Why Should I Remortgage?
The pros and cons of getting a remortgage
Things to Bear in Mind
So, those are the reasons you might consider remortgaging. But as with most things financial, its not a cut and dried decision, as there are drawbacks to remortgages too.
Redemption Charges
Most mortgages, especially those which had some sort of introductory offer, will charge a fee called a redemption charge if you pay off your mortgage early. This fee can be considerable, as it is often calculated as a percentage of your outstanding mortgage.
Most mortgages only have redemption charges or early settlement fees in the years immediately after an introductory deal has ended, for example in the first 3 years, but you should make sure you know whether you'll be charged, and if you are, whether the charge is large enough to cancel out any benefits of remortgaging.
Arrangement Fees
There are costs involved in getting a new mortgage too. Mortgage advisors will usually charge an arrangement fee of several hundred pounds, although some lenders will pay part or all of these fees to help tempt you into becoming a customer.
Survey Costs
Before lending you money secured on your home - that is, before accepting your mortgage application - every lender will want to make sure your home is worth what you say it is, and that there are no structural problems which could threaten your home and its value.
To do this, mortgage lenders will insist that you have a survey done on your home, which will also cost several hundred pounds. Again, sometimes a lender will pay for this as part of the deal, but only if your application is accepted. If you're declined, you'll have to pay the survey fees.
In any case, you'll likely have to pay these fees up-front before your remortgage application can proceed.
Mortgage Term
Although interest rates for mortgages are usually lower than for other forms of credit, the loan is generally paid off over a much longer term, meaning that more interest is paid in total, despite the prospect of lower monthly payments.
Conclusion
A remortgage is worth considering if your current deal isn't very good value and you could benefit from lower repayments, or if you need to release some of the equity in your home for whatever reason. But, like most other financial transactions, there are drawbacks too, and we recommend that you take the time to decide whether a remortgage is right for you, and if you have any doubt then consult a financial adviser.
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