Remortgaging allows homeowners more flexibility in their mortgage terms. Whether you’re experiencing a change in life circumstances or your situation has changed since first taking out your mortgage, you may have the option to extend or reduce your mortgage term.
Both extending and reducing your mortgage agreement come with their advantages and disadvantages, and will depend on your financial situation and lifestyle.
Can I extend my mortgage term when remortgaging?
Homeowners may wish to reduce their repayment amount due to an inability to afford the monthly costs, or to free up some equity for home improvements or debt consolidation. By remortgaging with a lender that offers a longer term, money can be freed up or monthly costs reduced. However, stretching the term will mean paying more interest over time, so it’s important to consider whether the savings you will make are worth the eventual higher cost. If you are considering extending the term of your mortgage to ease your monthly outgoings, you may be able to reduce the term again in the following years once your finances have improved. Alternatively, you could consider making overpayments – either of these options could help to offset the additional interest paid whilst on a longer-term strategy.Â
Various factors may stop you from being able to extend your mortgage term when remortgaging. Things like age, the type of mortgage you have and whether you’ve had repayment issues in the past can work against you. Each lender has different criteria, terms and charges, so it’s important to shop around to find the best deal. Make sure you consider the added fees that come with remortgaging, such as arrangement costs and Early Repayment Charges (ERCs).
Can I reduce my mortgage term when remortgaging?
Shortening your mortgage term allows homeowners to save on interest, pay off their mortgage debt sooner, and build home equity faster. Remortgaging provides the perfect opportunity to reduce your term, either with your current lender or a different one.
As a consequence, your monthly repayments will increase (the amount you pay back each month will be higher); however, your long-term financial situation will improve, so this cost may be worth it. You should consider this carefully to make sure that you can afford the higher monthly payments without placing the household budget under strain. As with most remortgage options, you may be subject to an Early Repayment Charge if leaving before your term ends, as well as owing various fees to cover the cost of switching lenders. All costs should be considered before making a final decision.
An alternative to reducing the term is making overpayments. These can be used to reduce the term of your mortgage but they are voluntary – meaning that you can choose to overpay when your budget permits and stop again when the time isn’t right.
How Key Solutions can help you with your remortgaging decisions
If you’re unsure whether extending or reducing your mortgage term is right for you, get in touch with one of our friendly team. We pride ourselves on our quality service, offering you transparent, honest advice that serves to give you the best guidance possible.
Whether you’re looking to extend your term due to a change in finances or hoping to reduce your term to pay your debt off quicker, we can help you navigate the remortgaging process and get the best deal for your situation.