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.
How much does it cost to remortgage?
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.
Typical remortgage costs
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.
Remortgage arrangement fees
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:
- upfront
- by adding it to your mortgage.
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.
Mortgage booking fees
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.
Remortgage legal fees
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.
Remortgage valuation fees
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.
Mortgage Early Repayment Charges
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%.
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.
