Eli5 Remortgaging with a new lender

Question

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?

In: 13

Answer 1

The payoff to the old lender usually comes from the new lender, and becomes part of the money you owe them. Say you wanted to get $50,000 from your mortgage, and owed $150,000 on the property. You would need to take a $200,000 loan, then use $150,000 to pay off the old loan and keep $50,000, and owe the new lender $200,000.