As a homeowner, you might be thinking about remortgaging to take advantage of lower interest rates, lower your monthly payments, or get cash out of your home’s equity.When you remortgage, you switch your current mortgage to a new one, either with the same lender or a different one.
While this can be a beneficial financial move, it’s important to weigh the pros and cons before making a decision. In this article, we’ll talk about the pros and cons of remortgaging in 2023 to help you figure out if it’s the right choice for you.
Pros of Remortgaging
Lower Interest Rates: One of the primary reasons for remortgaging is to secure a lower interest rate, which can save you money over the long term. Rates could change in 2023, so locking in a lower rate can help you stay financially stable and lower the total cost of your mortgage.
Reduced Monthly Payments: You can lower your monthly payments by refinancing to a deal with a lower interest rate or by extending the length of your mortgage.This can free up cash for other expenses or help you manage your budget more effectively.
Access to Equity: When you remortgage, you can use the equity you’ve built up in your home for things like home improvements, paying off debt, or investing in other opportunities.
Flexibility: When you remortgage, you can switch to a more flexible mortgage product, such as one that lets you overpay, underpay, or take a break from payments. This can be helpful if your financial situation changes or if you expect your income to go up and down.
Cons of Remortgaging
Fees and Charges: There are usually a number of fees and charges that come with remortgaging, like arrangement fees, valuation fees, and legal costs. These costs can add up, so you need to think about them when making a decision to make sure the potential savings are worth it.
Early Repayment Charges (ERCs): If you remortgage before the end of your current mortgage term, you may be subject to ERCs. These charges can be significant and may negate any potential savings from a new mortgage deal.
Longer Mortgage Term: Extending your mortgage term to reduce monthly payments may result in a lower overall interest rate, but it also means you’ll be paying off your mortgage for a longer period of time. This could increase the total amount of interest paid over the life of the loan.
Effect on Credit Score: When you apply for a remortgage, a hard credit check is done. This can have a short-term effect on your credit score. Additionally, if you’re unable to secure a new mortgage deal, you may face financial difficulties that could further damage your credit rating.
Whether or not you should remortgage in 2023 depends on your personal situation, your financial goals, and the mortgage market at the time. It’s essential to evaluate the pros and cons carefully, considering factors such as fees, interest rates, and potential savings. Consulting with a financial advisor or mortgage broker can help you make an informed decision that aligns with your unique needs and circumstances.