So you are thinking about remortgaging?
Remortgaging can help you reduce the cost of your monthly mortgage payments, but when choosing a deal, always look at the overall cost rather than the headline rate alone. It’s vital to take both the rate and any fees into account so that you can work out exactly how much you will save by moving to a new deal. You’ll also need to factor in any early repayment charges on your current mortgage deal if you’re looking to remortgage before it finishes.
Here, we explain some of the costs and charges you might come up against when remortgaging.
Remortgage arrangement fees
Lenders often charge an arrangement fee to set up your new mortgage. The amount varies widely between different lenders, and some deals don’t have an arrangement fee at all. The arrangement fee can either be a fixed amount, or it can be a percentage of the amount you are borrowing. Often the lower the mortgage rate offered, the higher the arrangement fee will be, and vice versa. Our advisers can work out if it’s worth you paying a higher fee to get a lower interest rate.
You can usually pay the arrangement fee in one of two ways:
• by adding it to your mortgage.
Although adding the fee onto your mortgage might save you money in the short-term, remember that you’ll pay interest on the fee over your whole mortgage term. Paying upfront means you won’t pay any interest on the fee. The arrangement fee is usually non-refundable if, for any reason, you don’t go through with the remortgage.
Mortgage booking fees
As well as arrangement fees, some lenders will also charge a booking fee which you must pay to secure the remortgage deal you want.
You’ll pay this upfront when you submit your mortgage application, and it cannot be added to your mortgage. Booking fees typically range from £100 to £200 and are non-refundable.
Remortgage legal fees
Legal fees are the costs you must pay a solicitor or conveyancer to carry out the legal work involved in transferring your mortgage from one lender to another. They’ll also arrange for you to pay the outstanding debt to your current lender.
You’ll have paid legal fees with your original mortgage, but there’s typically less work involved in a remortgage so it usually won’t cost as much. Our advisers can help you find a solicitor if you don’t already have one. Sometimes lenders offer free legal work as part of the remortgage deal, in which case they’ll appoint a solicitor themselves.
Remortgage valuation fees
Your new lender will need a valuation of your property before they will allow you to remortgage, so that they can be certain how much the property is worth.
They’ll usually appoint their own valuer or surveyor, but you will be expected to pay the cost of the valuation unless it is offered for free as part of your remortgage deal. Valuation fees vary depending on the size and value of the property but will typically cost from around £250 up to £1,500.
Mortgage early repayment charges (ERCs)
Early repayment charges are fees that you must pay if you want to leave your current mortgage deal before it finishes. You should always check whether you’ll have to pay any before you remortgage, as they could wipe out any potential savings you might make from remortgaging. You don’t usually have to pay any early repayment charges if you’re currently on your lender’s standard variable rate.
The cost of early repayment charges can vary widely. Sometimes they can be a flat percentage of your loan, or they may reduce over time. So, for example, if you’ve signed up for a five-year fixed rate deal, the early repayment charge if you switch away from this deal in year one might be 5%, but this could reduce by one percentage point each year, so in year five, the charge might be 1%.
Mortgage exit fees
Exit fees, otherwise known as mortgage completion fees – are administration charges sometimes imposed by lenders when you pay off your mortgage in full, either to remortgage elsewhere, or because you’ve reached the end of your mortgage term.
Remortgage deals with no fees
Not all lenders will charge remortgage fees. Some might offer a free valuation or free legal fees (or both) when you remortgage. Occasionally there may be no charges at all. Our mortgage advisers will know which lenders have the best deals to suit your needs