: May 19, 2021 ] Apr 22, 2021 by Aly J. Yale

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REASON FOR REFINANCING HOW IT WORKS
Take advantage of lower interest rates If market rates drop below the rate on your current mortgage deal, remortgaging can help you take advantage of them. Keep in mind that your ability to get a better interest rate depends on your credit score, too.
Get a lower monthly payment Remortgaging into a loan with a lower rate can give you a smaller monthly payment, too. You can also reduce your monthly payment by getting a remortgage with a longer loan term. (For example, choosing a 30-year remortgage loan would allow you to spread your remaining mortgage balance over 30 years, thus lowering your payments considerably.)
Pay off your loan faster You can also remortgage to change your mortgage repayment schedule. If you remortgage and choose a shorter mortgage term (a 10-year loan, for example), this would allow you to pay off your balance faster and get out of debt sooner. Remember that loans with shorter terms have higher payments.
Access extra cash You can also choose to remortgage into a higher-balance loan. You then get the difference between your new balance and the old one in cash. This is called a cash-out remortgage or a cash-out refinance. Learn more about this strategy below.
Debt consolidation Since mortgages tend to have lower interest rates than other types of debt, you might want to use a cash-out remortgage to pay those higher-interest debts off. This basically rolls those balances into your mortgage loan and helps you pay them off more affordably.

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