Tim Leonard
Remortgaging to a new deal with a lower rate can reduce your monthly repayments, but it’s important to remember there are various remortgage costs that you may need to pay too. Read on to learn more about the different remortgage fees you could be charged and other potential costs of remortgaging.
How much does it cost to remortgage?
How much it costs to remortgage will depend on any fees you have to pay for leaving your current mortgage and the charges that are payable on your new remortgage deal. Remortgaging can cost a few hundred pounds or several thousand pounds, depending on your situation and the new deal you’re taking out.
You may find it costs less, or perhaps have nothing to pay upfront at all if your new mortgage has no fees. However, the trade off here is that you’re likely to be paying a higher mortgage rate than you could get on a different mortgage where fees are payable. Weighing up the overall cost of remortgaging, taking into account both the mortgage rate and the fees, is crucial when working out if remortgaging is worthwhile and which deal is the best financially overall.
» MORE: See current mortgage rates
Fees for leaving your current mortgage
There are a few charges you may have to pay your current lender if you want to remortgage to a new deal.
Early repayment charge
You may have to pay an early repayment charge (ERC) if you want to remortgage before your current deal ends, and these fees have the potential to be big. Typically, the charge will be somewhere between 1% and 5% of your outstanding mortgage balance, with the percentage usually getting smaller the closer you get to the end of your tie-in period.
An early repayment charge is usually payable if you’re still in the initial rate period on a fixed-rate mortgage, or a capped or discount mortgage – and sometimes a charge can still apply beyond these periods too.
Some tracker mortgages have early repayment charges and some don’t. However, it’s usually the case that there’ll be no ERC if you’re paying your lender’s standard variable rate (SVR) – that’s why people tend to hold off remortgaging until their existing deal ends. Note you could line up your remortgage during the final six months of your current deal, so you can switch as soon as it expires – that way you won’t pay an ERC, and also avoid moving onto your lender’s SVR, which could be more expensive.
But whatever mortgage you have, it’s always a good idea to check with your lender about ERCs before remortgaging.
» MORE: When can you remortgage?
Deeds release fee
This fee may be charged by your current lender to cover the cost of sending the title deeds of your property to your new mortgage provider. A deeds release fee can typically cost anything up to £300, though some lenders won’t make a charge at all. It’s also possible you paid this fee upfront, in the form of an admin fee when taking your mortgage out.
Mortgage exit fee
An exit or closure fee is charged to cover the admin costs of closing your mortgage and switching it elsewhere. Mortgage exit fees are usually payable whenever you remortgage, even if your current deal has expired, and tend to cost around £60. Sometimes the exit fee and deeds release fee are the same thing, in which case the charge could be higher. However, some lenders don’t charge exit fees at all.
Costs related to your new remortgage deal
At the same time, there are a number of fees you may need to pay in relation to arranging your new remortgage.
Arrangement fees
Sometimes also called a completion or product fee, this charge relates to setting up your remortgage deal. Arrangement fees can be costly, with the highest potentially coming in at over £2,000. That said, there will be mortgages available that have lower arrangement fees, or no such charge. Crucially, however, it’s usual for products with lower charges to come with higher mortgage rates – this is why it’s important to consider both the rate and fees when trying to work out the cheapest option overall.
A lender may give you the option to add the cost of the arrangement fee onto your mortgage. This could be useful if you don’t have the funds to pay the fee upfront, but will mean higher monthly repayments and cost you more in the long run, as you’ll be paying interest on the fee amount for the duration of your mortgage. It’s also sensible to check whether an arrangement fee is refundable or not in the event that you don’t proceed with the mortgage.
Booking fees
Booking fees are charged by some lenders to effectively reserve a remortgage deal while your application is being assessed. For this reason, they may also be called reservation or application fees. Booking fees tend to cost somewhere between £100 to £300 and aren’t refundable, even if your application is unsuccessful.
Valuation fees
The lender you’re remortgaging with will want to confirm the value of your property before deciding if it can offer you a mortgage. It will also help determine how much they are willing to lend and at what interest rate. Some remortgage deals come with valuation costs covered for free, as an incentive, while a new valuation may not be needed if you remortgage with your current lender. If you have to pay the fees, the cost is likely to depend on the value and size of your home. Typically, valuation fees can be anywhere between £200 and £500, but may come in as high as £1,500 on less conventional or particularly large properties.
Legal fees
Legal fees are payable to a solicitor or conveyancer for the role they play in completing a remortgage. As well as sorting out the legal paperwork, solicitors ensure the deeds of your property switch to your new mortgage, and make sure your current lender receives the funds to pay off the mortgage you are leaving. Legal fees for remortgaging tend to come in around £300, but you may find lenders that are willing to cover these charges, as an incentive for switching your mortgage over to them. If free legal fees are offered, you’ll probably need to go with a solicitor that the lender chooses, and changing people on the deeds won’t usually be covered. Legal fees may not be payable at all if you remortgage with your current lender on similar terms.
» MORE: What are conveyancing fees?
Broker fees
If you use a mortgage broker to help you find a new deal, you may need to pay a fee for their services. This could be a flat fee of several hundred pounds or a percentage of your mortgage amount. There are also some mortgage brokers, including our partner London & Country Mortgages Ltd (L&C), who can offer fee-free advice. If a broker wants you to pay a fee upfront, check if it’s refundable if they don’t end up getting you a deal.
» MORE: Do I need mortgage advice?
Will there be fewer costs if I stay with my current lender?
If you’re simply moving to a new mortgage deal, valuation and legal fees may not be payable if you remortgage with the same lender. However, there could still be arrangement fees, depending on the deal, and potentially admin charges. But while it’s possible to avoid certain remortgage costs by staying with your current provider, it’s important to check the deals that other lenders are offering in case they could help you save money overall.
» MORE: Best mortgage lenders
Do you have to pay a solicitor to remortgage?
The legal expertise of a solicitor is usually needed if you’re remortgaging to a different lender. Some remortgage deals may cover the cost of legal fees but others will require you to pay. If you stay with your current lender, and are simply switching to a new rate, a solicitor won’t usually need to be involved.
» MORE: Do you need a solicitor to remortgage?
When should I remortgage to save on costs?
Waiting until the initial rate period on your current mortgage is about to expire may help you save on remortgage costs. This is because you’ll avoid the hefty early repayment charges that are often payable if you exit an existing deal early. You could still start researching remortgage options around six months before your current deal ends, giving you time to get a new one lined up, ready to switch to as soon as your old one finishes. That way you can also avoid moving onto your current lender’s standard variable rate – these rates tend to be higher than the rate you’re leaving and rates in the wider market.
» MORE: How long does a remortgage take?
Is a remortgage cheaper than a mortgage?
Remortgaging can be less expensive than taking out a first mortgage because there are some costs that you may not have to pay. In particular, free valuation and legal fees are often offered as an incentive by lenders to tempt you to choose them. You might also avoid having to pay these fees if you remortgage with your current lender.
» MORE: How remortgaging works
Is it worth paying the costs of remortgaging?
Paying the necessary remortgage costs can be worthwhile if it means you’ll lower your mortgage costs overall. Weighing up all the fees you’d pay alongside the new mortgage rate is vital, as is finding a deal that is suitable for you and your circumstances.
If you’re still within your current deal, and the early repayment charges are high, you may find the numbers don’t add up. Paying remortgaging fees may also not make financial sense if you only have a small mortgage outstanding. But if you still have a sizable mortgage, and your current deal is about to end, the costs of remortgaging could be worth paying if it means you avoid paying a higher SVR and you save overall.
» MORE: Try our mortgage interest rate calculator
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