How Much Does Remortgaging Cost?
When your initial mortgage deal is over, you are given a higher interest rate that is called the standard variable rate or the SVR. This is not how it used to work in the past years, but because many lenders have not been able to prepare their standard small prints for really low-interest rates, it has led to the situation we are in today.
There are some people that pay less on an SVR than others that look around to get better deals. If you think about it, it can seem rather unusual but the statement is not true for everyone.
If you stick with the same SVR for the rest of your mortgage you could even end up paying £50,000 in interest.
To avoid high-interest rates and save money it is a great idea to get a remortgage. But how much does remortgaging cost? You may already know that getting a remortgage comes with several fees that you need to pay.
The cost of leaving your existing deal
Early repayment charges that are required by your existing lender
An early payment charge is the sum of money you have to pay to a lender beforehand in circumstances of repaying your mortgage or overpaying for a mortgage more than is allowed. An EPC is also considered as a type of penalty for breaking the rules of the deal.
This makes the lender use the EPC fee to recover the amount of interest they are losing. The charge usually includes a fixed percentage of the mortgage debt.
If you are on a 5 year mortgage deal, then it could be as high as 5% in the first year, 4% in the second year, and 3% in the third year and so on.
You need to do the proper calculations correctly to see if you can handle this kind of payment. That’s why its always important to see how much does remortgaging costs.
To ditch the existing deal and also make it worth ditching you need to find a good remortgage deal with a lower monthly payment than the existing one you have.
Early repayment charges could go up to as much as 5%
If you have no choice but to pay these charges, you have the right to choose whether you want to pay upfront or increase the new mortgage deal you’re applying for from the new lender to cover these charges.
Be aware that choosing the second option will increase the loan to value ratio. This could send you into a more expensive commitment.
The way you can avoid this fee is to make sure the remortgage you are getting is complete after the current one you have ended. Although, if you get this wrong it might lead you to a financial disaster.
Deeds release fee that is required by your existing lender
This is also known as the admin charge. It is there for paying your existing lender to advance your title deed to your attorney. It contributes to how much does remortgaging cost.
It is not rare to be requested to pay this fee upfront when you set the mortgage up. In cases of leaving the deal, you will be requested to pay the deed release fee at the end of the mortgage. This fee does not include interest with it.
To check the amount that you need to pay for this fee look at the original paperwork or the Key Facts Illustration and mortgage offer.
Mortgage fees that are required from your new lender
Most of the products have one or two mortgage fees. The most common ones are the mortgage arrangement fee and the mortgage booking fee. Here is what they are important for:
This is the largest fee that lenders charge you. In the past, this fee covered the lender’s administration costs. Now it stands for being an essential part of the mortgage cost including the interest rate as well.
This fee is differently known as an application fee, booking fee, or a product fee. Your lender has the right to present it to you in either of these forms. Before agreeing to any mortgage you need to take a look at the fees it comes with. Ask yourself these two questions:
1. What kind of fee is the best?
Depending on the size of the loan you need, you can choose to go for a low fee and high rate deal or high fee and lower rate deal. In general, higher fees are better for large mortgages and vice versa. Both could influence how much does remortgaging cost.
Your lender will give you the option to add the fee to the mortgage or pay the arrangement fee beforehand. The only downside of adding the fee to the mortgage is that it comes with an interest rate.
However, if you pay the fee upfront and something goes wrong with the deal, there is a chance you can lose the money you paid for the arrangement fee.
2. Should you avoid low rates masked behind high fees?
A trick that lenders use is that they make the fees appear higher in order to make the interest rates look more appealing. They do this by raising up the Best Buy tables. Some charge fees that go up to £2000 in total.
The valuation fee that is requested by your new lender
Many remortgage packages do not insist on you paying this fee. Although if this fee is not paid for you it can cost up to £400. This greatly increases how much does remortgaging cost.
Lenders need a valuation to be secured. That is because if you fail to pay they can be able to repossess the home and still profit out of it.
The good side of this is that the valuation fee is the only survey cost you will need to pay. When getting a remortgage for a property you don’t need to provide a structural survey or homebuyers report.
When should you pay the valuation fee?
This fee is paid at the moment you apply. It is often paid at the same time with the mortgage arrangement fee.
The conveyancing fee that is requested by your attorney
When switching from your original lender to the different lender you will need a legal representative to deal with the transfer.
Most mortgages come with a free legal representative. The only negative thing about it is that the lender itself selects the legal representative and pays them the bare minimum. This decreases the chances to get a high-speed service from them.
When using your mortgage to remove or even add a family member to the deal, you need to tell this to your legal representative. This case requires additional procedures that are involved.
It also does not come with a free legal package. If you do not tell them upfront, problems regarding delays may occur. The conveyancing fee costs around £300. The best way to pay it is upfront.
The broker fee that is requested by your broker
When using a broker to help in getting a remortgage they might charge you an additional fee. There are also brokers that do not charge any fees.
Whether or not these brokers’ request a fee, they are worth using to save money if anything goes wrong during your transfer.
You need to be aware that there are brokers out there requesting a fee of £300 to even 1% of your mortgage value. That means that your fee can go up to thousands of pounds.
The amount you pay also depended on the broker. A decent broker reduces the fee you need to pay if they are getting a considerable amount of commission from your lender. Ask your broker for this information before making any payment.
It is advised to stay away from brokers who ask to pay the fee upfront. This is because when fees are paid in advance you could lose the money when you decide to not continue with the broker.
If you’re looking to see how much does remortgaging cost, take into consideration the broker costs.
The repayment of the new mortgage that is requested by your lender
You need to be aware of the rate you are applying for in order to work out the monthly payments of your new mortgage deal.
If you haven’t started researching yet, a Best Buy table can help give you the idea of a realistic rate that might apply to you.
Unfortunately, mortgage payments are an ongoing cost, and remortgaging to a cheaper deal can be worth it. To figure out how much does remortgaging cost, keep the fees in mind.
You need to keep in mind that the first payments are always going to be higher than your other usual monthly payments. This is because you pay interest the same month you get the mortgage.
When it comes to whether or not remortgaging is worth it, you need to understand that the total fees that you need to pay for the transfer can vary from around £3000 to up to £10,000.
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Can I remortgage with bad credit?
You can remortgage with bad credit, although you may not get as good of a deal as you would if you were applying with a higher credit score.
Your lender may charge a higher interest rate so consider taking a few months to raise your score before you apply.
How much does remortgaging cost?
The cost of remortgaging includes legal fees of around $1,000 to set up your new deal. If you have a high mortgage balance still, your new lender may help you cover the fees.
How do you remortgage?
To remortgage, you switch from one mortgage lender to another. You would need to apply to remortgage with the new lender and be approved.
Remortgaging is only worth it when you can get a better interest rate than what you already have.
Why should I remortgage?
You should remortgage if you are unhappy with your current mortgage terms or interest rate. Remortgaging can potentially get you a cheaper rate and save you money in the long run.