Fee-free remortgages
Remortgaging is all about trying to weigh up the benefits and total savings possible. With this in mind, is a fee-free mortgage always the best option? We take a look.
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The difference between remortgage rates one lender and another can offer is often in the hundreds, whereas remortgage fees can run into the thousands. But is a fee-free remortgage always the most cost efficient?
What is a fee-free remortgage?
There is no such thing as a totally fee-free remortgage, usually ‘fee-free’ refers to the arrangement fee. While this is the highest fee you’ll typically pay when remortgaging, it certainly isn’t the only one.
However, arrangement fees are the main 'set-up' fee when it comes to mortgages and can be up to £2,000, so a no-fee mortgage deal is often attractive.
However, when remortgaging, you can also incur fees from your old lender, such as exit fees and early repayment charges. Early repayment charges (ERCs) are usually a percentage of your overall mortgage debt, so can be fairly pricey.
If you are coming to the end of your introductory period, or already on an SVR (standard variable rate) then you won’t have any early repayment charges to pay. However, it is fairly unusual to find a remortgage whereby the arrangement fees, valuation fees and legal fees are covered.
Should I get a fee-free remortgage?
As you compare the remortgage deals available, you’ll notice that fee-free deals tend to have a higher rate of interest.
Ideally, the remortgage deal that will work out best for you is the one that costs you the least in the long term. So it’s important to look at the APRC to help you to understand which deal offers the greatest benefits over the life of the mortgage.
Keep in mind, however, that the APRC, which all lenders are obliged to show in the deal’s small print, won’t take into account the fact that most people remortgage after their initial period.
On the Mojo Mortgage Matcher screen we do that for you, and you can see deals filtered by the lowest total cost. Then, if needed, you can get free expert mortgage advice to ensure you’ve fully considered all of the options and chosen the best for your circumstances.
Of course, there’s no point in choosing the remortgage deal that saves you the most over 2, 3 or 5 years, if you can't afford to pay fees upfront, or have to put these fees on a high-rate credit card for instance.
Some lenders will add your fees to the mortgage debt - but. Again, it's important to realise that this will mean paying interest on the fees too.
Is 'fee-free' really a fee-free mortgage?
Fee-free usually refers to the fact that there is no arrangement fee. It's always worth checking whether there is an admin cost or a valuation fee with the lender.
There will still be legal fees, and possibly a broker fee. Although Mojo never charges any fee. If you are unsure, Mojo offers free expert advice via one of our fully qualified and FCA registered mortgage advisors, and can help you get exactly the right deal for your circumstances.