Remortgage Fees And Costs
Remortgaging your home basically entails taking out a new mortgage on the existing capital that you owe on your home.
There can be many benefits to remortgaging your home, although you will also likely end up needing to pay a variety of different fees in order for this process to go through.
In this guide, we’ll discuss some of the benefits that remortgaging your home can offer, as well as some of the fees involved in the process.
If you decide to use our services here at Loan Corp, we can also provide you with expert mortgage advice that will help you to decide whether it would be a good idea to remortgage your home or not.
Use our online mortgage calculator as a guide for your monthly repayments now
Benefits of Remortgaging Your Home
As we have mentioned above, there are some benefits to remortgaging your home; otherwise, there wouldn’t be any reason to do it!
In this section, we’ll discuss some of the benefits attached to remortgaging your home.
Reduction in monthly payments
People generally choose to remortgage their homes in the UK between the second and fifth years of their mortgage term. This is due to the fact that the interest rate of a mortgage deal often reverts to the Standard Variable Rate of your chosen lender during this period.
This interest rate will often be higher, meaning that your monthly mortgage payments will increase, which is why many homeowners choose to remortgage their homes at this time.
This allows these homeowners to take advantage of possibly lower interest rates, as it will allow them to once again pay the interest on their mortgages at a fixed rate. They may also be eligible to receive another discount period, which is provided at the start of a mortgage term.
It can help you pay off other debts
The interest rate on a mortgage deal is generally much lower than it is on credit card debt and some other types of debt, so many people often choose to remortgage their homes in order to free up some capital to pay off their other debts.
This means that if you have accumulated a lot of high-interest debt, you can remortgage your home, use the extra capital you receive to pay off these debts and transfer the cost to your mortgage, which will likely have a much lower interest rate.
Can reduce your term
If you are no longer happy with your current mortgage term and prefer to pay your mortgage back in a shorter term, then remortgaging your property can help you do this.
You can renegotiate your interest rate and term if you decide to remortgage your property so that you won’t be stuck paying interest at a much higher rate than everyone else if the interest rate has decreased since you first negotiated your mortgage deal.
While remortgaging your property can offer a variety of benefits to you, there are some fees involved in the process that you’ll need to pay before your remortgage deal can come into effect.
Below, we will discuss the various remortgage fees and costs that you can expect to pay if you decide to remortgage your home.
Telegraphic transfer fee
A telegraphic transfer fee, which is also known as a Clearing House Automated Payment System (CHAPS) fee, is a fee that you pay to your mortgage lender in order for them to transfer money to your solicitor.
It covers the disbursements, costs, and VAT that go along with receiving funds from remortgaging your home.
This will normally cost you between £25 and £50, but an important thing to note is that it is a non-refundable fee, so if your remortgage application is not approved, you won’t be able to get your money back.
You will normally be charged booking fees when you apply for a new mortgage or are trying to remortgage your home with an existing mortgage.
This fee is also non-refundable in many cases, so you will not be refunded if your mortgage application has been unsuccessful.
Some mortgage lenders will lump this fee together with the arrangement fee, so you may not see it when looking at your remortgage costs.
Some mortgage lenders will only charge you booking fees if the amount you owe on your home when looking to remortgage is large, while other mortgage lenders may not charge this fee at all.
If you are charged this fee, then you can expect to pay between £99 and £250.
If you want to remortgage your home, the lender you are looking to remortgage your home with will need to evaluate your property to determine whether it is worth the amount you want to borrow.
Thankfully, many remortgage packages do not include this fee, and even if they do, it will be the only survey cost you’ll be liable to pay. You won’t also need to pay for a structural survey or a homebuyer’s report like you would if you were applying for a mortgage on a new home.
Alternatively, you could also pay for your own private property survey to identify the maintenance and repairs your home may need, as this could also be a bit cheaper and save you some money.
If you don’t decide to do your own property survey, this fee will cost you anywhere between £250 and £1,500, depending on the value of your property and how long it will take to survey.
Mortgage account fee
Your mortgage account fee will cover the administration costs of your chosen mortgage lender. This fee will normally include the costs involved in setting up, maintaining, and then closing your old mortgage.
If you are charged this fee, then you may not need to pay an exit fee, as your mortgage account fee will cover this cost. However, you may still need to pay an early repayment charge if you have closed your mortgage before your term was up.
A mortgage account fee will normally cost you between £100 and £300.
If you are looking to remortgage your home, but couldn’t make some of your mortgage repayments on your old mortgage, then you will need to pay these fees, likely along with a penalty fee for your missed payments.
This penalty fee will differ from lender to lender, depending on the rules and policies that they have in place and how much you owe on your missed payments.
Mortgage broker fee
If you choose to hire a mortgage broker when going through the remortgage process to help you arrange your mortgage or offer you advice, you will often need to pay them.
Some mortgage brokers won’t charge you this fee, and they will instead take a commission from your mortgage lender; however, you will need to pay this fee if you choose to hire certain mortgage brokers.
This fee can vary dramatically as some brokers will charge you a flat fee of between £300 and £500, while others could charge a percentage of the amount you are looking to loan.
This can become pricey, as a 1% commission fee could cost you £1,000 if you loan £100,000, so you should choose your mortgage broker carefully.
Those looking to remortgage their homes should also be wary of mortgage brokers who ask for their fee upfront, as if the transaction does not go through, you will likely not be refunded.
Higher lenders charge
If you are planning to remortgage your home, you won’t always need to pay a higher lenders charge.
This fee normally only applies to those who place a small deposit down on their home loan, as it covers the cost of the lender’s insurance if someone is unable to meet their mortgage repayments and their home will need to be sold at a loss.
This fee will normally be set at 1.5% of your mortgage value, and, unfortunately, the only way to avoid this fee is by putting a larger deposit down, such as a 20% deposit instead of a 10% deposit.
There are, however, a few lenders on the market who will absorb this cost themselves, but this might result in your monthly repayments being slightly higher.
Buildings insurance fee
This fee is not always charged any more, and whether you end up having to pay this fee or not will depend on the lender you choose to get your loan from.
A buildings insurance fee can also be known as a freedom of agency fee or a fee for own buildings insurance arrangements. It will usually only apply if you decide to find your own buildings insurance instead of taking the one offered to you by your chosen lender.
While this fee may seem annoying and unnecessary, it is generally always best to just pay it and shop around for your own insurance, as you’ll probably be able to find a better deal this way, so you won’t have to pay as much for your monthly insurance premiums.
A buildings insurance fee normally costs around £25.
Early repayment charge
This fee will not always apply, so whether you need to pay it or not will depend on the mortgage provider you choose to loan money from.
An early repayment charge is also considered to be a penalty fee that you will be liable to pay if you “overpay” more than what is required of you monthly consistently or repay your mortgage during your tie-in period, which is normally the length of time of your initial deal.
The reason this penalty is applied is due to the fact that by paying your mortgage early, you are breaking your mortgage deal early, which means the lender will not receive all of the interest that they had planned to receive, so they charge you a penalty fee in order to recover these losses.
This fee is usually a percentage of your outstanding mortgage debt and reduces on a yearly basis, depending on how long you have stayed with your current deal. For example, you could be charged 10% if you break your deal in the first year and 7% if you break your deal in the second year.
You may also be liable to pay back any discounts you received in legal fees as part of your mortgage deal.
An exit fee is often paid to your lender when you repay your mortgage, whether you repay it early or not.
If you had to pay for a mortgage account fee, then you will likely not need to pay an exit fee.
An exit fee will normally cost you between £75 and £300.
An arrangement fee can also be called a product fee or a completion fee, as it is the fee you pay to secure your mortgage product.
You can sometimes add this fee to your mortgage if you can’t pay for it at the time; however, this will increase the cost of your monthly payments, interest, and the total amount you owe.
Arrangement fees can cost anywhere between nothing and £2,000. However, you should expect to pay at least £1,000 if you want to get a good interest rate.
What are the disadvantages of remortgaging your home?
While there are some benefits to remortgaging your home, some of the disadvantages include the fact that you are prolonging your debt and increasing it, which is an important aspect to consider.
Do you need a solicitor to remortgage your home?
If you are remortgaging through the same lender, you may not need a solicitor, but you should check with your lender beforehand. If you are changing lenders, then you will need a solicitor.
What does a surveyor look for when remortgaging?
They will look for any obvious problems with your home that could have an impact on its value.
If you aren’t sure whether you should remortgage your home after seeing this lengthy list of fees involved in the process, then you should contact Loan corp, as we can provide you with expert mortgage advice, so you can find a deal that suits you so contact us now.