What are the Pros and Cons of Remortgaging?

If you’re considering changing your mortgage deal, understanding the pros and cons of remortgaging is essential before you make any moves. There are plenty of reasons to remortgage your house, but there can be downsides too. Here, we’ll explore all the pros and cons of remortgaging along with explaining where you can find the best deals.

Pros of remortgaging

Remortgaging can offer plenty of diverse advantages depending on your financial goals and circumstances. Below are some of the most common reasons to remortgage and how you might benefit.

Lower your monthly repayments

One of the most popular reasons to remortgage is to secure the best interest rate. If your current mortgage deal has ended and you’ve moved onto your lender’s Standard Variable Rate (SVR), switching to a new fixed or tracker rate elsewhere can often save you money each month.

Also, if you own a higher level of equity, you may be able to access more competitive rates with lenders due to a lower loan-to-value (LTV) ratio than when you took out your current mortgage.

Release equity from your home

If you’ve built up equity in your property, remortgaging allows you to potentially access some of that money.

Popular reasons for remortgaging to release equity from your home include funding renovations or repairs, building an extension, consolidating debts, helping family members onto the property ladder, or even buying another property.

Switch to a more flexible mortgage

Another reason to remortgage your house is to gain access to benefits and features your current mortgage doesn’t offer.

This can include the ability to make overpayments with minimal penalties, take payment holidays, access to exclusive products like savings accounts, or benefit from a shorter fixed-term deal.

Debt consolidation

Some homeowners remortgage to consolidate unsecured debts like credit cards or personal loans into their mortgage.

Consolidating debts can simplify your debt repayments and reduce your overall monthly costs, but it extends the repayment over a longer term.

Shorten your mortgage term

Remortgaging doesn’t always mean reducing your payments. If you’re in a stronger financial position, you may want to consider a deal with higher repayments but a shorter overall term, which can help you on your way to becoming mortgage-free sooner.

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Cons of remortgaging

While there can be clear reasons to remortgage in certain situations, it’s not always the right choice for everyone. There are also several potential downsides to consider.

Early repayment charges (ERCs)

You could end up paying expensive early repayment charges (ERCs) if you want to switch to a new mortgage deal or new lender. These charges are especially common with fixed-rate mortgages.

However, it could still end up working out cheaper for you overall, so it’s often worth running the numbers to find out what’s the overall cheapest option, even if it means cutting your losses and paying any ERCs.

Negative equity

This will only impact certain homeowners, but if your property has fallen in value since you bought it (or you took out a high LTV mortgage), you could be in negative equity (where you owe more than the property is worth).

If this happens, remortgaging is usually challenging, as most lenders require at least 5% equity to approve a new deal. You may need to wait until your property value increases or you’ve repaid more of your mortgage.

Extra costs

Remortgaging typically comes with fees such as solicitor’s costs, valuation fees, and sometimes product fees. If you’re planning to move in the near future, the savings from a new mortgage deal may not outweigh these costs.

Eligibility for deals

Even if remortgaging looks appealing, you might not meet the eligibility criteria for a new deal. Lenders will assess your circumstances based on your current income, property type, employment status, and credit history.

For example, if your income has reduced, you’ve recently been made redundant, or you’ve missed mortgage payments, your chances of being approved for a competitive remortgage will reduce.

Mortgage balance is too small

If your outstanding mortgage is relatively low, remortgaging may not make financial sense. Along with the potential costs involved with switching, some lenders set minimum loan amounts, meaning you may not qualify for the best remortgage deals.

You’re happy with your current deal

If you’re already on a competitive rate and your mortgage lender offers the flexibility you need, remortgaging may not provide significant benefits. In fact, you could end up worse off if you pay unnecessary fees to switch.

Of course, if you’re currently on your lender’s standard variable rate (SVR), it’s usually worth looking at remortgaging, as SVRs are almost always more expensive. But if you’re locked into a low fixed rate, staying put could be the smarter choice.

Interest rates have increased

Sometimes, remortgaging simply isn’t cost-effective. If interest rates have risen due to market conditions or base rate increases since you secured your current deal, any new mortgage you’re offered could come with a higher rate.

In this scenario, remortgaging may actually increase your monthly payments rather than reduce them.

How Money Helpdesk can help you find the right remortgage solution

We specialise in helping homeowners make the right decision when it comes to remortgaging. Whatever your reasons for remortgaging, we can help you compare rates or explore alternative options.

Whether you’re looking to save money, release equity, or restructure your finances, our expert advisers can guide you through the options and compare the best remortgage deals from across the market.

Here’s why people across the UK choose us for their remortgaging needs:

• Compare the latest remortgage rates with our free comparison tool

• Our advisers are 5-star rated on leading review platforms

• Your first chat is completely free, with no obligation to proceed

• Access to exclusive remortgage deals and specialist lenders

If you’d like to explore the reasons to remortgage your house and find out whether it’s the right choice for you, you can speak to one of our experienced advisors here.