We reveal the cost of remortgaging your home so you can be well prepared for what’s ahead when finding a new loan for your property.
Remortgaging is the process of moving the mortgage on your existing property to another lender.
Remortgage costs may include several fees for leaving your current mortgage.
There are also numerous charges attached to the new mortgage.
Lenders may charge up to 5% of the outstanding mortgage as an early repayment charge (ERC).
What are the costs of leaving your current mortgage?
Remortgaging your home sometimes makes financial sense in the long term.
Still, it's essential to know that several fees and charges might apply, including costs related to leaving your current mortgage and others linked to the product transfer or new mortgage deal.
It is possible to add some of these fees to your new mortgage instead of paying them upfront.
Before you remortgage your home, do your research and consider the pros and cons of doing so.
Remortgaging your home may provide the following benefits:
- Lower interest rates compared to the standard variable rate (SVR).
- Predictable monthly repayments although these may be higher than your current mortgage, but lower than staying on the SVR.
- A shorter or longer term to pay off your overall mortgage.
- Cashing out equity for other purposes.
There may also be some drawbacks when refinancing your home, mainly in the form of added costs:
- The new lender may charge various fees to set up the new mortgage.
- Early repayment charges may amount to thousands of pounds.
- You may need to have your home revalued.
- If you remortgage to consolidate debt, you may pay more interest.
Learn more: remortgaging on help to buy
Early repayment charges
Early repayment charges (ERC) come into play when you refinance your property while it is still under the terms of your original mortgage deal.
Lenders usually calculate this as a percentage of the remaining amount of your mortgage, which can be a tidy sum.
These fees may vary between 1% and 5%. Early repayment charges usually decrease over time.
When you repay some or the entire loan sooner than expected, it costs the lender money, so the ERC is designed to compensate the lender for this.
Can you remortgage without paying an ERC?
Sometimes, you can avoid paying an ERC. If you’re at the end of your mortgage term, no ERC will be incurred.
If you must exit your current deal sooner, some lenders may allow you to spread it over several payments.
If you’re not switching lenders, they may include it as part of the new mortgage deal, but this would incur extra interest and may not be cost-effective.
Deeds release fee
Lenders charge a deeds release fee when you have repaid your mortgage.
This covers the administration costs of sending the property’s title deed to the new lender. It could range between £50-£300, according to Rest Less.
What are the costs of getting your new mortgage?
When you apply for a new mortgage, lenders often sweeten the deal with a low or discounted rate applicable for an initial period of two to five years.
However, as mortgage rates have soared over the past year or so, rates are now higher compared to rock-bottom rates during the pandemic.
Despite this, you can save thousands of pounds a year by remortgaging instead of staying on the SVR.
When refinancing your property, the new lender’s details must be added to your home’s title deeds.
A registered solicitor is responsible for this and charges conveyancing fees. These fees average around £300, but some lenders may waive this fee.
Mortgage broker fees
A mortgage broker does the hard work of finding the best deals, supporting you through the application process, and providing expert advice.
It may cost between £300 and £600 or up to 1% of the mortgage value.
However, some mortgage brokers earn commission from the lender, relieving you of this cost.
The arrangement fee covers the lender’s administration costs of setting up the new mortgage.
These can range between £500 and £1,500 or a percentage of the amount borrowed. You may be able to pay these charges upfront or add them to the mortgage.
Some lenders charge a once-off booking fee on application for one of their best deals. This could amount to £100-£200 but is not one of the typical costs of remortgaging.
When remortgaging your home with a new lender, they must know the property’s value.
They will send a surveyor or value to assess your home and may charge valuation fees for this service. This costs £250-£1,500, although some lenders offer it as a free service.
The new mortgage
To calculate your new mortgage payment, you must know your new rate and the remaining term of the loan.
How long does it take to remortgage?
Mortgage deals are typically valid for three to six months, and it’s wise to organise the switch before it reverts to your lender’s SVR.
The remortgaging process can take four to eight weeks.
For the smoothest process, follow these tips:
- Make sure you have all the relevant documentation ready and completed.
- Consider remortgaging with the same lender if they offer a competitive rate, lessening the legal work and fees.
- Use a mortgage broker to do the legwork for you.
Want to learn more about mortgages?
Although it’ll likely benefit homeowners in the long run, the cost of remortgaging may not be favourable initially.
Understanding the implications is essential before agreeing to a new mortgage.
If you want to learn more about mortgages, talking to a mortgage broker is the best option.
They can provide excellent guidance and have access to exclusive deals suitable for a range of circumstances, including if you’re self-employed.
If you’re looking for expert advice and the best remortgage deals, let Unbiased match you with a mortgage broker that meets your needs.