If you took a 5-year fixed rate mortgage deal in 2021, this year could be a big one for you, but what are the costs involved?
Remortgaging can be a fee-free process, so understanding exactly what the process is and when some fees may become due are important considerations from the outset.
Why remortgaging matters
If your current deal is ending soon, you could automatically be moved onto your lender’s Standard Variable Rate (SVR). This is often significantly higher than fixed rates and can also fluctuate in line with market changes. That is why it is important to plan ahead and consider your options early.
The main remortgage costs explained
- Arrangement (product) fee
This is the fee charged by the lender for setting up your new mortgage deal. This is usually around £999 and is often applicable on the lower rate deals. It can usually be added to the mortgage, but you will pay interest on it. It is important to understand that the cheapest rate isn’t always the best deal overall as you need to look at the total cost.
- Valuation Fee
Your lender will need to check how much your property is worth. This is often free with many remortgage deals but if not, it usually costs around £100–£300+ dependent on the property value.
- Legal (solicitor) fees
A solicitor handles the legal side of switching your mortgage. This is usually around £300–£1,000 but a lot of lenders offer free legals as part of their remortgage packages.
- Mortgage adviser fee
If you use a mortgage adviser, there may be a fee for advice and arranging your mortgage. This can range from £0 to £500+. A good adviser can often save you more than they cost by finding better deals and scoping the whole of market.
- Early repayment charge (ERC)
This is one of the biggest costs to watch out for. This charge will apply if you choose to leave your current deal before it ends and is usually 1%–5% of your remaining balance. Your mortgage adviser will be able to help guide you in more detail on this.
What most people get wrong
A common mistake is focusing purely on the interest rate. In reality, the true cost of a mortgage includes a lot more
- Fees
- Incentives
- Loan size
- How long you’ll stay on the deal
It is always important that you choose the one that works for you and your situation, not just the headline rate.
Final thoughts
Remortgaging doesn’t need to be overwhelming, but going in without understanding the costs can lead to expensive surprises.
With the current market shifting and many fixed rates ending, now is the time to get ahead, explore your options, and make sure you’re not paying more than you need to.
How PM+M can help
At PM+M, our expert mortgage adviser, Mark Chadwick, will scope the whole of the market to find a lender that suits you and your individual circumstances, guiding you through your options and supporting you every step of the way.
Contact Mark using the buttons below
PM&M Mortgages Ltd is an Appointed Representative of The Right Mortgage Ltd, which is authorised and regulated by the Financial Conduct Authority.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
