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 important 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.
Remortgage costs
Many remortgage deals will have low or sometimes even no set up costs, but that doesn’t always mean you’ll be getting the best deal. Your L&C mortgage adviser will make sure that the deal you get is the best for your circumstances. This sometimes means it won’t have the lowest interest rate, but might have lower costs involved, making it a better fit for you.
Remortgage arrangement fees
Banks and building societies often charge an arrangement fee to set up your new mortgage.
The amount varies between different banks and building societies 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. Your L&C adviser will work with you to decide if it's worth paying a higher fee to get a lower interest rate.
You can normally pay the arrangement fee in one of two ways:
- Upfront
- By adding it to your mortgage
Although adding the fee onto your mortgage might save you money in the short-term, you’ll pay interest on the fee over your whole mortgage term. The arrangement fee is usually non-refundable, so if you don't go through with the remortgage, you’ll lose that cash.
Mortgage booking fees
Some banks or building societies will also charge a booking fee which you must pay to secure the remortgage deal you want.
This can’t be added to the mortgage, so you’ll have to pay for it upfront when you submit your mortgage application. Booking fees typically range from £100 to £200 and are non-refundable.
Remortgage legal fees
Legal fees are what you have to 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.
Because there's typically less work involved in a remortgage, remortgage legal costs won't be as high as the legal fees you paid when you got your original mortgage.
Sometimes lenders offer free legal work as part of the remortgage deal. In this case they’ll appoint a solicitor themselves, and you won’t have to pay any remortgage solicitor fees.
Remortgage valuation fees
Your new lender will need a valuation of your property before you can remortgage. This is so they can be sure that the property is worth what you say it is.
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
Early Repayment Charges (ERCs) are normally charged if you want to leave your current mortgage deal before it ends. 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.
Mortgage exit fees
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.
Do you pay stamp duty on a remortgage?
Stamp Duty, or to give it its official name, Stamp Duty Land Tax (SDLT), is tax that home buyers need to pay when purchasing property or land over a specific value.
Stamp Duty applies in England and Northern Ireland, while homebuyers in Scotland need to pay Land and Buildings Transaction Tax, and buyers in Wales pay Land Transaction Tax.
For information on the latest rates that apply, have a look at our stamp duty calculator.
If you’re just remortgaging to a new deal or raising money for home improvements, then you don’t need to pay any Stamp Duty when remortgaging because the tax is only applicable on purchases of new property or land.
Do you pay stamp duty on transfer of equity and remortgage?
The exception to this is if you’re transferring the legal title of the property when remortgaging. In this case, either you or the person you’re transferring the property to may be liable to pay this, but it varies depending on the circumstances.
What is transfer of equity?
Transfer of equity is when a homeowner adds or removes someone (or multiple people) from the property's title, thus transferring ownership of the property to another person.
There are various reasons for transferring ownership of a property, but they include:
- Selling your share of a property
- Adding a new partner to the property title
- Buying out an ex-partner’s share of a property
- Gifting your property
How is stamp duty calculated when you transfer equity?
Stamp Duty is paid on the 'chargeable consideration' when transferring equity. When you buy a property outright, the chargeable consideration is the property's purchase price. But when transferring equity, it's calculated as the mortgage plus the amount being paid for the equity.
The Stamp Duty rates for the transfer of equity are the same as for purchasing a property, so if you're remortgaging while also transferring equity, you'll be liable to pay this tax at the applicable rates.
Are there any exemptions to Stamp Duty when transferring equity?
There are some instances where you don't need to pay Stamp Duty when transferring ownership of a property to someone else. These are:
- If you gift a property to a child, spouse, civil partner, or another family member and there is no chargeable consideration
- If you’re left a property in a will and no payment is being made for the share
- If you get the property as part of a divorce or separation
