There are countless reasons why you may choose to remortgage. You may want to benefit from a better interest rate, undertake some home improvements or borrow cash to consolidate debts. And, when you start the remortgage process, one of the most important factors to take into account is the cost you may incur by remortgaging. Our guide looks at the main fees you may encounter.
Product Fees: Application, arrangement or booking fees often apply to fixed or discounted rate mortgage deals. Fees can vary from a few hundred pounds to a percentage of the mortgage with the very lowest rates normally attracting some of the highest arrangement fees.
You will ordinarily find that standard variable rate (SVR) mortgages will attract lower arrangement or booking fees. This is because the lender won’t lose out if interest rates rise as your repayments will increase accordingly.
Valuation Fee: Even if you are not moving home, your remortgage lender will require a valuation of your property to be undertaken. There are two main reasons for this. Firstly, the lender needs to establish exactly what the property is worth in order that they can ensure they are not lending above their ‘loan to value’ limit.
Secondly, the value of your home is likely to have changed since you last had it valued for mortgage purposes. A lender will therefore want an up to date valuation of your home before they can agree a loan secured on it. This also goes for your current lender if you are remaining with them and taking out a further advance.
You can opt for various types of valuation, from very basic to full structural surveys. Usually the lender will only require the basic level, but if you want peace of mind you may wish to go for something more thorough. Of course, the more thorough and detailed the survey, the more money it will cost to do.
Conveyancing: Similar to when one first takes out a mortgage, for a remortgage you will need to pay conveyancing fees again. This will enable you to change the ownership of the property from one bank or building society to another lender. This is often costly, but in many instances, the lender appoints a solicitor and covers the fees.
If you are required to finance the conveyancing fees yourself, it is recommended that you use your own solicitor or someone who has been recommended to you. It is going to be a waste of your time and money to sift through the countless law firms who can all do this fairly non specialist task, but some of whom may charge significantly more than others.
Financial Advice Fees: Professionally qualified, independent mortgage brokers can help you source the very best remortgage deals. However, some brokers will charge a fee for their services. This fee is often reduced if the broker receives a payment from the lender and can often be a fraction of the savings that a broker can help you make by arranging a low cost remortgage deal.
Charges for Early Repayment: You need to check if your existing lender has written early repayment charges into your contract. This usually only applies to fixed or discount rate mortgages where you have a ‘low cost’ of ‘fixed’ period for the first few years of the mortgage. Even if you do have to pay an early repayment fee, it may still be cheaper to move to a new loan if the interest rate is low enough. Again, using a financial adviser will really help here.
Though costs will probably vary from lender to lender, there can be no escaping the above charges, so budget accordingly and never forget to shop around for the best remortgage product.
Timothy Frodsham writes for JustRemortgages.com one of the UK’s top sites for the latest remortgage rates and best remortgage deals.