Although there are often a number of benefits to remortgaging, there are also some drawbacks to remortgaging too and these should be considered if you are thinking about remortgaging your home.
Remortgaging may not be the best thing for you to do though if:
- You have a very small mortgage and may be less likely to make a saving if the fees are high; in this case it may be better to stick with your existing mortgage. Some lenders will not lend on borrowing of less than £25000.
- Your early repayment charge is very large and so it may be too expensive to change your mortgage product until your early repayment charge reduces. When you benefit from a fixed rate of interest for a certain period, your lender will apply an early repayment charge to the loan if you want to repay it within this period. Depending on how far into the fixed rate period you are, early repayment charges can be very expensive. The closer to the end of your fixed rate deal that you are, the cheaper the early repayment charge will be.
- The value of your home has dropped, meaning that you may not be able to borrow as much if you remortgage or the rates available to you may not be as competitive.
- You’ve had credit problems since taking out your last mortgage – lenders can be selective about who they lend to and the Financial Conduct Authority requires them to carefully check mortgage affordability to ensure you could afford to pay. When you apply for a new mortgage, the lender will require you to provide a lot of information to them, such as pay slips, detail of other outgoings, credit commitments etc
- You’re already on a very good rate, which may mean that it would be better for you to stay with your current mortgage deal, at least for the time being.
- Stretching your borrowing over a longer period of time increases the overall cost of your debt and so although it may reduce your monthly payments if you switch to a mortgage for a longer term, it may cost you more in the long run.
You should always weigh up the pros and cons or remortgaging and speak to a mortgage broker for advice on what the best deals are for you and your situation.
