How to remortgage Remortgage costs

Take all remortgage costs into account to see if you'll save

Remortgaging carries costs, and you should take these into account when weighing up the pros and cons of switching to a remortgage deal. Visit the mortgage calculators offered by Which? Mortgage Advisers to find out what your repayments could be at different interest rates, if you choose to remortgage.

Costs from your current mortgage lender

Firstly, find out what costs you’ll have to pay your current lender.

If you are still part-way through an initial deal, such as a fixed or discounted rate, you will probably have to pay early repayment charges and these can be high.

Early repayment charges are usually calculated in one of four ways:

• A percentage of the original mortgage loan amount.
• A percentage of the balance still owing on the mortgage.
• A percentage of the amount already repaid.
• A number of months’ interest.

So, if your monthly mortgage interest payment is £500 and your lender charges three months’ interest as a penalty, you’ll have to pay £1,500 in early repayment charges to switch.

That means you would have to be making a saving of at least £125 a month just to break even in 12 months. Over five years you would have to be making a saving of at least £25 a month to make it worthwhile.

There may be exit fees to pay to your current lender, which could range from £50 to £300.

You might also have to make a final interest payment on your existing mortgage. This could be to the end of the month.

Ask your mortgage lender for a redemption statement to see exactly how much you would have to pay to switch.

Costs from your new mortgage lender

If you are switching to a new lender, you’ll have to consider the costs it will charge you as a new customer.

There may be an arrangement, application, booking or completion fees or a combination of two or more of these. Arrangement fees can also be charged as a percentage of the amount you’re borrowing – make sure you work out exactly what this would cost you.

There will also usually be legal fees, although these should be minimal as there is very little legal work for remortgages.

You will have to have your property valued for the new lender so you might have to pay a valuation fee. However, remortgage deals may give you the valuation for free.

Mortgage advice

It is important to take advice in the case of remortgaging. The Which? Group offers an independent mortgage advice service that looks at every mortgage from every available lender. You can also find an independent mortgage adviser using the Unbiased website.

Visit our guide to how to get the best mortgage deal for more on mortgage fees.