REMORTGAGE COSTS

Nothing is ever for free and a switching your mortgage is no different. Just as when you took out your first mortgage there are several costs associated with setting this up. Depending on the final deal you get you may have to pay none, some or all of them.

When you are calculating whether or not it is worth going ahead with a remortgage you must always take these costs into consideration.

Remortgaging is not exactly the same as buying a property for the first time, so some of the costs you had when you originally bought will not be repeated or may be less. However there may still be some significant costs involved so make sure you know what you’re up for.

Typical Costs of Remortgaging

Property Valuation Fee (£250-£500)

This will be necessary to determine the current valuation of your property. Sometimes the lender may do a deal whereby they pay for this.

Homebuyers Report

Not required for a remortgage.

Structural Survey

Not required for a remortgage.

Mortgage Redemption Penalty (1 to 12 months interest)

If your existing mortgage was a special deal with an initial fixed or discounted rate, then if you repay the mortgage before the initial deal period you may have to pay an early repayment charge or penalty.

The value of these can be quite significant so carefully check the details of your current mortgage deal before proceeding as the size of the penalty you have to pay may mean that a remortgage would be too costly.

Mortgage Exit Fee (£50 - £300)

Even if you are not in a special mortgage deal you may still have to pay an administration or mortgage exit fee to pay off your current mortgage, but this won’t be so large as a mortgage redemption penalty.

However some have lenders have put up their exit fees, in some cases to a significant level, so check with your lender to find out what they are currently charging.

Lenders Arrangement Fee (£300 - £500)

The new lender will charge an administration fee or application fee for arranging and setting up your new mortgage. Sometimes you can have it paid by your new mortgage instead of having to pay the fee yourself beforehand. Sometimes the lender may not charge it.

Higher Lending Charge (£1500 average)

You will be charged a Higher Lending Charge (HLC), previously known as a Mortgage Indemnity Guarantee (MIG) premium, by some lenders when the size of the mortgage you want is above a particular percentage of the value of the property to be mortgaged. For instance this may be applied for a Loan To Value (LTV) ratio of 75% and above.

This can be an expensive cost and is often used by the lender to buy an insurance policy which will pay out if you stop making your repayments and default on your mortgage. It is for the lender’s benefit and protects them from loss if you default. Although you pay you don’t benefit!

Land Registry Fees (£100-£500)

When the mortgage changes on your property the Land Registry must be informed and must be paid a fee to record any changes in their records. In this case they will delete the old mortgage from the title deeds and replace it with the new one.

Local Authority Search Fee (£100-£150)

The cost of this is negligible in comparison to the other costs, which you may have to pay.

Stamp Duty

Not due for a remortgage.

Solicitors Legal Fees (£300 - £500)

Some legal costs will have to be paid but these will be less for a remortgage than for your initial purchase. These fees may be paid by the lender in some deals.

Mortgage Brokers Fees (1% average)

This is the cost paid to your mortgage broker for arranging your new mortgage. This cost could vary a lot depending on the type of mortgage, the resulting complexity and the amount of work involved in setting it up. Some brokers may offer a ‘fee free’ deal and will make their money on the commission they get from the lender.