Remortgage costs

Even though a remortgage could save you money in the long run, in the short term there will be costs involved that you will need to bear in mind before making your decision.

Early Settlement Fees

Your current mortgage may include a 'tie in' period where you committed to staying with the lender for a certain number of years. If you want to leave your current lender before the tie in period is up, you will be charged a fee for doing so. This fee will vary depending on your mortgage deal, but is usually a percentage of your overall mortgage size and so can be quite considerable.

Check your mortgage smallprint to see if you'll be charged for repaying your mortgage early, and if so how much the fee will be.

Exit Charges

Apart from penalties for leaving a lender during a tie in period, most mortgage providers will also charge an exit charge or admin fee to cover the cost of switching your mortgage away from them. Many lenders have raised their exit fees over the last year or so, and you may now be charged up to £200 or even more.

Arrangement Fees

If you arrange your remortgage through a broker or advisor, as most people do, then you will be charged an arrangement fee of anything between £250 and £1000, or even higher if you have special circumstances such as a poor credit rating. In most cases however, you can add this fee to your loan amount and spread the cost over the length of your remortgage rather than paying upfront.

Survey or Valuation

As your remortgage will be secured on your home, the lender will want to make sure your home is worth the amont you say it is, and that the property is in good enough condition to lend on. This means that they will need a survey or valuation to be done, and this cost will generally have to be paid by you. A basic valuation costs around £150. Some lenders however offer free valuations to try and tempt you in their direction.

Solicitors Fees

When you switch mortgage lender there will need to be some conveyancing work done by a solicitor, and in most cases you will have to pay this too. The good news is that the work involved is much simpler than when you buy a home, and so the solicitor's fee will also be smaller. Some remortgage deals will pay the solicitors fees for you.

Higher Lending Charge (HLC)

If you plan to borrow a high proportion of what your home is worth, say 90% or more, you may have to pay a higher lending charge or HLC. This is a form of 'insurance' for the lender, compensating them for the increased risk they take on when lending at a high loan to value (LTV). Any HLC will be made clear to you before you sign on the dotted line.