Remortgaging is changing your already existing mortgage plan to another because they offer you a better interest rate on your payments. For an example, if you are paying 7.5% on a $100,000 mortgage, and another provider offers you 7% on the same amount, you are likely to save around $9,300 over a 25 year period. This all sounds very attractive. Unfortunately mortgage lenders include a clause in their agreements imposing a penalty, should you wish to change your mortgage plan.
Therefore before you give up your old mortgage, you should always call your mortgage broker and find out what sort of penalties your mortgage plan will incur should you choose to remortgage. They will be more than happy to refer your contract and hand you the information. Once you have this information, do a quick calculation and find out if you will still save money by switching your mortgage plan. You should also call your personal finance advisor and ask him/her to go through your old and new plans and calculate whether the new plan will save you money. This is simply because there are many variables to consider and since you may not be in the real estate business, you may make a mistake that may cause you to pay more than your current plan.
If your new plan will save you more money after all the calculations, you may want to come up with a plan to reinvest your savings in stocks or a savings account. This way you will be acquiring more money from the savings made by remortgaging.