How much does it cost to remortgage?

With mortgages becoming a whole lot more expensive due to recent interest rate rises, remortgaging sooner rather than later is at the forefront of most homeowners’ minds.

Securing yourself a new mortgage deal with fixed rates unlocks several advantages, especially as interest rates continue to creep up and the cost of living increases to eye-watering levels. If your current mortgage deal is coming to an end, your property has increased in value, or you’ve put a little money aside and wish to overpay, remortgaging could be a great step forward. It doesn’t come without its costs, however.

In this blog post, we offer a breakdown of the fees involved in remortgaging so you can enter the process with your eyes wide open.

Early repayment

Early repayment charges are applicable to both fixed-rate and discounted mortgage deals. As the name suggests, they are instated when you attempt to end the arrangement earlier than planned, either via remortgaging or selling up.

Lloyds Bank explains more about how these early repayment charges are calculated:

“An early repayment charge is usually between 1% and 5% of what you still owe on your mortgage agreement. You might be able to pay less if you have been with your lender a long time, but this is up to the lender. You can choose to pay your early repayment charge in one lump sum. This might make sense if the charge is lower than the amount of interest due on the rest of your mortgage.”

Depending on the lender you are looking to take your new mortgage out with, these early repayment charges may be able to be spread across the length of your new agreement instead of being paid in a lump sum.

Exit fees

The vast majority of mortgage lenders charge exit or redemption fees for closing your account with them. 

Although costs vary, the average exit fee is £50 to £300. You should already be aware of your mortgage exit fee as this charge is fixed when you took out your deal with most products. Some redemption fees can however change throughout the term of your mortgage.

Lender arrangement

Whilst the previous charges are due to be paid to your existing mortgage provider, this fee is enforced by your new lender. New lender arrangement fees can be as much as £1,000 to £1,500 or more. This cost covers a variety of aspects that go into arranging your new mortgage, from its administration to its application costs.

Also known as a mortgage product or completion fee, the new lender arrangement charge can be paid upfront or added to your mortgage. It is however important to note that any fee added to your mortgage will incur interest.

Legal costs

Remortgaging is no doubt different from buying a home, but this doesn’t mean you won’t have to foot the bill for its legal fees. Most of your legal fees however are paid by your new lender when remortgaging. 

Some products require some contribution towards these legal costs (usually £300 or more). Unlike the mortgage arrangement fee, any legal costs need to be paid upfront and cannot be added to your mortgage.

Valuation

The value of your property is integral to the remortgaging process. Your lender will conduct their own valuation as part of the application process to provide an indication of its current market value so the appropriate loan-to-value (LTV) can be calculated. The valuation of your property will effectively impact the mortgage deal you can get.

Valuation costs usually range from £200 to £300, but many lenders offer free valuation as an incentive.

Want to reduce these fees?

Whilst some fees incurred during remortgaging are unavoidable, some charges can be reduced. When the time to remortgage arrives, using a broker to remortgage is recommended.

As a leading independent mortgage advisor, we can help you find the best mortgage deal for your needs and budget. Find your local advisor today to get started.

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