The Pros & Cons Of Remortgaging Your Home

Whether you want to drastically decrease or extend your mortgage term or you need to raise some capital, property owners could consider remortgaging. Whilst this is often a simple enough process, changing your mortgage is always going to carry a combination of both risks and benefits and requires careful thought.

We don’t offer financial advice, so we’re not here to tell you whether you should or shouldn’t remortgage your home, instead, this article is designed to provide you with a balanced view of what the pros and cons of remortgaging could be.

Let’s get stuck in with the basics first and cover what remortgaging is. The process of remortgaging involves changing your mortgage, either by way of borrowing a greater amount to pay off your existing mortgage or by switching to a different mortgage provider.

People will consider remortgaging for a variety of reasons. They may need to reduce their monthly outgoings and simply switching to a lower interest rate mortgage deal may not be an option. People may wish to borrow more from their existing lender, typically when major home improvements are desired or to pay off a Help To Buy loan.

Cons of remortgaging your home

• A negative change to your credit rating could limit your choice of remortgage deal, potentially excluding you from the lowest interest rates.
• If your remortgage is being done to raise capital, for example, to fund an extension to your property, to keep your repayments affordable, you may need to extend the term of the new mortgage, which could have implications further down the line regarding things like your retirement age. This means that it’s crucial for individuals to consider the long-term implications on their financial plans.
• Increasing the length of your mortgage term means you’ll end up having to pay back more interest costs in the long run.
• There could be a cost to leave your current mortgage provider or end your current deal early, so you’ll need to factor this into your decision-making process. Early repayment charges or exit fees can vary among lenders, so make sure you find out exactly how much any early repayment charges or exit fees will be first.

Pros of remortgaging your home

• Depending on your LTV (loan-to-value ratio), remortgaging could mean that you benefit from a lower interest rate which could save you thousands of pounds in interest over the remaining term of your mortgage.
• Depending on your existing mortgage deal, fixing at a more favourable interest rate could mean more affordable repayments.
• You could be given an incentive to remortgage with some providers offering things like a lump cashback sum, though this alone should never be a reason to make such a serious financial decision.
• You might want to remortgage to reduce the remaining term of your mortgage, for example, to bring the remaining term down from 15 to 10 years. Not only can this save you thousands of pounds in interest but it means your repayments will end sooner.
• Remortgaging can allow you to release capital for things like home improvements or other large financial outlays.

Things to do ahead of remortgaging

If you’re considering remortgaging, these are some of the things you may want to do now.

• Make sure you know key figures, like how much you’ve got left to repay and how long is left on your current mortgage term
• Get a property valuation to find out how much your home is currently worth
• Find out when your current mortgage deal ends and work out any penalties or early redemption charges if applicable
• Consider seeking independent financial advice before you make any big decisions
• Do plenty of research to help determine whether you should choose a fixed, tracker or standard variable mortgage deal
• Find out what current mortgage interest rates are so you’ll know what a competitive rate looks like and what you’re likely to need to repay each month
• Consider the financial implications of extending your mortgage, particularly in terms of additional interest that you’ll be charged and increasing the number of years you’ll need to continue paying for

If you’re considering remortgaging your property, you can start by getting an online property valuation here to help you understand just how much equity you might have accrued in your home or get in touch now for a free consultation.

Although we don’t offer financial advice we have a mortgage broker on hand to assist with offering advice. The Property Portal will provide an instant Agreement in Principle and we can also book your free consultation with a mortgage broker to discuss the best remortgage product for your individual needs – start the remortgaging process here.