How much does it cost to remortgage?
Remortgaging can save you money in the short term and in the long term but there are costs involved which you need to know about.
When you are working out whether it's worth your while switching from your current lender to a new one, and which remortgage deal is best for you, you must take into account the charges involved.
How much it'll cost you depends on the size of your current mortgage compared to the value of your home, and the terms and conditions of your existing mortgage.
The total figure is going to depend on your circumstances as a borrower and the size of your current mortgage compared to the value of your home, as well as the terms and conditions of your existing mortgage.
The charges for remortgaging are similar to those you paid to mortgage in the first place and may include:
- arrangement fee
- legal fees
- valuation fee
- exit fee
- early repayment charge
Not all lenders charge all these fees. Some might offer a free valuation or free legal fees or both. Occasionally there may be no charges at all. Our mortgage advisers will know which lenders have the best deals to suit your needs at any one time.
Arrangement feeWhen this applies, you pay an arrangement fee to your new lender to set up your new mortgage. The amount varies hugely between different lenders but broadly you can assume that the lower the mortgage rate, the higher the fee. And vice versa.
The fee is a fixed amount so it's more cost effective for larger remortgages. Our advisers can work out for you if it's worth paying a higher fee to get a lower interest rate.
You can pay the fee in one of two ways:
- you can pay outright if you have enough money to spare and some lender insist that you do
- or you can add it to the remortgage and pay it off with your mortgage over the years - though this does mean you'll be paying interest on the amount of the fee and this adds up over time.
Be aware that the fee is probably non-refundable if, for any reason, you don't go through with the remortgage.
To remortgage you'll need a solicitor or conveyancer for 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 less work involved in a remortgage so it won't cost as much.
Our advisers can help you find a solicitor if necessary.
Sometimes lenders offer free legal work as part of the remortgage package, in which case they'll appoint a solicitor themselves.
Your new lender will want a valuation of your property and it's probably changed since you last took out a mortgage.
Typically they'll appoint their own valuer or surveyor. They want this information for their own purposes but you pay the cost of it. How much depends on the value of your property but often lenders include the valuation for free as part of the remortgage deal.
Early repayment charge (ERC)
When you remortgage for a fixed rate, you get a remortgage package. This says you'll keep the remortgage for a set number of years - typically 2, 3 or 5 years.
It's possible to get out of the deal within that timeframe - perhaps you find a much better deal or your circumstances change. But, if you do, you'll have to pay a penalty charge - the ERC.
The amount of the ERC depends on the size of your mortgage. Usually it's calculated as a percentage of the loan, between 1% and 5%. That works out to a large lump sum of money and it's usually better to wait until the end of the mortgage period before remortgaging.
An exit fee - or mortgage completion fee - is an administration charge often imposed when you pay off your mortgage in full - whether that's to remortgage with a different lender or because you can afford to pay off the mortgage.
Is there such a thing as a fee free remortgage?
You won't find a remortgage with no fees attached at all. But there are remortgage deals that include some or all of these fees: free legal work, free valuation and no arrangement fee.
As a trade off, you'll find that the interest rate charged is higher than the packages where you pay all the fees. It's up to you to decide which deal to go for.
There are hundreds of remortgaging deals around and our advisers can search for the ones that suit you best. There is no commitment and no charge for our service. It is fee free.