There are lots of good reasons to remortgage. It could be you want to find a better rate, or perhaps release some capital from your home, perhaps for improvements or to consolidate some debts.
When looking for the right remortgage deal, it’s important to remember that there could be costs associated to leaving your current mortgage deal and it’s important to know the overall cost of making a switch, even if your current deal is coming to an end.
It could be that the product you choose to move on to is different, depending on how fees are structured. Some with a higher interest rate may have a lower booking or arrangement fee, which could mean you’re better off over the term of the product.
Early Repayment Charges
These are the costs of leaving your mortgage early that you need to pay to your existing lender. There is sometimes a penalty for repaying your mortgage during a tie-in period. So, if you are in the first two years of a fixed deal and you want to repay your mortgage at that time, you’re going to incur a charge. (It’s worth noting that some mortgage products allow you to overpay up to a limited amount of the total remaining balance.)
As the lender is losing some of the interest costs, they will charge you an early fee to recoup some of that money. The charge differs by lender but can be as high as 5%. You don’t normally need to pay an early repayment charge when the fixed fee period ends.
Deed Release Fee
This charge goes to your existing lender, and it’s the charge you pay to get your current deeds sent to your solicitor. You can pay this upfront when you first set up the mortgage, or you can choose to pay it at the very end of the mortgage. Always make sure that you have this fee detailed in writing, though, as your lender shouldn’t charge this if they haven’t specified it in the paperwork.
New Mortgage Fee
To the new lender, you might pay new product fees for the new mortgage you are looking to take out. There could even be two fees that you pay here: the mortgage booking fees and the mortgage arrangement fee.
This is another fee that you pay to the new lender. Most of the remortgaging packages that you find will give you this for free, but if it’s not paid as part of an incentive, then it could cost £300 – 400. Valuations are a necessity for security, and you shouldn’t miss out on paying this one if you’re advised to do so.
This is a fee that goes to your solicitor. They will be doing all the legal paperwork required to take the interest from the original lender off the property and register the new lender. Your solicitor will know the drill here!
There’s usually a fee for the mortgage broker, however this is often only if you choose to proceed. At The Mortgage Store, we may charge a fee but if we do, only if you choose to proceed with a mortgage that we arrange for you.
Lastly, you will obviously need to make new mortgage repayments to your new lender – as standard. These will vary depending on the amount of your mortgage and the payments to which you’ve agreed.
Discover Whether A Remortgage Is Right For You
At The Mortgage Store, we factor in more than just the interest rate on your next mortgage. We look at the broader picture of the cost of exiting your current deal, as well as the cost of your new product to advise both when and how you should remortgage.