Correct at 30/06/2023
Remortgaging can help reduce your monthly mortgage payments, but when choosing a deal, always look at the overall cost rather than just the headline rate.
It’s vital to take both the rate and any fees into account to work out the exact cost to remortgage and how much money you could save by moving to a new deal. You’ll also need to factor in any Early Repayment Charges (ERC) on your current mortgage deal if you’re looking to remortgage before it finishes.
So, how much does remortgaging cost? Here, we explain some of the charges you might encounter so you can really understand the answer to that question.
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Certain fees can be added to your mortgage balance, but remember that you'll be paying interest on them for the remaining term of your mortgage if you do. The good news is that you won't pay a fee for our advice.
Many remortgage deals will have low or sometimes even no set up costs – as part of our advice service we always check that any new deal is worthwhile for you to switch to based on both the interest rate and any fees involved.
Whether it’s best to take a deal with set up fees or opt for a fee free remortgage will depend on several factors including how much you owe on your mortgage and how long you have to pay it off.
You can find out more information on the process with our guide to remortgage charges.
Lenders often charge an arrangement fee to set up your new mortgage.
The amount varies between different lenders and some deals don’t have an arrangement fee at all. The arrangement fee can either be a fixed amount, which tends to range from around £500 to around £1,500, or a percentage of the amount you’re borrowing. Usually the lower the mortgage rate, the higher the arrangement fee will be, and vice versa. Our advisers can work out if it's worth paying a higher fee to get a lower interest rate.
You can usually pay the arrangement fee in one of two ways:
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. It’s good to know that the arrangement fee is usually non-refundable if you don't go through with the remortgage.
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.
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 the outstanding debt to your current lender to be repaid and will register your new lender’s mortgage against your property.
You'll have paid legal fees with your original mortgage, but there's typically less work involved in a remortgage so remortgage legal costs won't be as high. 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 and you won’t have to pay any remortgage solicitor fees. It’s always good to ask your adviser in case this is true of your new lender.
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.
Early Repayment Charges (ERCs) 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 ERC if you’re currently on your lender’s standard variable rate.
The cost of an ERC 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 mortgage deal, the ERC 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%.
Exit fees, sometimes known as mortgage release or discharge fees - are administration charges charged 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. Some lenders don’t charge these at all although others can be as much as £300, the exact amount will be set out in your mortgage offer.
One additional cost you don’t need to bear in mind when it comes to remortgaging is Capital Gains Tax (CGT). That’s because CGT is only due when the property is sold or transferred.
One cost you can’t afford to overlook is the actual cost of your new mortgage, so how much your monthly repayments will be.
This is a good time to consider whether your situation has changed since you took your last mortgage out and if so, could you reduce the term of your mortgage and try and pay it off sooner? This will save you interest payments in the long run as you’ll be clearing the debt more quickly.
Although many people change lenders to reduce their monthly repayments, others want to make their mortgage more suitable to them – perhaps switching from a variable rate to a fixed rate. In some cases, your monthly outgoings could increase when you choose a new lender so it's important to know what you could afford.
You can use our mortgage calculators to find out how much your repayments are likely to cost you.
You should also factor in how much you can afford to spend on all of the additional fees outlined above.
The short answer is; yes. There are usually fees involved in switching to a new deal but switching now could help you save money in the longer term. For example, if your current deal is coming to an end, the cost of doing nothing and falling on to your lender’s SVR would likely be far higher over time than remortgaging now. You can use our remortgage calculator to see just how much it could cost you.
When looking for the best mortgage deal to suit you, you're likely to find a lot to choose from and selecting the right one may seem daunting. It’s also easy to be taken in by low rates or lack of fees on particular deals, but that doesn’t mean you should go for them. As a mortgage broker we'll do all the remortgage research for you and tell you what your best option is based on your circumstances. And, best of all, we’re fee free – so you won’t pay a penny for our service.
If you approach your current bank or mortgage lender for advice on remortgage deals, they're likely to only suggest their own rates. At L&C we’ll compare deals from across the market – helping you find the best possible deal for you. Get in touch with us to find out more about how we can help you remortgage your home.
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