How to Decide Whether to Remortgage

If you have a mortgage then you may wonder whether you should be considering remortgaging. There are two main reasons why people might remortgage and these tend to be either to borrow more money or to switch to a cheaper lender. As these are very different then you will need to go through different reasonings with each.

Remortgaging for More Money

If you are considering borrowing more money it is a good idea to make sure that this is wise. Often, if our property increases in value, it means that we have the opportunity to increase our mortgage so that we can buy more things. Many lenders are happy to extend the amount that we are borrowing so that we can perhaps pay for work on the house, for example. As long as they are satisfied that we will be able to repay what is borrowed or that they will be able to get their money back by repossessing if payments are not met, they will lend more. But the borrower needs to be careful. They need to think about the fact that they might have higher monthly repayments or that their mortgage might last for longer. Either of these could be a problem and it is really important to find out whether you will be paying more so that you can decide whether this is something that you will be able to afford. You should also consider whether you really do want to be repaying for longer, if this is something that will happen, especially if you are getting older and it might prevent you from retiring early. Also, although mortgage rates are low, you do repay over a long time period, so the cost of borrowing in monetary terms could be high, so you need to make sure you calculate this and compare with other means of borrowing.

Remortgaging to Save Money

Changing your mortgage provider so that you can pay less, can be a great idea. You will need to be careful though to make sure that your current provider will not charge you a lot of money if you switch. Some lenders have an early redemption charge and if you try to repay what you owe early, they will charge you a significant sum of money to cover the loss in interest that they will see as a result of you either paying off the mortgage or switching to a different provider. So, you need to contact your lender to find out whether there will be any consequences if you move to a different provider. You may find the new lender may have a fee as well, perhaps an admin fee when you first take on the mortgage so that is worth checking out. You will need to calculate whether it will be worth moving. It can be a risk as well as if you are moving to a mortgage with a variable rate, that could go up at any time. Although lenders tend to remain competitive, they can change the rates to whatever they like so they may go up but it can be a risk worth taking as otherwise you could be stuck with a high rate for a long time. However, do check if there is a charge for leaving your current lender as it could be really expensive and not worthwhile.

So, there are different reasons for remortgaging and yours may not fit into one the above categories even. Whatever the reason, think about whether it is a sensible idea and whether it will work for you. Consider the costs and savings and look carefully at what you can afford to make sure that you are making the right decision for you and your budget. It is sensible to try to spend less, but if you need to borrow then make sure you choose the cheapest option.