What are the costs of remortgaging? An account of the various fees of remortgaging

Remortgaging, although very profitable for the borrower, in most cases, does have initial costs attached to it. It is very important to understand all these costs and how they add up so you can calculate if remortagaging would be profitable in your particular case.

Let's see what the initial mortgage costs are and when they apply.

Reservation Fees

Because remortgaging is in essence the repayment of the outstanding debt with your present lender and the arrangement of a new mortgage with a more advantageous lender, initial fees for the second mortgage will still apply. Initial fees range from two or three hundred pounds to as much as seven or eight hundred pounds.

Some lenders will not charge a initial reservation fee as a way to attract costumers but be careful as interest rates might be higher for these types of offers and in most cases it is more advantageous over the long term to pay the initial fee but be charged less interest. We generally recommend avoiding fee-free remortgage or mortgage packages.

Initial reservation fees are also referred to as set-up fees, booking fees or arrangement fees.

Valuation Fees

The lender you change to will also want to know the exact value of your property so he is sure that the money lent can be recuperated. You will have to cover these cost that might be anywhere from £ 100 to £ 250, depending on the value of your property. Again, we do not advise to opt for a fee-free remortgage as these come with higher interest rates that will be less advantageous over the long term.

Conveyance Fees

Conveyance fees for remortgages are smaller than with the first mortgage of the property or may be avoided altogether. You might still want to involve a solicitor but be sure to enquire about the exact costs before you do so they can be introduced in your remortgaging profit calculation.

Previous lender's Tie-Ins

A specific cost and preferably one you should avoid is that of the tie-in clause that your current lenders might impose on you. Tie-in clauses usually last as long as the special interest rate offer lasts. If such a clause is still valid on your mortgage consider waiting until it is no longer applicable.

A tie-in clause could force you to pay a percentage of up to 5% of the remaining capital sum or interest equivalent to a couple of months. You have to carefully calculate whether a change of lenders would be profitable with an additional penalty as an added cost or if you would be better of waiting until such a penalty is no longer applicable.

If you have an extended tie-in clause check what the exact validity term is.

Final Word

Depending on the exact costs of remortgaging in your particular case, a change of lenders could reduce your monthly payments by as much as a third.

However, in some cases it may be worthwhile to renegotiate your mortgage deal with your present lender as he might be willing to offer more than the competition.