Remortgages Fees Are Not Always a Bad Thing, Here's Why...

Remortgaging offers lots of benefits. You can also take advantage of low rate fixed or tracker deals and you can take the opportunity to borrow additional cash to consolidate debts or to improve your home. And, of course, remortgaging can help you to save money on your mortgage repayments.

One option however, is to do your research in the hope of finding a remortgage that does not involve any fees. Many lenders offer free legals or will pay for the valuation, but sometimes this not be the best option. But why?

Upfront Fees Can Mean Lower Interest Rates: Remortgages where there are no upfront fees involve usually a fixed rate mortgage, whereby no arrangement, legal or valuation fees are payable. But this may not always be the best option.

Lots of low rate mortgage deals have an arrangement fee. For example, let's say that you have a £150,000 'interest only' mortgage that you want switch onto a five year fixed rate. A 'fees free' lender may offer you a deal at 5.5% with no associated charges. However, another bank or building society may offer a five year fixed rate at 5% with an arrangement fee of £999. The lower rate saves you £750 per year in interest payments, so it's worth paying the £999 fee as you will save significantly more than this over five years.

Don't Just Look AT Remortgage Deals: It is important that you don't just look at remortgage deals, whereby the lender will pay for valuation and legal fees on the mortgage. You should also look at other mortgages, which involve you paying the fees yourself as this can sometimes actually be cheaper long term.

Let's use the example above again. As well as the two deals identified above, the lender also offered a 4.5% fixed rate deal for five years. However, you had to pay the costs yourself - £400 for a valuation and £350 to your solicitor. The lower rate saves you an additional £3,750 over five years so you would still end up a further £3,000 better off, even though you had to pay some fees.

Paying a broker: Mortgage brokers are professionally qualified individuals who can help you scour the mortgage market to find the best remortgage deal for you. Often, brokers will be able to offer 'exclusive' remortgage deals which are only available through them and can save you an additional sum on your repayments. So, using a mortgage broker can often mean you will benefit from a much better remortgage deal that you'd find yourself.

So you might find that your brokers charge a fee, but if your broker does, you will normally find that the deal they access for you saves you substantial sums of money. Whatever the figures, the amount saved will be a lot more than any fee you will be charged by the broker.

Paying early repayment charges: In some deals, it is a good investment to pay an 'early repayment charge' to your existing lender in order to free you up to take on a better mortgage deal elsewhere. This is especially true if you are paying a high interest rate. You will most likely make substantial savings htat will outweigh anything you spend in the short term.

You need to be sure that the savings you will make on your new remortgage deal outweigh the early repayment charges you will pay to your current lender. The calculations can sometimes be tough and a mortgage broker or financial advisor can often help you look at your various options to decide what the best solution is for you.


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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.