Cost of Remortgaging

If you thought remortgaging was all about saving money, think again! Yes, remortgaging does help you free up extra cash, consolidate debts and invest in personal financial projects but there are also hidden costs involved.

You may not be aware of the costs that are involved with remortgaging, so here are some of the most common costs associated with a remortgage.

Remortgage Package Deals

Most lending companies offer remortgage schemes in the form of package deals. These package schemes typically take into account various expenses such as legal expenses, valuation fees etc.

If the lending company is not currently offering any remortgage package, you will need to make a payment in order to switch from your existing mortgage scheme.

Some common associated costs include valuation fees from the lending company, which can start anywhere from 200 pounds and depending on the remortgage deal that you are applying for the cost(s) can rise even more.

There are set-up expenses associated with the remortgage, which on average range between 200 to 800 pounds! These costs are usually charged when you reserve the remortgage, complete the remortgage or when the remortgage is administered.

Other Expenses When Remortgaging

Whilst certain costs need to be paid upfront, others will be added on to the new remortgage. However, this also entails having to pay interest above the fees for the tenure of the remortgage.

Solicitor fees are also included as part of these extra expenses and the solicitor is responsible for ensuring a smooth switch from one remortgage to another. Local search expenses can be around 150 pounds and this is on top of the basic legal expenses you will occur.

Certain lending companies charge redemption fees or penalties, which would come into effect if you switched from this mortgage to another one before the special deal tenure ended.

Make sure to check the applicable redemption penalties from your lending company otherwise you could be in for a shock when you receive the bill!

Financial Workarounds

Given the fact that most lending companies offering remortgages will charge you valuation, legal, solicitor fees and miscellaneous expenses, there are still ways in which you can reduce the number of fees payable.

By opting for a lifetime tracker remortgage deal the interest rate stays within a specific percentage of the base rate for Bank of England. This rate is applicable through the tenure of the remortgage and is usually around 4.94%.

You could also opt for a fixed rate remortgage, whereby the rate remains the same irrespective of market conditions. The downside to this type of remortgage is that if the market rates should fall, you still end up paying a higher monthly payment.

Most remortgage deals, which look financially cost-effective might end up being expensive a few years down the line.

Hence, it is crucial to read the fine print before you register for any remortgage deal, know the actual costs involved, penalties, charges and fees from the lending company as well as what the rate rises to, once the special deal tenure has ended.

Typically, if the introductory rate was very low, it will rise substantially after the introductory period ends.

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