What Is A Remortgage?Remortgage GuideQ:What is a remortgage? A: A remortgage is a change of terms of the original mortgage. This is usually for two reason. 1. To extend the period of the mortgage thus lowering the monthly payment. 2. To release equity built up in the property without the need of actually selling said property. Example of a remortgage. You purchased a property 5 years ago for $100,000.You have paid $20,000 off of the original loan.The property has increased in value 20% to $120,000 Value of property $120,000 - money owed $80,000 = $40,000 equity. If you wish to access that $40,000 without selling the property you could remortgage for the additional $40,000, with which you are free to spend as you wish. I personally remortgaged once to raise funds to purchase a business. With the original mortgage the loan must be spent on the property, a remortgage, the loan can be spent on anything. The disadvantage to this is that property value can decrease and if you increase the size of the mortgage and this happens, you may not be able to sell your property. Example 2 You buy the same property for $100,000 on a 30 year mortgage and pay for 5 years again left owing $80,000 with a monthly payment of say $1000. You then have to change jobs unexpectedly and can no longer pay $1000 a month. You can now remortgage $80,000 over 30 years again and have a $750 a month payment and keep your property.
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