There are many costs associated with the re-mortgaging process which you must also take into account when you are making your calculation and assessing whether the benefits outweigh the disadvantages of re-mortgaging. It can be expensive and will depend on the size of your current mortgage compared to the home value as well as the terms and conditions of your existing mortgage.
Typical charges include:
- Early Repayment charges (ERC)
- Arrangement fees
- Valuation fees
- Exit fees
- Legal fees
An Early Repayment Charge (ERC) will apply when you take action to re-mortgage whilst within your current fixed period mortgage. They are like penalty charges for changing your mortgage within a fixed term. The amount of the ERC will depend on the size of the mortgage and can be calculated in three different ways and as follows:
- A % of the balance still left on the mortgage
- A % of the amount already paid
- A % of the original mortgage amount
The most common type of ERC is usually a % of the loan amount remaining taken between 1% and 5%.
Arrangement Fee:
Lenders can charge for a number of things as part of their cost for arranging a mortgage. Essentially, you are paying a fee to the new lender to set up the mortgage. Usually, the lower the mortgage rate, the higher the fee. You can pay this fee in various ways:
- You can pay up front if you have the means to do so
- You can add it to your mortgage and pay for it over the years-but it is important to note that you will also be paying interest on this amount
This fee can be non-refundable if the deal does not go ahead.
Legal fees:
A Solicitor/Conveyancer will be required for the re-mortgaging of the property. But usually there is less work than when you first apply for a mortgage.
Some lenders offer free legal services as part of the re-mortgaging package and it is always good to look out for this as it will save you some fees.
Valuation Fees:
It will be a requirement of your new lender to seek a valuation of your property as it will have certainly changed since you first took out your mortgage.
Again some lenders can include the valuation fees as part of their re-mortgage package.
Exit Fee:
This is a fee payable to the old lender for closing down your mortgage. Usually the amount of exit fee to be paid in the case of a re-mortgage is stipulated in your mortgage contract. Exit fees can cost anywhere from £50 to £300.
As you can see there are a lot of fees associated with re-mortgaging, but as mentioned there are lenders who will provide an attractive package that may reduce some of these fees i.e. by providing free legal services, free valuation and no arrangement fees. The only downfall with this is that the interest rate may end up being higher as a result of the reduction of fees.
Our goal is to find the best re-mortgage deal on the market to ensure that overall you gain rather than lose as a result of re-mortgaging.
