A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
Before you remortgage your house, there are a few things you should know. Find out how much it might cost you, whether or not it’s worth doing and all of the important fees involved that could trip you up.
A remortgage is the process of paying off one mortgage with the proceeds from a new mortgage using the same property as security. But before you jump into anything, make sure to do your research so that this financial move is right for you.
Before making any rash decisions, review your current contract.
The cost of remortgaging varies depending on the borrower, which is why it’s essential to compare your options and read your current contract carefully before beginning the application process. Not knowing how much you could be charged for breaking your agreement might leave you with a hefty bill–some lenders charge exit fees that can amount to thousands of pounds. If you are considering remortgaging, you may benefit from the advice of an independent mortgage advisor who can help you find the best deal for your situation.
It’s a big mistake to sign up for a new service without knowing exactly how much you’ll be charged for leaving your current agreement early. Some lenders charge exit fees, and these can cost thousands of dollars if you’re not careful to stick to the terms of your contract.
What are the remortgaging fees?
While some of these fees might not apply to you and your mortgage, they’ve been included just in case. By being prepared, you can avoid any unwanted surprises down the road.
What fees and charges can you expect to be involved when remortgaging?
Early Repayment Charge
If you repay your mortgage or overpay during a tie-in period, an early repayment charge will apply. This is typically the length of time you are on an initial deal. For example, if you’re fixed for two, three, five years etc., there would be a corresponding early repayment charge.
Deeds Release Fee
This fee—commonly called a deeds release fee or an admin charge—is what you pay your current lender to relay the title deeds of your property over to your solicitor.
Arrangement Fee
The fee charged when taking out a new mortgage which used to cover administrative costs, which also forms part of the true cost of a remortgage along with interest rates. It can also go by product fee, mortgage fee or booking fee.
What is an early repayment charge?
Different lenders will charge their own early repayment charges (ERCs), so the following figures are only meant to give you a general idea of how lenders might charge customers who want to exit their contracts via remortgage or overpayments.
Valuation Fee
Valuations are required by lenders in order to assess the risk involved in loaning you money against a property. The fee for this service covers the cost of investigating the property and identifying any potential issues that could prevent its sale in the event of repossession. This fee can typically range from £250 to £1,500 but is often waived when negotiating a remortgage.
Conveyancing Fee
The fee for this legally removing the old lender’s interest in the property and registering the new one varies, though it could be free depending on who your chosen lender is and what type of remortgage contract you sign.
Mortgage Broker Fee
Mortgage brokers typically charge either a flat fee or a percentage of the loan amount for their services. The amount you end up paying will depend on numerous factors, including the complexity of your background and if there is any adverse credit. Your Mortgage Experts’ fees, which are 1.5% of the loan at most with a typical rate of 0.3%, and also with only small nominal flat fees for standard remortgage cases.
New mortgage repayments
There are many factors that will affect the amount you pay for your new mortgage, including the interest rate, the amount you borrowed, and the type of mortgage. In general, mortgages with longer terms will have higher interest rates. However, extending your mortgage term can also help spread out the cost of your mortgage. Before making a switch, be sure to speak with a broker to calculate your new repayment plan.
What is an early repayment charge?
Different lenders will charge their own early repayment charges (ERCs), so the following figures are only meant to give you a general idea of how lenders might charge customers who want to exit their contracts via remortgage or overpayments.
Early repayment charges are typical with most lenders, and these fees generally scale based on the percentage of the outstanding mortgage amount. For example, a five-year tracker deal may come with an early repayment charge of 5% in year one, 4% in year two, 3% in year three and so on. With this type of fee structure applied to a £300,000 outstanding mortgage in a given year:
- 5% is equivalent to £15,000
- 4% is the same as £12,000
- 3% translates to £9,000
- 2% equals £6,000
- 1% is worth £3,000
Is an early repayment charge making a remortgage too expensive?
Some lenders have ERCs that are hundreds of pounds while others charge much more, which makes it expensive to leave a mortgage contract early. Lenders do this because if you remortgage and settle your old mortgage agreement early, the lender loses money from interest charges.
An ERC can either make up for the difference or act as a deterrent to people leaving. The great news is that sometimes, by simply switching mortgage deals, the money saved can surpass the cost of an ERC.
Is it possible to remortgage without having to pay an early repayment charge?
It is usually possible to do this without any penalties, however it depends on your lender and the terms stated in your contract. If you remortgage after your fixed rate or promotional period has ended (for example, at the end of a two-year, three-year, five-year fix), then you shouldn’t be charged anything. However, if you switch before that period has ended, you could be faced with paying a percentage of the remaining mortgage balance.
Decide if remortgaging is the best choice for you.
It can be helpful to pay an early repayment charge if:
- A remortgage deal can have a lower monthly payment than what you’re already paying.
- An increase in interest rates concerns you because it would make your mortgage repayments more expensive when your current deal expires.
You should compare many lenders before making a choice about remortgaging, and it’s best to use a mortgage broker who understands what details to look for in a contract and which lenders you can apply to.
Am I eligible to remortgage my property?
Many people mistakenly believe that holding a mortgage with one company guarantees acceptance from another company if they decide to remortgage, but this is not always accurate.
Advice from a mortgage broker that specialises in bad credit can be very helpful if you have high levels of debt or have missed payments on things like loans and utilities in the past six years. This is because they know which lenders are more likely to approve you for a mortgage loan.
You would not want to apply for a loan without checking your eligibility first. If you get rejected, that will stay on your credit report for six years and future lenders will be able to see it.
Should I get a remortgage?
The cost of remortgaging varies depending on the individual’s mortgage agreement.
Currently, interest rates are rising and they are projected to continue climbing in the next year or so. Because of this, we have been fielding a lot of questions about whether it is prudent to remortgage for a lower rate or lock in a long-term rate now for more stability. The answer to this question depends on your individual financial circumstances, what type of mortgage rate you currently have (fixed or variable), and how much risk you’re willing to take on.
Remortgaging may help reduce monthly payments, the total mortgage amount or allow for more borrowing; however, before switching, check eligibility with a qualified broker and take time to understand the key details of both your current and any new potential contract – it might just save you money.
Get remortgage advice now
We want to help you with your mortgage needs. Your Mortgage Experts team are professional and always ready to assist—no matter what your situation is. If you need to remortgage in order consolidate debt or simply get a lower interest rate, we’re here for you.
Call 0208 154 1111 or get started online and the right person will contact you soon with the information you need.
Luca Bertolino
Mortgage ExpertYour Mortgage Experts is led by Luca Bertolino with 20 years experience in financial services and in the property market. Through Luca’s wealth of knowledge and expertise, Your Mortgage Experts have become a trusted adviser that clients have come to rely upon for all their mortgage and protection needs.
