A remortgage might be a good financial move for many homeowners but it isn’t the right move for everyone. Those that are already on good deals with low interest rates or those that have less than 25% equity in the property are probably not going to be best placed for remortgage deals. Those that have bad credit or very small mortgages may also find that it isn’t worth going through the process.
Even those that are not one of the above need to consider the pros and cons of a potential remortgage before proceeding.
Cons:
- You might incur fees such as a high Early Repayment Charge if you remortgage before the end of your current deal
- If you secure more debt against your property and fail to keep up with repayments, you could end up having your property repossessed
- If you consolidate your short-term debts, this is likely to be spread out over a longer period on your mortgage and you may end up paying more interest in the long term
- Your monthly repayments are likely to be higher
- You may end up with a longer mortgage term
- It will be easier to find yourself in negative equity if house prices fall as you will have reduced your level of equity
- The Loan-to-value will raise and if this might mean you can’t access competitive rates as at the lower LTV.
Pros:
- You could switch to a cheaper deal and save money on your monthly payments
- You can use the remortgage to release equity in your property (please note this would increase the size of the loan)
- You can extend or shorten the loan term to suit your financial needs
- You can use the remortgage to consolidate more expensive debts such as credit cards if there is sufficient LTV
- You can usually borrow a larger amount that possible under a personal loan
- You can use the money for almost any legal purpose
Before you commit to a remortgage application, consider whether it will be beneficial to your financial situation not only in the short term but in the long term as well ensuring that the benefits outweigh the drawbacks.
