Remortgaging can help you save on your monthly mortgage repayments. However, there are a few fees you need to factor in to work out whether the savings are as good as they seem.
The ideal time to remortgage is at the end of fixed rate period, because slipping onto a lender’s standard variable rate (SVR) can be expensive. Sometimes exiting a fixed rate early can work in your favour, even if you face early repayment charges. And if you’re on a variable rate and not tied in, it’s always good to keep your eyes out for better rates.
Whatever your situation, the great news is you can avoid some remortgaging fees and prepare for the others so that you don’t get any nasty surprises. Here are 5 to watch out for.
1. Early Repayment Charges
Remortgaging means calling time on your current mortgage deal and searching for something more competitive. And since you’re leaving before the end of the agreement, you may be charged Early Repayment Charges (ERCs).
If you’re on a standard variable rate you might not need to pay ERCs. If you’re on a fixed-rate deal – say, 2-year fix – your lender’s ERCs could decrease as time goes on. In any case, it’ll be clearly stated in your paperwork if you’re expected to pay ERCs for leaving your agreement early.
EVEN WITH THESE FEES, IT CAN STILL WORK OUT CHEAPER FOR YOU TO REMORTGAGE
Even with these fees, it can still work out cheaper for you to remortgage. At Mojo Mortgages we can help you calculate whether your new, lower monthly repayments will still be worth switching to after the charges are accounted for.
2. Exit fees
It’s not uncommon for a lender to charge between £75 and £300* to close your account. Your contract will tell you how much, if anything, you’ll be charged. You can also request a redemption statement for a breakdown of charges.
3. Arrangement fees
An arrangement fee is what a lender charges for setting up your mortgage and is sometimes called a completion fee. The amount varies from one lender to the next and sometimes on the size of the mortgage. You’ll find details in section 8 of your Key Facts Illustration (KFI).
4. Valuation costs
You might be remortgaging with the same lender, but if you do find a better deal elsewhere, don’t be surprised if the new lender wants its own valuation of your property and charges you for it.
On some mortgage deals lenders will waive these costs, but otherwise you could be asked for between £150 and £1,500*, depending on the value of the property.
5. Broker fees
Personalised advice from a mortgage broker can save you money when you remortgage, but some brokers charge a fee for their service (often taking a commission from the lender when you sign up with them too).
At Mojo Mortgages we’re different. We’ll find the best remortgage deal for you and we won’t charge you a penny for it. We’re lovely like that.
*Source: Money Advice Service