Remortgage Risks: What You Need To Know Before You Switch

Thinking about remortgaging? You’re definitely not alone—it’s become a huge trend, especially with all the talk about saving money on monthly payments or cashing out some home equity. But while it sounds pretty tempting, there are a few risks you really need to know about before you sign anything.

One big thing people miss is that remortgaging isn’t free. Lenders love to advertise low rates, but they tend to hide the sneaky fees and conditions in tiny print. You might end up paying for an early repayment charge on your old mortgage, legal costs, valuation fees, or even a broker’s commission. These can add up to thousands and eat into any savings you thought you’d get.

And here’s a tip: always check how swapping loans could mess with your credit score. Every new application leaves a mark. Apply for a bunch of remortgage deals at once, and you can actually hurt your chances of getting the best rates. It’s not just about the numbers—the timing and your overall financial picture matter too.

• Why People Remortgage (And When It Makes Sense)
• Hidden Costs and Fees No One Talks About
• Risks With Changing Interest Rates
• How Remortgaging Can Affect Your Credit and Plans
• Tips to Dodge Regrets and Bad Deals

Why People Remortgage (And When It Makes Sense)

Remortgaging isn’t just about chasing a better interest rate, though that’s usually what gets people talking. Lots of folks switch their mortgage to a new deal when their current fixed or tracker rate ends, especially if they want to dodge their bank’s expensive standard variable rate (SVR). Sometimes, banks’ SVRs can be 2% or more above the best deals on the market—which could bump your payments by hundreds every month.

Here are the big reasons people remortgage:

• To grab a lower interest rate and shrink their monthly payments
• To lock in a fixed rate if they’re worried about rates going up
• To raise extra cash—usually for home improvements, kids’ education, or to pay down more expensive debt
• Because their current mortgage deal is about to end, and they’d rather not pay the SVR

Sometimes people use remortgaging as a quick fix for short-term money problems. But that can be risky, especially if you’re just rolling credit card debts into your mortgage. Sure, the payments get spread out, but you end up paying way more in interest over time.

So when does remortgage actually make sense? It’s usually worth it if:

• You can swap to a much better rate—even after you count all the costs and fees
• Your home value has gone up, so you qualify for a lower loan-to-value (LTV) deal
• You need to free up cash for smart investments, like boosting your home’s value
• Your credit score is strong, so you’ll actually get the deals advertised

Let’s check out a table with some real differences in rates and payments:

If you’re thinking about switching, double check if you’re still tied in with early repayment penalties. Some lenders want as much as 5% of your balance as a fee if you leave the deal early, especially in the first few years. Always do the maths—remortgaging should add up in your favor, not just look good on paper.

Hidden Costs and Fees No One Talks About

This is where people get hit the hardest. When you remortgage, it’s not just about moving from one deal to another. There are more fees in the mix than you think, and if you’re not watching, they stack up fast.

Early repayment charges bite a lot of homeowners. If you’re still in a fixed or discount period with your lender, you can get charged a chunk of your balance—sometimes as much as 1% to 5%. For a £200,000 loan, that could mean £2,000 to £10,000 just to leave. It almost wipes out the savings a lower rate could bring.

Then there are exit fees, often called “deeds release” or “admin fees.” They sound small but usually run from £50 to £300. Doesn’t sound awful until you add it to other fees—like legal costs. You usually need a solicitor to switch mortgages, and most charge £300 to £800 for the paperwork. Even if your new lender throws in “free legals,” check what’s really covered—extras pop up all the time.

Don’t forget about valuation fees. Your new lender wants to know your home’s up-to-date value, and if they don’t offer a free valuation, you’ll pay £150 to £1,500, depending on your place. Some brokers also tack on their fee—figures of £0 to £500 aren’t rare. Plus, you might get stuck with a new product or arrangement fee from the new lender. These are usually £999 to £2,000, and sometimes they ask you to pay this up front instead of adding to your loan.

Check out what these can look like in real numbers:

Look, every remortgage deal has its own combo of hidden costs. Always add everything up and don’t be fooled by fancy adverts only showing the headline rate. Sometimes it’s smarter to stay where you are than to switch and get buried under fees. Ask for a full breakdown from your broker or lender before you even fill out an application. Trust me, you don’t want any nasty surprises at the last second.

Risks With Changing Interest Rates

Interest rates are like the weather—always changing and totally out of your control. If you’re thinking about a remortgage, you need to pay close attention to what’s happening with rates, because even a small jump can hit your wallet hard.

Let’s get real: That super-low fixed rate you see today might be gone tomorrow. Since early 2022, rates have been all over the place. For example, the Bank of England base rate jumped from 0.1% in December 2021 to 5.25% in August 2024. That’s a massive leap in a short time, and it changed everything for people coming off old deals.

If you remortgage right now and lock in a deal, you could dodge another rate hike—but if rates drop in a year or two, you’ll be stuck paying more than you need to. On the flip side, if you pick a variable or tracker rate, your payments could go up fast when the market climbs. It’s really about balancing risk and what you can afford if things go south.

Here’s what a difference recent rate hikes made for a typical £200,000 mortgage with 20 years left:

That’s more than a £400 jump a month in three years! If you can’t handle big swings like that, you might want to stick to a fixed rate, even if it’s not the lowest on offer right now.

• Watch out for super-short fixed-rate offers—they might look cheap, but you could get hit with a higher rate much sooner than you expect.
• Ask your lender what happens if rates fall soon after you switch. Some mortgages have huge exit fees if you want to jump ship early.
• Always check the small print on variable and tracker mortgages. Most aren’t truly “capped”—there’s usually no limit to how much your payment might shoot up.

Rates can feel unpredictable, but a bit of homework now saves big headaches later.

How Remortgaging Can Affect Your Credit and Plans

Let’s get real about what happens to your credit score when you remortgage. Every time you apply for a new home loan, the lender does a hard check on your credit report. If you’re just browsing deals and suddenly apply to several banks, each check adds a mark. Too many in a short time? Your score might take a noticeable dip—sometimes by 10 to 15 points per application.

Missing even a single mortgage payment while changing lenders can have an even bigger impact. Payment history makes up about 35% of your credit score, so a missed payment sticks around for years.

Here’s a quick look at how different actions during remortgage affect your credit profile:

Remortgaging can also throw a wrench into your bigger plans. If you’re hoping to get a new car on finance or take out a personal loan soon after, lenders might get spooked by all the recent activity. They could offer you worse terms or just say no.

• Space out your applications. Aim for one, not a shotgun approach.
• Make sure your details (name, address) match between lenders. Typos can delay an offer or cause a rejection.
• Hold off on other big finance moves until your new mortgage is sorted and your credit has recovered.

The bottom line: plan your remortgage steps so you don’t trip up your credit or mess with your other money goals. One misstep here can echo for years.

Tips to Dodge Regrets and Bad Deals

No one likes to feel tricked or short-changed, especially with big decisions like remortgaging. A few smart moves can help you protect your money and avoid costly mistakes down the line. Here’s what really matters if you want to come out ahead.

• Remortgage calculators really come in handy. Plug in all the main costs—including arrangement fees, solicitor charges, and even the lender’s own fees—before you get too excited about offers. Comparing the real cost helps you spot deals that aren’t as good as they look on the surface.
• Always check for early repayment charges on your current deal. Many lenders charge a penalty if you switch before the end date—they can run from 1% to 5% of your loan. Call your current lender and ask about any hidden costs if you’re unsure.
• Don’t just look at the headline rate. Introductory deals often jump up after a year or two, sticking you with monthly payments that are way higher than you expected. Ask specifically what your rate will be once the special deal ends.
• Read all the small print. Terms around overpayments, payment holidays, or penalties for switching schemes can quickly turn the deal sour. Write down any questions and ask your lender or broker to answer them, in plain English, before you commit.
• Shop around, but don’t make too many applications at once. Multiple credit checks can knock down your score by a few points each time, and that might bump you into a higher interest bracket.

If you’re ever feeling stuck or unsure, talk to a fee-free mortgage advisor. They’re not paid by specific lenders and can give you an unbiased view of what works for your situation. A 2023 report from the Financial Conduct Authority found that people who got independent advice were less likely to regret their remortgage choice a year later.

To sum it up: be nosy, double-check everything, and don’t rush. Cutting corners can wipe out the savings you hoped for, so slow down and ask the tough questions before you sign.