Remortgage fees explained
Remortgaging your home can be expensive and you should take the fees associated with remortgaging into account when weighing up the pros and cons of switching to a new remortgage deal.
Remortgage fees essential information
It’s important to check the cost of mortgage fees carefully, as they can easily add up to thousands of pounds. Although when compared to the overall cost of your mortgage loan a thousand pounds may seem like a small amount, if you’re remortgaging every few years then these fees could soon add up to a significant amount.
Don’t add remortgage fees to your loan
You may be given the option to not pay the upfront fees for remortgaging, and instead adding them to your overall loan. Which? advises caution here – interest will be added to these fees, meaning that you that the overall cost could be much higher over the longer term.
The Which? mortgage comparison tables let you search all available remortgaging deals from lenders large and small to choose the best deals based on quality of service as well as cost and benefits.
Remortgage fees from your current mortgage lender: Early repayment charges
If you are on a fixed rate or discounted mortgage deal, it’s likely that you’ll have to pay an early repayment charge in order to end that arrangement.
Early repayment charges are usually calculated in one of four ways:
- A percentage of the original mortgage loan amount.
- A percentage of the balance still owing on the mortgage.
- A percentage of the amount already repaid.
- A number of months’ interest.
So, if your monthly mortgage interest payment is £500 and your lender charges three months’ interest as a penalty, you’ll have to pay £1,500 in early repayment charges to switch.
Remortgage fees: Exit fees
Many lenders will charge an exit fee for closing your mortgage account, exit fees tend to cost between £50 and £300. Your original mortgage contract should include the cost of any exit fee you may need to pay.
If you are considering switching you should ask your provider for a redemption statement to see exactly how much it will cost you to close your current mortgage.
Remortgage fees from your new mortgage lender
There may also be costs to pay from your new lender, although to entice you in they may decide to waive some or all of them.
Remortgage fees: Arrangement fees
Lenders can charge you for a number of things as part of the cost of ‘arranging’ the mortgage. Arrangement fees cost around £1,500 on average, but they can also be much more than this. They could also be called booking fees, product fees, admin fees, application fees or any other fee to cover the cost of setting up the mortgage.
Remortgage fees: Legal fees
There will also usually be legal fees to cover things like valuation of the property and conveyancing. These fees will be much lower than for someone who is moving to a new property as there is much less legal work involved in a remortgage.