- Project plans
- Project activities
- Legislation and standards
- Industry context
- Specialist wikis
Last edited 31 Jan 2021
A mortgage is a loan taken out to buy property or land. Typically, mortgages are taken out for the purchase of homes and run for 25 years but mortgages are also available for commercial properties, and the term can be shorter or longer. The loan is ‘secured’ against the value of the property or land until it is paid off.
Remortgaging (or ‘refinancing’ in the United States) is the process of taking out a new mortgage on the property or land. This may be done when the terms of the mortgage change, or to take advantage of a better deal offered by a different mortgage product, or to borrow additional money.
For example, fixed mortgages rates, particularly ones that offer low interest rates, may only last for a limited time – around 2 to 5 years. When this period ends, the lender will generally move the mortgage onto a standard variable rate (SVR) which is often higher than the previous interest rate. In this situation, there may be cheaper interest rates available on the market which could save the borrower substantial sums of money. As a result, they may remortgage the property.
Some other reasons why property owners may choose to remortgage include:
- The property value has increased since the first mortgage was taken out, making the it eligible for lower rates.
- There is a concern that interest rates may go up.
- In order to pay off the mortgage earlier.
- To raise capital for home improvements, to pay off other debts, etc.
- For a more flexible mortgage that will allow some payments to be missed (‘payment holidays’).
Before remortgaging, it is important that the property owner carefully assesses all the cost implications. For example, they may be required to pay an early repayment charge to the existing mortgage lender which can be high, as well as an exit fee. These should be compared with the savings that can be made by switching to a different mortgage product.
 Find out more
 Related articles on Designing Buildings Wiki
- Buy-to-let mortgage.
- Construction loan.
- Council of Mortgage Lenders.
- Equity and loan capital.
- Equity in property.
- Funding options.
- Green mortgage.
- Ground rent.
- Land value.
- Mezzanine finance.
- Property chain.
- Property ownership.
- Shared equity / Partnership mortgage.
- What is a mortgage?
Featured articles and news
Take just two minutes to provide your feedback.
An update of standards and regulations are under consideration.
Exploring the key to the adoption of this abundant energy source.
His clients have ranged from Liberace to St Nick to world-class athletes.
These tactical structures can be permanent or temporary.
Organisation recognises milestones of the project's next phase.
Welding and metalworking businesses must manage respiratory risks.
New report explores how regulations are being put into action.
The golden thread and BS 8644-1.
Bitumen binder may delay road surface deterioration.
A varied portfolio of internationally recognised buildings.
Threatened by housing and expanding universities.
Getting "boots on the ground" to make things happen.
Building systems may begin to learn.