The Perils of Mortgage Refinancing

What is Mortgage Refinancing?

Mortgage refinancing refers to the act of applying for a second mortgage to replace the current mortgage.

It is particularly useful in times of falling interest rates, as a newly refinanced mortage can lock in a lower interest rate, when old lenders do now lower rates in line with the base rate.

Alternatively, these financial products can be used as a way to take out cheaper loans, as securing a loan against a dependable asset (i.e. your house) is seen as a low risk transaction by the lender.

What makes them popular?

Mortgage refinancing is popular because it can either

save money
be a cheap loan.

Know the risks

Get sound financial advice

Sound financial advice should be taken before a mortgage is refinanced. It is not prudent to take financial advice from a financial advisor who works for a mortgage refinancing firm as they will probably be on commision and just try to sell you the deal that earns them the most money.

Do not be victimised by predatory lenders

Many television adverts for home refinancing firms target vulnerable elderly people. This is sickenning as they are trying to profit from a vulnerable section of society in a harmful way. There are also stories of predatory telesales practices, where salespeople would cold call vulnerable elderly home owners, and pressure them into accepting unnecessary and uncompetitive loans.

Read the small print

You should also make sure you read the small print. There were many financial scandals last year regarding people who did not read the small print. Some experienced their debts soar and lost their homes.

Be aware of fees as well as repayments

Even if people use mortgage refinancing sensibly with the aim of lowering their mortgage rate, care should be taken that there are excessive up-front fees or costs, and that there aren’t any hidden penalty charges in the small print.

You can lose your home

Be aware that if something goes wrong you could lose your home. Do not take out large loans for trivial purposes.


Before refinancing your mortgage make sure you understand all the terms and conditions. If someone cold calls you and tries to sell you a mortgage refinancing deal the safest option is to put the phone down. Such cold callers will be working on commission and will not have your interests in mind. So always use a reputable broker or lender.

Also, be aware that you home may be at risk if you do not keep up with payments. It is therefore unadvisable to take out large loans with which to spend on trivial pursuits.

This article is based on the author’s opinion and does not constitute financial advice. The author is not liable for the results of any decisions made as a result of reading this page.

Jon C is a proud home owner based in London, UK.

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