If you need to remortgage soon, it’s important to understand the costs involved so you can be certain you’ve found the best possible deal to suit your needs.
The good news is that most lenders have started reducing their mortgage rates in response to August’s base rate cut, so it might be worth starting the remortgaging process sooner rather than later. You can usually lock into a new deal between three and six months before you want it to begin, giving you plenty of time to do the necessary groundwork and compare costs. Read more about this in our articles Five good reasons to remortgage right now and When is the best time to remortgage?
Here, we outline any fees you might need to pay to your current lender when you’re remortgaging, and those that may be involved in securing a new deal.
It’s important to bear in mind that the information and costs we’ve provided here were correct at the time of publishing and are subject to change. The criteria used is illustrative only and costs will vary depending on your property type, value, and the complexity of your circumstances.
Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,250 reviews.
Potential costs for leaving your current mortgage
You don’t necessarily have to wait until your current deal has finished to remortgage. You might find that there’s a better deal available, particularly if you’ve paid off a substantial amount of your existing mortgage.
However, it’s vital to check for early repayment charges (ERCs) if you leave your existing deal before it ends, as these can add up to thousands of pounds and could mean that it isn’t worthwhile making the move.
The majority of ERCs range from 1-5% of your current mortgage balance, but the amount you’ll pay for leaving your deal usually depends on how far into it you are. For example, you may have to pay 5% of your mortgage balance in year one, reducing to 4% in year two, and 3% in year three. On a £150,000 outstanding mortgage, a 3% ERC would be equivalent to £4,500.
However, you usually won’t have to pay an ERC if you remortgage once your deal has ended at which point, unless you have a remortgage deal in place, you’ll usually automatically move onto your lender’s standard variable rate (SVR), which is typically the most expensive type of mortgage rate.
Even if you don’t have to pay your current lender an early repayment charge, you may have to pay a ‘deeds release’ fee, which is typically between £50 and £300.
This is a fee that you pay to your existing lender once the mortgage has been repaid to cover the administrative and legal costs of transferring the property’s title to you. You may have paid this when you originally took out your mortgage, but sometimes it’s paid when your deal comes to an end. Your original paperwork, such as the mortgage’s Key Facts Illustration should detail the amount you have to pay for this.
Remember that you can usually overpay your mortgage by up to 10% a year without paying any early redemption penalties. Read more in our article Should I overpay my mortgage?
Potential costs of your new mortgage
The majority of mortgages have arrangement fees, and some may also have legal fees, although many remortgage deals come with free legal and valuation work included. It’s important to factor in the overall cost of any new mortgage deal, rather than focusing just on the headline rate, as there can be an array of different charges which can substantially bump up the overall cost.
Charges you’ll usually need to factor in include:
Mortgage arrangement fee
Cost: Anything from £0 to £2,500
This is usually the biggest charge you’ll pay to your new lender when remortgaging. As a general rule, the lower the mortgage rate, the higher the arrangement fee. As these fees can be significant, it’s really important to include this cost when you’re comparing deals.
If you’re using a mortgage broker to help you with your remortgage, they should be able to work out what the best deal is for you, given your personal circumstances, and including the arrangement fee. You may have the option to add this fee to your mortgage balance, or pay it upfront. Remember that while adding it to your mortgage balance may be appealing, to avoid the initial outlay, this is likely to be more expensive over the long run as interest will be applied to the amount you owe throughout the mortgage term.
Booking fee
Cost: Around £100 to £300
There’s a chance that you might be charged a booking fee – also known as an application or reservation fee – to secure a new deal. However, this fee isn’t particularly common these days. If you do need to pay it, you’ll do so when you complete your mortgage application, and you should be made aware of this when applying. Bear in mind that you won’t get this money refunded if the mortgage isn’t completed.
Valuation fee
Cost: Around £150 to £300 or offered free of charge
As part of the remortgaging process, your lender will request a valuation survey to ensure that your property is worth what you’re paying for it, so that they can be confident they’ll be able to recoup your mortgage balance if you fail to keep up with your repayments. However, a growing number of lenders offer a free valuation as part of the remortgage process. If you are charged, you’ll usually pay the fee when you submit your mortgage application so that the survey can go ahead.
Conveyancing fee
Cost: Around £300 or included as part of the package
This is a fee that may be charged for the legal work required to remove your original lender’s link to your property and register your new lender when you remortgage. Many lenders will include a free legal package as part of the remortgaging process, although the downside is that in this scenario they choose the solicitor and they may not provide the best service. Remember to tell them any changes to your circumstances that could impact your mortgage, such as removing a partner or spouse from the legal documents.
Mortgage broker fee
Cost: £0 to £500+. Some mortgage brokers are fee-free, so you don’t have to pay for their advice at all. Those which do charge typically charge a flat fee or a percentage of the loan amount.
Deciding on the right mortgage deal for you isn’t necessarily straightforward, particularly as there are thousands of different deals to choose from. A mortgage broker can advise which deal is likely to suit you best, factoring in the costs involved and assessing whether you’ll be able to afford repayments if interest rates continue to rise. They’ll also be able to tell you how much you may be able to borrow, based on your income and outgoings.
Essentially, a broker acts as a middleman between you and the lender, aiming to smooth the process of securing a remortgage deal. Learn more in our guide Should I get advice on my mortgage?
Brokers who offer fee-free advice are paid a commission from lenders. While you don’t have to pay anything to use their services, they should still offer you unbiased advice.
Those who have a fee which is a percentage of the mortgage amount, usually charge between 0.3% and 1%. For example, if you’re borrowing £150,000 and a broker charges a 0.5% fee, you can expect to pay £750 for their advice. Read more in our article How much do mortgage brokers charge?
How do I remortgage?
When you come to remortgage, switching to a new deal with your existing lender is probably going to be the simplest option, but you may not necessarily end up with the best deal on the market. It usually pays to shop around, particularly given your mortgage is likely to be your biggest financial outgoing.
However, it’s not always easy to work out which remortgage deals you’ll be eligible for, particularly if your circumstances are complex or they’ve changed over recent years. Read more in our article Can I remortgage if I’m struggling financially?
Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,250 reviews.
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