Remortgaging is a common strategy for homeowners, landlords and investors to secure a better mortgage deal, release equity from their property, or switch to a more flexible mortgage product. When handled correctly, the potential savings of a remortgage can be significant. However, it is important to understand the associated costs before choosing this approach, as they can sometimes outweigh the savings you would make.

The total cost to remortgage depends on your current mortgage deal, the terms of your new lender and what is needed on the legal side. For example, in most cases, and especially when you switch from one lender to another, it will be necessary to undergo a similar conveyancing process as you did when you first bought the property. Factors such as your new lender's management costs and their requirements from the conveyancing process can affect the total, and should be clearly outlined in their terms.

At JMW, we specialise in conveyancing for remortgages and have represented many clients through this process efficiently and successfully. We advise on what to expect at all stages of the process and handle the paperwork on your behalf to make the remortgage proceed as smoothly as possible. While the costs involved are not unpredictable, they should be researched before you choose a new mortgage lender or product and move ahead with the process. Here, we outline the fees involved in borrowing more or switching from an existing deal to a new one, and how they can affect the financial viability of remortgaging your property.

What Are the Main Costs When You Remortgage?

There are several ways to switch your mortgage, and each will come with different types of fees. Some lenders offer incentives like a fee-free remortgage package, with no arrangement fee, a free valuation and free legal services. However, even in these cases, you will still need to consider any early repayment charges imposed by your current lender. It is important to budget for every possible charge to protect your investment in your property during a remortgage.

Early repayment charges

An early repayment charge is a fee you may have to pay to your existing lender if you leave your current mortgage deal before the initial term ends, such as during a fixed-rate period. This is typically the largest remortgage cost and is calculated as a percentage of your outstanding mortgage balance. You can avoid an early repayment charge by waiting until your current deal expires before you remortgage, but some investors remortgage early to get the best possible rate.

Arrangement fee (or product fee)

Most new mortgage deals come with an arrangement fee, also known as a product fee. This is a charge from the new lender for setting up your mortgage. Often, a mortgage with a lower interest rate will have a higher arrangement fee. You can usually pay this fee upfront or add it to your mortgage balance, but be aware that if you add it to the loan, you will pay interest on the application fee for the entire mortgage term.

Legal fees

When you switch to a new lender, you will need a solicitor to carry out the legal conveyancing work. This involves removing the old lender's interest in your property and registering the new one. Some lenders offer free legal services as an incentive, but this means using a solicitor chosen by the lender, who acts primarily for them. If you wish to protect your investment, it is advisable to choose your own solicitor, and legal costs are generally negligible compared to the savings you can make by remortgaging.

Valuation fees

Your new mortgage lender will need to carry out a valuation of your property to confirm its current market value. This helps them determine the loan-to-value ratio, which influences the interest rate you are offered. Valuation fees vary depending on the property's value.

Mortgage broker fees

If you use a mortgage broker to compare different lenders and find a new deal for you, they may charge a fee for their service. Some brokers are fee-free as they receive their commission directly from the mortgage lender.

Exit fees (deeds release or administration fees)

Just as your new lender charges a fee for setting up your new mortgage, your existing lender may charge exit fees for closing your account and sending the title deeds to your solicitor. Not all lenders impose these charges, so check your original mortgage agreement to ensure you budget correctly.

Booking fees

A booking fee is a non-refundable, upfront charge to secure a specific mortgage rate. Also called a reservation fee, this type of charge is growing increasingly rare.

There are many things to consider to make sure you have accounted for all of the relevant charges. For example, fee-free remortgage deals offer a way to save on these costs initially, but usually have a higher interest rate, so you should always calculate the total cost over the fixed term to decide what is best for you.

Can You Save Money When You Remortgage?

If your goal with remortgaging is to save money in the long run, there are several steps you can take. The potential savings from a better mortgage deal can far outweigh the upfront fees provided you approach the process carefully.

Once your initial fixed-rate deal ends, you will likely be moved onto your lender's standard variable rate, which is usually much higher. You can start looking for a new deal three to six months before your current one expires, and this means you will avoid paying inflated interest. If you find a new mortgage deal with a lower interest rate, you could keep your monthly repayments the same and shorten the loan term. This means you will pay less interest over the life of the mortgage. However, whether or not this works for you will depend on what you want to achieve with your remortgage.

Should I Seek Legal Advice?

Legal advice is essential before and during the remortgage process. JMW's solicitors handle the entire legal process on your behalf to ensure a smooth transaction.

We will protect your interests by reviewing your new mortgage offer, check your existing agreement for hidden charges and manage the secure transfer of funds between lenders. Even once your part of the process is finished, we keep working to ensure all legal formalities are completed correctly, including updating details with HM Land Registry.