Remortgage Fees It's Always a Good Idea To Pay
- By Howard Ogollegos
- Published 09/22/2011
- Real Estate
- Unrated
There are many reasons why people consider a remortgage. The most common is to potentially save money by way of lower interest rates. Another reason is to take a further advance for the purposes of home improvements and so on. But there are fees involved with a remortgage.
Discovering a 'fees free' remortgage deal might be very enticing, but it is important to weigh up your options carefully before accepting one. Deals like these involve lenders covering legal and valuation costs incurred by your remortgage, which means that you don't have to pay for any costs. Whilst this sounds ideal, there are many circumstances where paying some of the fees might actually be preferable. Our quick guide explains why.
Pay a fee for a better deal: Lots of lenders sell their remortgage products on a 'fees free' basis. This means that they don't charge any application or arrangement fee for the discount or fixed rate product they are offering. Other lenders do charge fees for their remortgage deals. If you are comparing remortgages it's worth taking both the interest rate and fees into account as products with fees are often offer lower rates.
Lots of low rate mortgage deals have an arrangement fee. For example, let's say that you have a GBP 150,000 'interest only' mortgage that you want switch onto a five year fixed rate. A 'fees free' lender may offer you a deal at 5.5% with no associated charges. However, another bank or building society may offer a five year fixed rate at 5% with an arrangement fee of GBP 999. The lower rate saves you GBP 750 per year in interest payments, so it's worth paying the GBP 999 fee as you will save significantly more than this over five years.
Go for the best deal, not the best remortgage deal: Lots of lenders offer a 'remortgage
package' with their deals. This means that they will meet the valuation and legal costs incurred in your remortgage. However, there are instances when you would be better off meeting the costs of the survey and paying your solicitor in order to take advantage of a particularly competitive remortgage rate.
Let's use the example above again. As well as the two deals identified above, the lender also offered a 4.5% fixed rate deal for five years. However, you had to pay the costs yourself - GBP 400 for a valuation and GBP 350 to your solicitor. The lower rate saves you an additional GBP 3,750 over five years so you would still end up a further GBP 3,000 better off, even though you had to pay some fees.
Paying a broker: Some homeowners decide to be independent when looking to switch mortgages. In fact, there may well be several good reasons to visit a mortgage broker in order to find the best deal for you. Brokers tend to have access to a wide range of remortgage products; many brokers offer a range of rates that are 'exclusive' to them and not available on the high street
A mortgage adviser will obviously charge fees for their services, however they can often be paid direct from the lender by way of a commission payment, so you may not actually have to pay any fees to them yourself.
Paying early repayment charges: 'Early repayment charges' are levied by your existing mortgage lender for repaying your loan early - typically whilst you are still benefiting from a discounted or fixed rate. However, it can sometimes be worth paying early repayment charges if the savings you will make by remortgaging onto a better deal outweigh these.
Early repayment charges can be difficult to calculate and can sometimes run into several thousand pounds. Deciding whether to pay early repayment charges to remortgage can be tough and you should consider carefully whether this is the best course of action.
Discovering a 'fees free' remortgage deal might be very enticing, but it is important to weigh up your options carefully before accepting one. Deals like these involve lenders covering legal and valuation costs incurred by your remortgage, which means that you don't have to pay for any costs. Whilst this sounds ideal, there are many circumstances where paying some of the fees might actually be preferable. Our quick guide explains why.
Pay a fee for a better deal: Lots of lenders sell their remortgage products on a 'fees free' basis. This means that they don't charge any application or arrangement fee for the discount or fixed rate product they are offering. Other lenders do charge fees for their remortgage deals. If you are comparing remortgages it's worth taking both the interest rate and fees into account as products with fees are often offer lower rates.
Lots of low rate mortgage deals have an arrangement fee. For example, let's say that you have a GBP 150,000 'interest only' mortgage that you want switch onto a five year fixed rate. A 'fees free' lender may offer you a deal at 5.5% with no associated charges. However, another bank or building society may offer a five year fixed rate at 5% with an arrangement fee of GBP 999. The lower rate saves you GBP 750 per year in interest payments, so it's worth paying the GBP 999 fee as you will save significantly more than this over five years.
Go for the best deal, not the best remortgage deal: Lots of lenders offer a 'remortgage
Let's use the example above again. As well as the two deals identified above, the lender also offered a 4.5% fixed rate deal for five years. However, you had to pay the costs yourself - GBP 400 for a valuation and GBP 350 to your solicitor. The lower rate saves you an additional GBP 3,750 over five years so you would still end up a further GBP 3,000 better off, even though you had to pay some fees.
Paying a broker: Some homeowners decide to be independent when looking to switch mortgages. In fact, there may well be several good reasons to visit a mortgage broker in order to find the best deal for you. Brokers tend to have access to a wide range of remortgage products; many brokers offer a range of rates that are 'exclusive' to them and not available on the high street
A mortgage adviser will obviously charge fees for their services, however they can often be paid direct from the lender by way of a commission payment, so you may not actually have to pay any fees to them yourself.
Paying early repayment charges: 'Early repayment charges' are levied by your existing mortgage lender for repaying your loan early - typically whilst you are still benefiting from a discounted or fixed rate. However, it can sometimes be worth paying early repayment charges if the savings you will make by remortgaging onto a better deal outweigh these.
Early repayment charges can be difficult to calculate and can sometimes run into several thousand pounds. Deciding whether to pay early repayment charges to remortgage can be tough and you should consider carefully whether this is the best course of action.
Howard Ogollegos
Howard O'Gollegos writes for JustCommercialMortgages.com the UK's No.1 site for the latest commercial mortgage rates and commercial property finance news.
View all articles by Howard Ogollegos