Remortgaging could be one of the most financially savvy things you do as a homeowner. The question of whether you have to pay to remortgage is an interesting one because although there will likely be some upfront costs, when done correctly you can actually save a considerable amount of money by remortgaging – often thousands of pounds a year. Therefore, remortgaging to a better deal could ‘pay for itself’ and more. If you are remortgaging to release equity from your property, then although it may not ‘pay for itself’ as such, it still tends to be a very affordable way of raising funds for things like home improvements. In this guide, we’ll explain what remortgaging is, when you should remortgage, and what fees may be involved.
What is Remortgaging?
Remortgaging is when you transfer your mortgage to a new fixed-rate deal, usually to get a better rate from a new lender. Locking in a new fixed rate can save you thousands of pounds in interest a year. If you’ve built up equity in your home, either through an increase in property value or by paying off some of your mortgage, you may now be in a lower Loan to Value bracket and you could be eligible for a better deal. Remortgaging is also a popular way to raise funds for things like home improvements by releasing some equity from your property as tax-free cash. Remortgaging is similar to taking out a new mortgage as you’ll have to pass affordability and credit checks with your new lender. A mortgage broker can help you find a great deal and then make the switch easy for you. Once you’re accepted, your new lender will pay off your old mortgage and your new fixed-rate deal will begin.
When Should I Remortgage?
It’s most common to remortgage at the end of your current fixed rate period, because otherwise you’ll be moved onto your lender’s higher Standard Variable Rate which can cost hundreds of pounds more in interest each month. We advise speaking to a mortgage broker 3 – 6 months before your fixed-rate period ends to allow enough time to find the right deal and make the switch. You can remortgage before your fixed-rate deal ends, for example, if you want to lock in a low interest rate before they begin to rise, but we’ll need to work out if this is the most cost-effective route by looking at your circumstances. If you are already on your lender’s Standard Variable Rate, then you’re likely paying a lot more than you need to be – so speak to us as soon as possible and we’ll try and switch you to a better deal before you waste too much money. You can find out what deals are available to you and see how much you could save for free during your FREE no-obligation consultation.
What Fees Will I Have to Pay When Remortgaging?
There are a number of fees involved with remortgaging, however, your new lender will often cover some of them for you. In most cases, you should only remortgage if you’re going to save money by doing so, even once any fees are taken into consideration. This is why it’s so important to speak to an experienced mortgage broker, as they’ll search the market to find a deal that makes remortgaging a money-saving exercise, not a costly one!
Mortgage Broker Fee
We offer a FREE Mortgage Review. This is a free, no-obligation chat where we:
- Assess your affordability without any risk to your credit score
- Search the market to see what great deals are available to you
- Show you how much you could save by switching to a better deal
- Carry out an Agreement in Principle (if required)
- Answer all of your questions about remortgaging
If we find you a deal that will save you money and you would like us to switch your mortgage hassle-free, we typically charge a fee of just £295 for existing customers or up to £495 for new customers. This includes a mortgage advisor and a senior administrator working on your case, who will liaise with your lenders and solicitor to ensure the switch is executed seamlessly for you.
Mortgage Arrangement/Product Fee
Some remortgage deals come with a mortgage arrangement fee or product fee, which can be up to £995. There are ‘no-fee’ options available but these often have a higher interest rate, which could make them more costly in the long run. Your mortgage broker will look at the overall cost over the term of your new deal to figure out whether it’s cheaper to choose a product with an arrangement fee or one without.
Early Repayment Charge
If you remortgage at the end of your fixed-rate period, you shouldn’t have to pay an early repayment charge (ERC). However, some lenders charge an ERC if you decide to remortgage before the end of your fixed-rate period, and this is usually on a sliding scale between 1 – 5% of your remaining mortgage balance (depending on how close you are to the end of your fixed-rate deal). You’ll be able to find out if this fee will apply to you by checking your contract or speaking to a mortgage broker.
You may want to remortgage early if you need to release equity from your home as tax-free cash or if you want to lock in a new fixed-rate deal at a low interest rate. As interest rates may rise over the coming years, in some cases you may still be able to save money even if you have to pay an ERC. We can work out if this is the right option for you during your FREE no-obligation consultation.
Valuation Fee
As you are essentially taking out a new mortgage on your property, your new lender will require an up-to-date valuation so they can work out your current Loan to Value (LTV). If your home has increased in value since taking out your original mortgage, you may now be in a lower LTV bracket and have better deals available to you. The good news is, many lenders cover the valuation fee for you, so be sure to speak to a mortgage broker to find a deal that includes a free valuation.
Solicitor Fee
You’ll need a solicitor to handle the legal processes involved with remortgaging. Again, there are some lenders who will cover your legal fees or offer cashback to reimburse you. Your mortgage broker will be able to find these deals for you and work out if you can save money by choosing one. We can also put you in touch with a trusted local remortgage solicitor, as we do not provide this service in-house.
The Bottom Line
Although there are some fees involved with remortgaging, you can usually save money by switching to a better rate. This is especially true if you are approaching the end of your fixed-rate period because if you fail to remortgage at this point you could end up paying thousands of pounds more each year on your lender’s Standard Variable Rate. Some of the fees involved with remortgaging may be covered by the lender if you find the right deal; and some fees, like the arrangement fee, may be worth paying if the product comes with a lower interest rate. There are many variables so it’s important you speak to a mortgage broker to find out what products are available to you and whether you can save money by switching to a better deal.
We’ve been helping our local community with remortgages for over 30 years! We search thousands of products to find a deal that suits your needs perfectly. If you see you can save money by switching to a better deal and you’re happy to continue, we can guide you through the process and liaise with your lenders and solicitor to ensure your remortgage goes smoothly.
Book your FREE no-obligation consultation with one of our friendly advisors to get going quickly. We have offices in Frimley and Basingstoke, or we can help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
