Remortgage is exchanging your current mortgage for a new mortgage. The biggest reason to remortgage is to save money with a reduction of interest rates every month.

Remortgages help you to pay mortgages faster by reducing loan term. Remortgages are of fixed type in which there are fixed repayments and variable type includes variable amount repayments. Remortgages include changing your current lender to a new lender because very few lenders will entertain remortgages for their current borrowers. Remortgages are available for both homeowners and tenants, good and bad credit holders.

Remortgaging is the process by which a person or couple either:

• Switch their mortgage lender to capitalize on cheaper interest rates

• Re work their current mortgage with their same lender to receive the benefits of cheaper interest rates.

Remortgaging could provide the means by which the payment equals what a person’s new finances can manage, and the term of mortgage changes in the homeowner’s favor by decreasing in its length of time. People also choose to remortgage their homes to gain money. Debt consolidation can be achieved by gaining enough finance to pay off debt and having only one lump sum to pay. Remortgaging one’s home allows for extra money is some cases as if the home debt is paid down and interest is lowered, money may be made available and debts may be paid off.

A remortgage loan is a type of transaction where the homeowner chooses to switch mortgage lenders, but they will stay in the same property as in the first mortgage.

People choose remortgage when they want to save on repayments or if they want an injection of extra funds.

Remortgages generally fall into three categories: fixed rate, discounted rate, and variable rate. With a fixed rate, your payments will be set for a certain length of time. During this period, your payment rate will not fluctuate up or down, but it will stay at the same level. Once the predetermined fixed-rate period is over, the loan will then adopt a variable rate. A discounted rate remortgage is like a variable rate mortgage, but it differs in that the lender offers you a discount on your interest rate. Thus, your payments will be reduced for a certain length of time, but your payments are still influenced by the fluctuations in interest rates. A discounted rate remortgage becomes a variable rate remortgage once the discounted period is over.

A variable rate remortgage makes it fairly difficult to predict what your monthly payments will be since the interest rate fluctuations will determine the amount you have to pay each month.

Cash Back Mortgages offer an opportunity to take a cash lump sum, usually at the start of your mortgage. It can be a fixed amount or a pre agreed percentage of the amount of the loan.

Percentages range between 1% and 5% - but can be as high as 10% - of the mortgage amount.

Cash back mortgages are often not stand alone mortgage types, and can be added onto the other different mortgage types, such as trackers and fixed rate deals. In fact, pure cash back mortgages are quite uncommon.

The obvious advantage of a cash back mortgage is that it gives you some money at a vital time to enable you to buy items such as those mentioned above, or home furnishings, or you might choose to pay off your credit card debts, or use the cash to help pay off those fees that go with buying a house as discussed above.

Cash-back mortgages are often useful for first time buyers with the mortgage lender offering a lump sum of cash at the start of a mortgage, giving them a good start to their home owning life.

Of all the decisions you’ll have to make on your mortgage, the most confusing part is understanding interest rates.

Understanding what each type of interest means can help you make the right decision when it comes to choosing the mortgage you want to go with.

Variable Rate

This is one of the most common mortgages and probably the one that people relate to the most. It simply means that your monthly payments will be dictated by whatever the current interest rates are – so, if the housing market is good, you’ll probably see your monthly payments rise, whereas if the market’s in a slump, your interest rates and payments will be lower.

Tracker Rate

Similar to a variable mortgage but with one big difference – the interest rate is tied directly to the Bank of England, so whatever decisions are made there, you’ll find your interest rate is slightly above or slightly below, dependent on current rates.

Fixed Rate

The other most popular type of mortgage, since this keeps your interest rate fixed for a set period of time (usually between 2-5 years). This ensures that you know exactly what you’re paying month in and month out. Of course, the downside to this type of mortgage is that if bank rates fall, you won’t benefit from the lower mortgage payments that people on variable rates will enjoy. You’re also usually penalised if you decide to switch lenders throughout your mortgage term, often as much as 3-4 months worth of interest.

Capped Mortgage

Often seen as a mix of variable and fixed rate, a capped mortgage means that your interest rate will only go so high for a set amount of time. So, if your cap is 10% and the housing market crashes through to 10½% or more, you won’t pay the extra rates. However, there’s the added bonus that if the interest rates fall, you’ll make the savings that a variable rate mortgage would give you.

Discount Mortgage

Just as it suggests, this will offer you a discount on your variable interest rate for the first couple of years on your mortgage. However, although it helps reduce your early monthly payments, you still pay the same overall amount that you would if you take out a standard mortgage.

Cashback Mortgage

Excellent for the first time buyer especially, this offers you a cash rebate at the start of the mortgage, calculated as a percentage of your overall mortgage. You receive this cash instantly, and simply pay it back at the end of the mortgage. This is an ideal solution for anyone just starting out on the property ladder, or for anyone on a limited budget.

There are other types of mortgage as well as these ones, including current account mortgages and offset mortgages, which a specialist advisor would be able to discuss with you. Just knowing what’s available and whether it’s suitable for you or not can make a big difference in the long run.