How much will remortgaging cost?
Mortgage fees, solicitor costs & more
There are different costs to remortgaging and it's important to know what these are. This guide explains what fees and charges you'll potentially face. Some won't apply to you, but we've listed them in a timeline of when you'd likely have to pay them, and to who, so you can get a rough idea of how remortgaging can ultimately cost.
Need a new mortgage? Switching lender isn't your only option. You can also get a new deal from your current lender – something called a product transfer.
Costs for leaving your current mortgage deal
There are two fees you may have to pay to your existing lender to remortgage away from them (though not always):
1. Early repayment charge
An early repayment charge (ERC) is a penalty applied if you either leave your mortgage deal before it has finished or overpay your mortgage by more than is allowed. For example, in the event you've got a five-year fix but decide to remortgage after three years.
Essentially, you're being penalised for breaking the deal early, so the lender uses the ERC to recoup the interest it will lose. The ERC is usually a percentage of your outstanding mortgage debt – but often that percentage reduces the longer your deal's been running.
For example, with a five-year fixed deal, the ERC could be 5% in year one, 4% in year two, 3% in year three… you get the gist. So on a £200,000 outstanding mortgage balance:
5% is equivalent to £10,000
4% is equivalent to £8,000
3% is equivalent to £6,000
An early repayment charge could cost you up to 5%
How can I avoid this fee?
If you don't want to pay an ERC, make sure your remortgage completes after your current deal ends – for example, at the end of your five-year fix, two-year tracker, etc.
Many lenders let you lock in a new deal three to six months in advance, so if your current deal is ending soon and you want to secure today's rate, this can help. Though when you lock in make sure you set the remortgage date for the day after your current deal ends.
It's a financial disaster to get this wrong, so make sure your solicitor has the right date.
Is it ever worth paying an early repayment charge?
In some circumstances it can work out paying an ERC – as long as you've done your sums:
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The new deal would have a much lower interest rate than your current one. So you still might save even if you have to pay an ERC – see our Ditch your fix calculator.
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You believe interest rates will go up significantly by the time your deal ends. In this situation, you might consider paying an ERC in order to move deal now rather than later. In essence, you're paying to ditch your current deal early to secure today's interest rate, in the hope of insuring against future rates rises. But without a crystal ball, there's just no guarantee of knowing what'll happen to interest rates – so doing this would be very risky.
Important. If you pay an ERC, you can either pay the lender you're leaving upfront, or get a bigger mortgage from your new lender to cover the charge. Note that the latter will increase your loan-to-value, meaning you might get a worse interest rate.
2. Deeds release fee
A 'deeds release fee' – also referred to as an 'admin charge' – is paid to your current lender so they can give your solicitor the property's title deeds.
Often you can choose whether to pay this fee when first setting up the mortgage or when the deal ends. As interest isn't charged on it, it makes sense to pay at the end. See your original mortgage paperwork to check that what you're being charged matches up.
If your lender charges a deeds release fee (not all do), it'll set you back from £50 to £300.
Costs for getting your new mortgage deal
There are also a number of fees you could end up paying to set up your new, remortgage deal.
1. Arrangement fee
Most mortgage deals have at least one, if not two, fees: the mortgage arrangement fee and mortgage booking fee.
The arrangement fee is the biggest of the two fees, and is a key part of the true cost of a mortgage deal, along with the interest rate. It's sometimes called a product fee, or even, confusingly, booking fee or application fee – in fact, lenders can conjure up any name for it.
ALWAYS look at this fee when choosing a mortgage deal. There are two things to consider:
A low interest rate might disguise a high fee. Lenders sometimes use high fees to make their interest rates look more attractive, so they rise up the best buy tables. Expect an arrangement fee to cost at least £1,000 to get a top interest rate, possibly £1,500.
How big a mortgage do you need? Whether it's best to go for a high fee/low-rate deal or a low fee/high-rate deal depends on the size mortgage you need. Generally speaking, higher fee/lower-rate works better for larger mortgages. Our Compare two mortgages calculator can help you to see the correlation.
You can usually choose between paying the arrangement fee upfront or adding it to your mortgage. The disadvantage of adding a fee to your mortgage is you'll pay interest on it until you've cleared the mortgage. But if you pay the fee upfront, you could lose it if you don't end up completing the remortgage (say you're moving home but the sale falls through).
Luckily, there's a trick you can use to ensure you don't lose the fee or pay any interest...
Add the arrangement fee to your mortgage – but pay it off immediately
Adding a fee to your mortgage protects you from losing the fee if your remortgage doesn't go ahead for any reason. Don't worry about this affecting your loan-to value, it won't.
But if you are at the top of an LTV band, the lender might not allow you to add it. So check.
To avoid paying interest on the fee, after your new rate kicks in make a mortgage overpayment equivalent to the size of the fee (though only if you can afford it). Lenders usually allow overpayments of 10% of your mortgage balance each year without penalty.
2. Booking fee
Rare these days, but some lenders charge a booking fee to secure a mortgage deal (might also be called an application/reservation fee). If yours does, it'll be between £100 and £300.
If the deal comes with a booking fee, you'll need to pay it as soon as you apply for the deal. The fee is non-refundable, so you won't get it back if the remortgage falls through.
3. Valuation fee
When it comes to remortgaging, most lenders give you the valuation for free. If yours doesn't, expect to pay around £300 to £500 – though it can be significantly more than this, depending on the value of your property (sometimes more than £1,000).
Lenders require a valuation for their security, so they can be sure that if you're unable to repay the mortgage, they can repossess your property and get a decent amount for it when it's sold.
Fortunately, this is the only survey cost you'll face. Unlike buying a new home, you won't need to shell out for a homebuyer's report or structural survey.
The valuation fee will need to be paid when you apply for the mortgage deal.
4. Conveyancing fee
Legal work is required to replace your lender's interest in the property with the new lender.
Many lenders include this for free with a remortgage. But the lender will select the solicitor, and chances are it's paying the bare minimum, so don't expect a high-speed service.
And remember when remortgaging:
If you're adding/removing a name from a mortgage, you need to tell your solicitor
That's because there's additional work involved and it won't be included in any free legal package, so you need to get a quote from the solicitor. If you don't tell them upfront, it could cause delays later on (and affect the completion date).
If the legal fee isn't included in the deal, you'll have to pay it upfront – it'll cost around £350.
5. Broker fee
If you're using a mortgage broker, it may charge you a fee. But there are many fee-free brokers too, which can save you money.
Where you pay for a broker, the fee can be anything from £300 all the way up to 1% of the mortgage value (£1,000 per £100,000).
What you pay can also depend on whether the broker gets commission from the lender. A broker may be willing to reduce your fee if they're getting decent commission. Always ask.
Beware of brokers that ask for the fee upfront. As with most fees paid in advance, you could lose it if you later decide not to go ahead with the remortgage. Where possible, ask to pay the fee when the mortgage completes (though you can't add it to your mortgage).
See our Cheap mortgage finding guide for more on how to find a good broker.
6. Your new mortgage repayments
To work out the exact monthly repayment for your new mortgage, you need to know the rate you'll be applying for. Use our Mortgage best buys tool to benchmark a realistic rate.
Then have a read of our Cheap mortgage finding guide, which'll give you a full rundown of how to find and apply for a top mortgage deal. Once you know your rate, our mortgage calculator can show you your rough monthly repayment.
Your mortgage repayments are an ongoing cost, but hopefully you'll be remortgaging to a good deal. Your first payment is likely to be higher than the rest, as you pay interest in the month you get the mortgage as well as for the upcoming month.
Looking for more mortgage help?
We've got lots of other helpful guides:
Remortgage guide. A full remortgaging how-to.
Cheap mortgage finding. How to find the top deal for you.
Mortgage best buys. See today's top mortgage deals.
Should you remortgage? What to ask yourself.
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