Remortgaging (known as refinancing in the United States) is the process of paying off one mortgage with the proceeds from a new mortgage using the same property as security. The term is mainly used in the United Kingdom, though what it describes is not unique to any one country.
Often the purpose of switching is simply to secure a more favorable interest rate from a different lender.
The process of remortgaging does not usually involve moving home or taking out a second mortgage on the property; it is in effect the transfer of a mortgage from one lender to another.
Homeowners may choose to remortgage for various reasons, usually to reduce the overall monthly mortgage payment amounts. However, other reasons may include to reduce the size of repayments, to pay off a mortgage earlier, to raise capital, or to consolidate other more expensive short term debts.
Homeowners often misuse the expression remortgage when they are simply switching from one product to another with the same lender; this is not a remortgage which involves the removal of one legal charge over a property and its substitution with another in favour of a new lender.
The ability to remortgage is very much based on an individual’s circumstances and as the costs involved can be very large it is always best to take advice from a suitably qualified individual.
In Canada the majority of remortgage rates track the Bank of Canada base rate. The base rate has been at an historical low since March 2009, but have started to rise again in recent years, to it’s current level of 1.5% at the time of writing this.
Due to these record low rates many people with an existing mortgage may be able to remortgage their home from a higher rate onto a lower rate which can result in a saving on their monthly mortgage repayments.
As with any large financial investment remortgaging should always be undertaken with appropriate advice from a suitably qualified professional.
The timing of remortgaging your property is important particularly at a time of an imminent increase in base rates in Canada which will undoubtedly have the knock-on effect of increasing monthly repayments on homeowner mortgages.