Mortgage redemption query

Moglet

When you remortgage, is the mortgage redeemed?

Is it for any remortgage or is it only when you change lender?

Thanks

kingstreet

Changing products with the same lender is best called a product transfer. The discharge or deeds release fee would not be charged.

A remortgage involves redeeming the mortgage with the current lender by replacing it with a new one from a different lender. The discharge fee would be charged.

HTH

Moglet

Thanks Kingstreet.

So just to make sure I'm understanding correctly....changing product with an existing lender would not trigger a redemption of their charge but changing to a new lender would?

Is changing product ever complicated by changing product along with further borrowing?

Perhaps it might help if I explain the reason for my query - my OH is buying a house on a shared equity scheme. The contracts say the loan is repaid under the following circumstances;

1) sale of property or transfer of equity.
2) anniversary of 10 years
3) redemption of the 1st charge

I asked the question of the broker (who you must use as they understand the whole new build and shared equity process), would remortgaging (for a better deal) trigger repayment of the loan and I was told that as long as it didn't involve further borrowing that it didn't. It wasn't made clear that you couldn't change lender.

The contract would seem to say that you can't change lender but my main concern is would he be stuck on their SVR or can he opt for a new product with them after the initial product expires.

He will be asking the solicitor but thought I'd ask you knowledgable people too.

kingstreet

Transferring products while staying with the same lender would have no implications and the charge would remain the same. There would be no change to the charges register at the Land Registry.

When remortgaging a shared equity property, this effectively works in a similar way to the pre-emption clause when you use the right to buy.

The shared equity is in fact a second charge over the property and this confers certain rights to the charge holder.

If you wish to remortgage and no change of mortgage amount is involved, the second charge holder can agree formally to the transaction by giving a deed of postponement. The second charge remains a second charge and the new mortgage lender gets a first charge.

If extra money was being borrowed during remortgaging, this could affect the amount of equity the owner has in the property, reducing the security of the second charge. Charge holders are reluctant to permit a deed of postponement in these circumstances as it could affect them directly, particularly in an uncertain property market.

Ultimately, the charge holder has the right to agree to, or reject, an alteration which as you say, involves the redemption of the first charge. Whether they choose to do so is entirely at their discretion.