Taking out a remortgage can be a good idea for a number of reasons, but there are also several costs and fees applied to remortgages.
It is up to every mortgage holder seeking a cheaper remortgage to weigh up the costs and fees attached to changing loans.
Sometimes, the costs and fees attached to a mortgage loan will be worth paying in order to take advantage of better rates.
Many remortgages have fees and costs attached, including valuation fees, legal costs and early repayment charges or redemption penalties.
Valuation fees and costs
The lender that you remortgage to could charge for valuation fees, largely due to the fact that most mortgage lenders to do trust the initially survey and need to reassess the value of the house. Some lenders provide free valuations to prospective new customers, as a way to attract more business.
Remember, as with all mortgage fees and costs, that the whole cost of the remortgage should be considered, not just the cost of the valuation.
Arrangement fees have increased significantly in the last decade. The cost of remortgaging can carry a surprisingly large fee, and remortgage customers should always check to see how much this fee is when looking for a remortgage.
Remortgage redemption penalties (early repayment charges)
Early repayment charges (ERCs), also known as mortgage redemption penalties, can be one of the most expensive aspects of a remortgage. Special mortgage offers usually last for a set period, and anyone that tries to remortgage during this set period can attract high redemption penalties.
The aim of redemption penalties is to keep customers with the lender for a certain period of time, at least until they have made a profit. Redemption penalties can be particularly high during the first year of a mortgage for those borrowers .that seek a remortgage.
When looking for a remortgage, it is worth assessing how much your redemption penalties will be on your current loan, and also how much it will cost when you want to remortgage again a few years down the line. In the competitive UK mortgage marketplace, many lenders do not attach early redemption charges.
Redemption charges and early repayment penalties are usually in the small print, and consumers should ask both their old and new lender how much these penalties are in relation to their remortgage.
Legal and administration fees
Legal fees and administration fees are often applied to a remortgage to cover the costs of hiring a solicitor and setting up the remortgage.
Some mortgage lenders are more competitive than other. Furthermore, some lenders will agree to refund certain fees if optional extras are included in your remortgage, such as mortgage payment protection insurance.