The Hidden Costs Of Remortgaging

house out of money

Many of us remortgage our homes as a way of finding a better deal or as a way of raising some money. But whilst we all focus on the interest rate charged there are often hidden fees which can really rack up, in fact the average fee for a fixed rate mortgage is now more than £1000, the highest it has been for four years.

Attractive Offers

Many lenders are now trying to encourage us to change mortgage provider with the lure of a lower interest rate. But some of the lowest interest rates also have the highest fees, one is as much as £4000. The average fee is £1,018 compared to £886 in July 2014. There are a number of fees you could be charged for changing your mortgage provider. Here we list them for you.

Early Repayment

You can be charged an early repayment fee if you repay your mortgage during the tie in period, which is usually the length of time you had a deal for. This is essentially a penalty for breaking the deal early, and is a way for the lender to get some of the money back it will lose by you leaving. The charge is usually a percentage of the mortgage debt. Do work out exactly what this charge will be as it could be more prudent to wait until your tie in period is coming to an end.

New Lender Fees

Most mortgage providers will charge you a mortgage booking fee and a mortgage arrangement fee. An arrangement fee is also called a product fee, booking fee or application fee. Do check out how high this fee is as you may be offered a low interest rate but if the arrangement fee is really high then it may not be such a good deal.

The booking fee is often applied to fixed rate, tracker or discount deals and is usually around £100-£200. You normally have to pay this as soon as you make an application and it is non-refundable. 

Exit Fee To Current Lender

This is essentially a fee you pay to your current lender to cover them for sending on your title deeds to your solicitor. Some providers give you the option to pay this up front when you take the mortgage out or when you leave. Do check out all your paperwork to see what the charge is as some mortgage providers have been known to charge more as an exit fee than was in the original contract.

Additional Fees

There will also be fees payable to your new lender. These include a valuation fee which in some cases is free, if not this usually comes in around £300-£400. You will also need to pay your solicitor a conveyancing fee, although some remortgages offer free legal work. If not this could come in around £300.  If you have used a mortgage broker then you may also have to pay them a fee which can range from a set fee to a percentage of the loan.

 

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