One home loan term that most people know but are not sure as to what it does or what it can do it can do is a remortgage.
The starting point before moving on to remortgages should be to consider firstly what a mortgage is. A mortgage is the form of loan that almost 100% of those wanting to buy a property needs and these can be people moving from one property to another or to those buying their first home.
The only alternative to taking out a mortgage is when buying a property is to pay cash but it is only a small number of people who have that amount of money readily available.
Mortgages are set at their original rate for a certain period which can be from one year to on average five years although longer tie in periods are also available.
During the tie in period a homeowner would incur a hefty early repayment penalty if the mortgage is settled sooner.
The early settlement charge varies between one mortgage lender and another but is rarely less that 2% of the mortgage balance remaining and can even be up to 5% meaning that to settle early would be silly and costly.
At the end of the tie in period there is no penalty to be paid and it is then that a prudent homeowner would be wise to obtain quotations for mortgages from other providers to compare these figures with what he has been offered by his current lender.
This is when the term remortgage comes in as a remortgage is when a homeowner changes his mortgage provider.
Changing mortgage from one mortgage provider to another is what is called a remortgage.
A great deal of money can be saved by taking out a remortgage as interest rates vary enormously from one mortgage lender to another and a remortgage arranged with a different bank or building society can have a much lower rate of interest than the Standard Variable Rate offered by the current lender.