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October 7, 2020
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When you are remortgaging, it's all about trying to weigh up the total savings, which can be up to £300 a month against potential fees that can run into the £1,000s. So, if you had the option of a fee-free mortgage, you'd take it right?
Not always, let's take a look.
First of all there is no such thing as a fee-free remortgage. When you remortgage you take out a new mortgage with a new lender who pays off your debt to your existing lender.
So, on that basis, you could look to remortgage to a fee-free product, but you may find that actually doesn't save you money. (More on that below.)
Arrangement fees are the main 'set-up' fee when it comes to mortgages. They can be up to £2,000, so avoiding these with a no-fee mortgage deal looks good.
The added complication when remortgaging is that you can actually incur fees from your old lender, even if your new lender is fee-free.
These fees come in the form of exit fees and early repayment charges, although it is mainly early repayment charges that you want to avoid, as they are usually a percentage of your overall mortgage debt, so can be fairly pricey.
The good news is that if you are coming to the end of your introductory period, or already on tour bank's SVR then you will not have any early repayment charges to pay and in theory could get a fee-free remortgage.
That depends on the other aspects of the mortgage deal.
Around 40% of mortgage deals are currently advertised as fee-free or no fee. No fee headlines can have the effect of luring customers in, as can extremely low headline rates.
As you look and compare what remortgage deals you can get, you'll see that very broadly fee-free deals – those without arrangement fees, or valuation fees – tend to have a higher rate of interest.
You can compare all the remortgage deals available to you with Mojo. It takes a few minutes and if you need it, you can get free expert advice.
In order to get the remortgage deal that works out best for you, and costs you the least in the long term, you need to compare the total cost of every monthly mortgage repayments across the period plus the fees.
On the Mojo Mortgage Matcher screen we do that for you, and you can see deals filtered by the lowest total cost.
Of course, there is no point 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.
If that's the case you can opt for the cheapest no fee mortgage deal, or see if your lender will add the cost of the fees to the mortgage debt. Again, if you want to do this, it's important to realise there will be a knock on effect for the overall cost, as you will be paying interest on the fees too.
If you are unsure, Mojo offers free expert advice and can help you get exactly the right deal for your circumstances.
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.
Here's a few other articles you may find useful.
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