Last Updated on 22nd September 2020
A remortgage can have a number of benefits, such as reducing your mortgage rate or withdrawing equity. Maybe you want to renovate your home or treat yourself to a holiday. Well, a remortgage could be the answer only if the fees and costs make financial sense.
If you’ve decided to remortgage you’ve perhaps tried calculating the costs of doing so and whether or not it’s a viable option. Calculating the cost of a remortgage can be a demanding task so we’ve decided to write this article to help you through it.
We’ll cover everything from remortgage fees, surveyor fees, legal fees and how to get the best rate. You can also contact our advisors at any time with your mortgage questions.
What fees will I be charged to remortgage?
Fees for a remortgage can vary. Listed below are some costs you’ll need to consider before you remortgage:
- Lender arrangement fees
- Booking fees
- Survey/valuation fees
- Early repayment charges
- Solicitor fees
- Mortgage broker fees
Fees payable to your broker will usually depend on the broker and the mortgage they’ve sourced, along with your own individual circumstances.
Solicitor fees will vary, however some remortgage deals will include free legal work as part of the mortgage. We will discuss this in more depth further into the article.
Each lender will always have numerous products on offer. Furthermore, each mortgage deal will have different costs attached. Let’s take a look at each cost in more detail.
What is a lender arrangement fee?
An arrangement fee is payable to the lender for ‘arranging’ the mortgage. Some lenders will have little or no arrangement fees whatsoever, whereas some lenders will charge arrangement fees in excess of £1000. Arrangement fees will either be a fixed amount or may be based on a percentage of your mortgage.
Why would someone pay an arrangement fee of £1000 if they can remortgage with a different lender who has zero arrangement fees? The reason is simple. The best remortgage deals typically have arrangement fees attached to them. You can add the fee to your mortgage, however you will pay interest on this in addition to your mortgage. As a result, it makes financial sense to clear this fee upfront.
Lenders can also charge booking fees, however, they’re usually quite small in comparison with other fees. Booking fees don’t tend to exceed £150 and can be as little as £20. In other words, a booking fee is almost a type of administration charge.
Mortgage lenders are ultimately running a business, so they will charge borrowers for the privilege of a low-interest rate. To minimise your remortgage fees, you’ll have to calculate the overall cost of entering into a remortgage.
It’s impossible to say whether or not deals with or without arrangement fees will save you money without assessing each mortgage and calculating your overall cost. If you’re struggling to do this, our advisors can help.
Do I need a survey to remortgage?
Your lender may carry out a survey of the property you wish to remortgage. Whether or not a formal survey is carried out, lenders need to be sure that your property offers adequate security. Lenders also need to be sure that the remortgage amount meets the actual market value of the property.
Some lenders may offer free valuations as part of their deal, whereas other lenders may charge. It’s important to note that homeowners aren’t able to select their own surveyors for remortgage purposes.
Remortgage valuation fees are normally in the range of £0 – £1500. Survey fees will depend on the size of the loan, in addition to the remortgage deal you’ve selected.
What is an early repayment charge?
Early repayment charges (ERC) may be charged if you choose to remortgage earlier than your lender has agreed. For instance, each mortgage will typically have introductory periods of 2, 3 or 5 years. Once the initial period has passed, a remortgage should be free of early redemption charges. Nonetheless, if you remortgage earlier than agreed, you may leave yourself open to early repayment fees.
It’s important to check whether or not your current deal does pose an early redemption penalty. You can then calculate the amount and assess whether or not it’s viable to take an early remortgage. You may find that it makes financial sense to perhaps wait until you’re able to remortgage without having to pay early repayment charges.
Early redemption penalties will vary. Each mortgage will have unique terms, including the fees for redeeming your mortgage early. You can usually find the exact figure in your Key Facts Illustration (KFI). Some lenders base the fee on a percentage of the loan amount, whereas other lenders have a fixed fee.
If you hope to remortgage, but you’re unsure of whether or not you’ll be charged an early repayment fee, you can ask an advisor for help.
Selecting a solicitor for your remortgage
You’ll remember that when you first purchased your home, you instructed solicitors to carry out the conveyancing. Although you’re not purchasing the property again, solicitors will still need to carry out legal work in relation to your remortgage.
The legal work required for a remortgage is largely on behalf of the lenders involved with the transaction. This is because the initial charge from your first lender needs to be removed from the property title and replaced with a charge from your new lender.
The amount of legal work involved is a lot less when compared to purchasing a property from scratch. This is reflected in the fees charged by solicitors for a remortgage. As a result, legal fees are typically lower when compared to new purchases. Some lenders will offer you free solicitors as part of the remortgage deal, whereas other lenders may charge.
You can also instruct your own solicitor to carry out the legal work on your behalf. Legal fees charged by a lender often tend to be lower than if you were to use your own solicitor That being said, you may also notice a difference in the level of service you receive.
Some lenders also offer cashback incentives if you decide to use your own solicitor. This can be quite useful as the cashback can then be used to cover some remortgage fees.
Legal fees will vary and will start from being £0 but can go up to £400, possibly more depending on the value and tenure of the property. Some solicitors may also charge more if you’re withdrawing equity from the remortgage or changing your mortgage from residential to buy to let.
Mortgage broker fees for a remortgage
If you use a mortgage broker to find you the best remortgage deal possible, then brokers will charge you a fee for their time and expertise. Selecting the right deal can save you hundreds, if not thousands of pounds over the duration of your mortgage term.
Brokers can also do all of the number crunching for you. Doing so can ensure that you’re getting the best remortgage possible. You can make an enquiry with an advisor for more information.
We also have specialist advisors available if you have adverse credit or your income isn’t well documented.