How much does it cost to remortgage?

In the following guide, we’ll explain each of the different charges to give you an idea of the prices associated with remortgaging, along with tips to lower your costs.

The costs involved in remortgaging are enough to give anyone pause, particularly as a number of fees are paid out to various parties.

Whether you’re searching for a better offer, consolidating your debts, or releasing equity on your property, these are the fees you’ll want to consider before make a decision.

While interest rates have fallen in recent years, mortgage-related fees have skyrocketed, and could add in excess of £2,000 to your remortgaging costs.

One of the benefits of remortgaging is securing a favourable deal that gives you access to better rates on the property market. While this is a clear advantage for any homeowner, it’s important to look through the overall costs involved in remortgaging than simply the rate itself.

Early Repayment Charge (ERC)

Cost: 1% - 5% of your outstanding mortgage

This first fee is only applicable if you choose to remortgage before your tie-in period ends. You may also incur an ERC if you overpay by more than the lender has stipulated in the contract or if you pay it in its entirety at an earlier than agreed upon date.

If your deal has a tie-in period, check whether it is longer than the mortgage period. Many lenders will charge an ERC even your deal has elapsed, as they may require you to spend a set amount of time on their standard variable rate (SVR) after your deal ends.

It is your choice as to whether you wait for the SVR period to end or simply pay the ERC to switch whenever you like.

Be sure to find out when your early repayment period elapses before switching to a new deal. Failure to do so may significantly lower, or even remove, the potential savings you could make.

Should you choose to pay the ERC, you may have the option to pay upfront or add the costs to your new mortgage – though choosing the latter means you will also pay interest on it.

ERCs are typically between 1% and 5% of your outstanding balance. For example, if you still have £100,000 left to pay on your loan, it would result in a £1,000 fee.

In many cases, and especially if your lender is a high street bank like Natwest, HSBC or Lloyds, your percentage will be reduced the longer you have had the deal.

Remortgaging is often chosen as a way to avoid the standard variable rate you will automatically switch to once your initial deal elapses. Paying an ERC may actually work out cheaper.

It is preferable to shop around near the end of your current mortgage, as you will not be required to pay penalty charges. Otherwise, check with your mortgage adviser, who can steer you to the right deal for your needs.

Deed Release Fee

Cost: £50 – £300

A deed of release is a legal document that removes a previous claim on an asset, such as a home, and is proof of release from this binding agreement.

Otherwise known as an administration fee, the deeds release fee is charged by lenders once your mortgage is paid in full. Essentially, it covers the legal costs of having your title deed returned.

It is charged if you dissolve your contract before the pre-agreed term, though it differs from an ERC.

It may be that you have opted for a more attractive deal with another lender once your fixed rate ends. It can also be levied if you pay off your outstanding mortgage by overpaying or by paying with a large lump sum.

Please note, your contract may also stipulate a mortgage exit fee of between £75 and £300.

Arrangement Fee

Cost: £200 – £2,000

An arrangement fee is charged by lenders for arranging credit on your behalf. While it may seem unusual that these are considered administrative fees – if it is just used to cover the cost of setting up the loan, why do prices vary so wildly? – but it is actually linked to the lenders’ interest rates.

In short, the lower the rate, the higher the arrangement fee. It offers lenders a way of making returns on their low-interest offers.

Lenders may say that the fee offsets the costs of underwriting, assessing mortgages and other basic admin services, but in practice, the low-high interest rates balance out the high-low fees – offering a trade-off which, for the borrower, is paid in a fixed sum or as a percentage of the loan.

Before making a decision, look through the annual percentage rates (APR) of each lender to get a thorough idea of the associated costs involved in remortgaging.

High fees may actually be better for those taking out a large loan because they will have cheaper interest rates over a long period.

Conversely, low fees are ideal for those with smaller loans, as they can delay paying the mortgage.

Many lenders will allow you to add the arrangement fee to your loan, but you will have to pay interest on it.

Conveyancing Fee

Cost: Around £300, though the lender may cover it free of charge

When you’re remortgaging a property, it is advisable to hire a property conveyancing solicitor.

Their responsibilities are as follows: performing ID, Land Registry and leasehold checks; obtaining redemption statements from your existing lender; conducting property searches; issuing a formal offer after valuation; and combing through your contract before gathering the signatures of each involved party.

Many remortgages include a free legal package which covers such charges, though in this event the solicitor will be chosen by the lender. Alternatively, you may pay the fee and have the freedom to shop around for a solicitor. Some lenders may even offer you a cashback incentive if you use your own.

Your property conveyancing solicitor will also pay off your old mortgage upon completion and send the remaining money to you.

Valuation Fee

Cost: Around £300 – £400, though it may be offered free of charge

Unlike new home mortgages, a valuation fee is the only survey cost you may have to pay. You will not be required to pay for a homebuyer’s report or structural survey, for example.

Through either a desk-based or physical inspection, your loan to value (LTV) ratio will be calculated to give you an indication of your home’s market value, and determine which mortgage rates are available to you.

A valuation is necessary for the lender’s security. If you fail to repay the loan for whatever reason, the lender is then able to repossess the property and recoup their investment.

It is paid when you first apply for a mortgage and is often bundled in with the booking and arrangement fees.

You can do some of the research yourself by accessing online valuation tools – which are based on the Land Registry Database – and comparing similar properties in your area.

Remember, your available interest rates are subject to change if your valuation places you in a different LTV band.

Mortgage Broker Fee

Cost: Free, or at a fixed fee between £300 or 1% of your loan amount

A mortgage broker compares deals on the market, calculates affordability, handles the paperwork and mortgage application, and negotiates terms and conditions. They may also source value-added mortgage products to attach to your loan.

Many mortgage brokers do not charge a fee for their services, but those who do may charge around £300 or 1% of your total loan amount.

It is also dependent upon whether the broker keeps the lender’s commission. Ask if they are wiling to reduce your fee in return for a good commission.

Even if they are paid via commission, you should be able to receive impartial mortgage advice from them. Check how they are paid from the outset and be sure to verify your broker’s fee in advance by getting an estimate in writing.

Some brokers ask for fees in advance. This is not recommended, as you stand to lose money if you choose to pull out. Only pay once the mortgage is finalised.

Delays may result in extra time fees, which can be incurred if the borrower does not disclose their full financial details or fails to send the correct information before a deadline. Make sure you have all your documentation in order before meeting with a broker to avoid this charge.

These are the typical costs that are involved in the remortgaging process, though it is still important to meet with a specialist to discuss the variables that may affect your specific remortgaging costs. Remember to compare the rates, quotes and all remortgaging fees with your mortgage adviser before finalising any deal.

You may also find it helpful to ask for a copy of the key features illustration, which documents every potential fee. For more information on how you can lower your remortgaging costs, contact our team directly.