Cost Considerations To Always Keep In Mind When Remortgaging

There are countless reasons why you may choose to remortgage. You may want to benefit from a better interest rate, undertake some home improvements or borrow cash to consolidate debts. And, when you start the remortgage process, one of the most important factors to take into account is the cost you may incur by remortgaging. Our guide looks at the main fees you may encounter.

Product Fees: Possibly the largest cost in any remortgage deal are the product fees that come with a new loan offer. These fees are usually higher on mortgage deals where a borrower is offered a better rate; these deals include discounted and fixed rate mortgages.

Standard Variable Rate mortgages are normally less costly in terms of the actual product fees, simply because the bank calculates that there is less risk. When the Bank of England base rate goes up, the mortgage rate rises as well, and this means that the bank is protected against a loss of earnings.

Valuation Fee: With every loan secured on a property, even a remortgage, you still must get a completely new property valuation carried out. This is necessary for two key reasons. Firstly it is necessary because when you are moving to a new lender, the bank or building society will want to have the property accurately valued to ensure that the new loan is not higher than the property is supposed to be worth.

The second is that the worth of your home is likely to have increased or decreased since the valuation you had done on the property. Even if you are sticking with the same lender, they will still want to be sure that the property is worth what you think it is worth.

Whilst a remortgage lender may pay for a basic mortgage valuation, you may have to meet the additional costs of a more detailed survey. A homebuyers report or a full structural survey may cost you several hundred pounds depending on the estimated value of your home.

Conveyancing: As with a new home purchase there is some legal work involved in the remortgage process. Lenders often have an appointed solicitor who handles their remortgage legal work and you may even find that the lender will meet the cost of this as part of a special remortgage deal.

If you do have to meet the costs of the conveyancing yourself it is advisable to use a reputable solicitor. Using your own legal team or a solicitor that has been recommended to you should help the process progress more smoothly. This may also save you some money.

Financial Advice Fees: It is recommended when you are planning to remortgage that you make good use of a broker to get the best deals available for you. This will save you a lot of time and hopefully equally as much money. However, these services invariably come with a charge. Either a lender will pay the brokers fee or you will, and in many ways the latter is preferable, you initial outlay will be recouped by savings over time, and you'll probably get sounder advice if you are paying for it.

Early Redemption Penalties: Even though you are holding on to your home when you remortgage, you will still have to pay an early redemption charge if you are within the first few years of the mortgage deal. These normally apply to fixed, discount or capped rate mortgage deals and when you are being offered a preferential rate. Check what penalties could potentially apply to you with your lender and factor these figures into the deal, as they could fundamentally alter the relative profitability of your remortgage.

Though costs will probably vary from lender to lender, there can be no escaping the above charges, so budget accordingly and never forget to shop around for the best remortgage product.


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Timothy Frodsham writes for JustRemortgages.com one of the UK's top sites for the latest remortgage rates and best remortgage deals.