Mortgages are one of the biggest commitments you can make, and, most likely, you won’t ever face a larger debt in your lifetime. Just like almost every product or service that’s offered today, mortgage rates can rise and fall, and new lenders can enter the market offering much better deals than you might have agreed to when you first mortgaged your property.
There’s no reason to stick with the initial mortgage you agreed to, which is where remortgaging comes into play. Remortgaging can help you save money in the long run – but it needs some consideration. Here are some of the top pros and cons to consider if you’re thinking about remortgaging your property:
Pros
1. Your fixed-rate deal is about to end
Most mortgage lenders will offer a fixed-rate mortgage for around five years, after which you’ll be able to switch to another lender if you find someone who’s offering a better deal. The mortgage market changes so frequently that you’re more than likely to find something with better interest rates if you know where to look.
2. You’re looking for a better rate
If you choose to stick with the same lender after your five-year fixed-rate period, you’ll usually be able to remortgage at any chosen point into the future if you want to. Even if you have to pay a small exit fee to move away from your current lender, it can be worth it in the long run if you switch to a deal with better interest rates.
3. The value of your property has risen
Property value can increase for a number of reasons – whether by something you did, like redecorate your kitchen or install smart security features, or whether by a factor out of your control, like the construction of a new attraction near to your home’s location. Your property value can directly affect your mortgage payments, so get calculating if necessary.
Cons
1. Your debt is insignificant
Once your mortgage debt falls below a certain amount, you’ll struggle to find lenders who are interested in offering you a deal. Not only that, but it might simply not be worth switching from one lender to the other – and paying the potential fees to do so – because you probably won’t make much of a saving from doing so.
2. Your working situation has changed
If you took out your mortgage initially when you were in a different working situation, you need to be aware that lenders now insist on seeing evidence of your income when considering whether to offer you a deal. This may mean that if you’re now earning an unstable income, or you’re self-employed, you might find it more difficult to get accepted by a lender. Learn more about the factors that affect being offered a mortgage on LetMeBank.
3. Your home’s value has decreased
Just like the value of your home can rise, it can just as easily fall. In this case, you’re best avoiding remortgaging your home because your rates are only going to be negatively affected by a change in lenders. All you can do is continue with your current mortgage, making overpayments if possible, and ride the storm out.