Eli5 Remortgaging with a new lender

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I can’t quite wrap my head around this so anything will be appreciated.

So if a company ‘buys’ a property for me with the expectation of me paying it back, when I switch mortgage companies, does the new company pay off the debt to the old company? How does it transfer over?

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7 Answers

Anonymous 0 Comments

The company does not “Buy” the property for you, they grant you a loan which you use to buy the property. However you are using the value of the property as collateral against the loan if you were to stop paying.

When you get to the end of the fixed rate you can repay the loan in full with no penalties. If you get a new fixed rate mortgage this is what is done, whether with a new company or not. lets say you have a mortgage with company A for $500K and after the fixed rate you have paid it down to $480K. You get Company B to give you a mortgage for $480K and they will pay off your first mortgage, and take the place of Company A.

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