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What are the costs of remortgaging?

Typically people remortgage to save money, however, there are fees associated with most remortgage deals, so it’s important to weigh these up against any savings that you would make with a new lender.
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What type of remortgage fees will I pay?

Fees associated with remortgaging fall into two main categories, those that you may need to pay in order to leave your existing mortgage deal, and those you need to pay to arrange your new one. Not all lenders will charge every type of fee, and it can be possible to remortgage with no fees at all, however, this won’t necessarily offer you the best long-term benefits. 

As the fee structure of each lender is different, it’s impossible to predict exactly what your remortgage costs will be without knowing which fees your current lender may charge you and which deal you opt to switch to. A good starting point is to look at your existing mortgage terms or contact your lender to find out which fees, if any, will apply if you decide to leave your current deal.

Compare Mortgages

The next step is to compare the mortgage deals available to you, and weigh up the costs of arranging them against how much you will save on your mortgage repayments once it is in place. A mortgage broker will be able to help you with the calculations, which can be fairly complex. 

Below we’ll take a closer look at the different types of remortgage fees that you may have to pay, and how much these will cost you, on average. Of course, not all of these fees will apply in every set of circumstances.

Costs associated with leaving your current mortgage:

Early repayment charges (ERCs)

Unless you’re already on your lender's SVR (standard variable rate) it’s highly likely that you will have to pay ERCs if you leave your deal before it ends. 

Fixed-rate deals usually last between two and ten years, and you’ll typically have to wait until that period ends if you want to switch mortgages without paying early repayment charges. 

If you’re on discount or tracker rate mortgage deals, there will typically be an introductory period attached. You will usually also need to pay ERCs to leave this type of deal before the introductory period is over. 

Early repayment charges are often the most costly element of remortgage fees, with most lenders charging between 1% and 5% of your outstanding mortgage balance. It’s therefore important to weigh up the costs of remortgaging before your deal has ended, vs. waiting until it has. 

You’re often able to secure a new remortgage deal three to six months before your deal comes to an end, which will automatically come into effect when it does. This can be a great way to lock in an interest rate that may not be around when your deal ends. 

Is it possible to Remortgage without paying ERCs?

Waiting for your current deal to end will allow you to remortgage without having to pay any ERCs at all, however, of course, personal circumstances may not always allow for this. 

If you’re desperate to leave your existing deal, you may be able to avoid paying ERCs immediately, however, you won’t be able to avoid them completely.

Some lenders will allow you to increase your mortgage borrowing to cover the ERCs, however, do be aware that this will raise the LTV (loan-to-value) ratio of your loan, which may mean that you can no longer access the most competitive interest rates. 

You will also end up paying interest on early repayment charges that are added to your mortgage, so bear in mind that this is not always the most cost-effective option in the long term. 

Deeds release/Admin fees

Also known as admin fees, deeds release fees are sometimes charged by your existing lender to have your property ownership deeds transferred to your solicitor.

Not all lenders impose this fee, but those that do will usually charge between £50 and £300 for this service.   

Exit fees

Not all lenders charge an exit fee, but those that do tend to do so whether or not you are leaving your deal early. This means that you could end up paying both ERCs and an exit fee to leave some deals. 

This is not typically a high cost, and is usually somewhere in the region of £50-£65, but it’s worth considering as part of your calculations if your lender does plan to charge you this type of fee. 

Costs associated with taking out a new mortgage:

Broker Fees

You don’t have to use a mortgage broker when you’re looking to remortgage, however, they can often be very beneficial, as they will be able to scan the entire market very quickly to find the best deal for your circumstances. They will also be able to provide advice on remortgage costs and help you calculate your best course of action based on your specific needs. 

Many brokers charge a fee for their services, and this can be fairly expensive. Some charge a flat rate of between £300-£600 and others charge the fees as a percentage of your new mortgage deal, often up to 2% of the total mortgage value. 

It’s a good idea to be cautious of those brokers demanding up-front fees, as it’s possible that you could lose this type of payment, if they are unable to find you a suitable deal!

The good news is that there are some totally fee-free mortgage brokers available, such as our partners at Mojo mortgages. 

Arrangement fees/Product fees

This charge applies to most remortgages, and can be known as an arrangement fee, product fee or application fee. It’s basically the cost lenders charge in order to set up your new mortgage with them.

This is one of the higher fees that come along with remortgaging, and usually costs around £1,000-£2,000, although it can be higher. It’s worth noting that many lenders will allow you to add this cost onto the loan, however, this is only possible if you meet the affordability criteria of the larger loan. 

You should also bear in mind that you will pay interest on any fees added to the loan, whereas you won’t incur any interest charges on them if you pay upfront. 

Do all lenders charge arrangement fees? 

No they don’t, but there is generally a tie in with mortgage interest rates, meaning that a no fee remortgage won’t always be the cheapest option in the long-term. 

To put this in a little more context, those mortgages with free-free or low arrangement fee options often have higher interest rates, whereas those mortgage products with the highest arrangement fees generally offer the lowest interest rates available. 

Can I add the arrangement fees onto the loan?

Whether or not it’s worth paying out a fee to get a better rate of interest will depend on your circumstances, and how much you’re borrowing. If you do decide to go ahead with a higher fee product, however, it’s usually possible to add this to the loan, rather than having to pay upfront. 

As well as making deals with higher arrangement fees more accessible to you, adding the arrangement fees to your loan will prevent you from losing them, as you would if you had paid upfront and the mortgage did not complete. 

Just like when you took out your original mortgage, a solicitor will need to be appointed to deal with the legal aspects of your remortgage application. This includes their charge for conveyancing, which is transferring the property deeds from one mortgage to another. 

If you have to pay for this service, it’s typically around £300, however, many lenders will offer free legal services as an incentive to remortgage with them. Bear in mind, however, that you won’t have a choice of solicitors in this case, and will have to use lender selected legal services. 

It’s also worth noting that free legal fee offers don’t typically apply if you’re adding or removing someone from the title deeds during the remortgage process. 

Valuation fee

Your new lender will need to carry out a valuation of your home before they are able to offer you a mortgage with them, as it will help them determine the level of equity you hold in your property, and therefore the interest rates that you will qualify for. 

Costs vary depending on the surveyor firm used and the size of your home, but are usually in the region of £300-£500. For larger or more unusual properties this could be as high as £1500, however. 

Again, this type of fee is something that you will often see offered for free when you remortgage, as an incentive to choose that particular lender. 

Booking fees

Booking fees are slightly confusing, as they often refer to different aspects of the mortgage application process, and come under many different names, although they are not often charged in the current market. 

Some lenders, however, will charge this fee to book (rather than carry out) a new mortgage valuation. Some will label it as a reservation fee, and it’s used to secure a particular rate before you go through the full application process.  

Although not often payable on modern mortgage products, it’s important to note that this type of fee is usually non-refundable where it is charged, and is typically in the region of £100 - £300.

Why remortgage?

There are a number of reasons that you may choose to remortgage, however, the most common ones are to save money by locking in a more competitive interest rate, or to borrow more money against your home.

In this article you can look at the various reasons why you might choose to switch mortgage lenders, as well as when it might be best to stay put, in far more detail.

When is the best time to remortgage?

The best time to remortgage is usually when your current deal comes to an end. If you choose not to remortgage at this time, you will be automatically transferred onto your lenders’ SVR (standard variable rate) of interest, which is often higher than other interest rates. 

Unlike fixed-rate deals, if you’re on a tracker or discount rate, it will be possible for your repayments to fluctuate, whether or not you’re locked into the deal, as they are both variable rates. If your variable rate mortgage rate suddenly becomes much more expensive, it may well be worth considering paying an ERC to secure a lower fixed-rate deal. 

Of course, in turbulent times, like 2022, where the Bank of England base rate rose multiple times, every type of mortgage interest rate is typically affected, so there won’t necessarily be a cheaper fixed-rate option available. 

Whilst those already in a fixed-rate deal won’t have to worry until their fixed-rate period comes to an end, there is no guarantee that new fixed-rate products will be any cheaper than your current variable rate. 

This makes this type of decision very much a judgement call, which can involve a fair bit of guesswork, and is absolutely best supported with some robust advice from a qualified broker. 

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