Cost Considerations To Always Keep In Mind When Remortgaging

Many people forget the 'real' cost of a remortgage. Remortgaging isn't just about getting a new interest rate that is lower than the current one. It's also about considering other fees that are involved and weighing up whether it's better to stay put or move to a new product.

Product Fees: Possibly the largest cost in any remortgage deal are the product fees that come with a new loan offer. These fees are usually higher on mortgage deals where a borrower is offered a better rate; these deals include discounted and fixed rate mortgages.

Standard Variable Rate mortgages are normally less costly in terms of the actual product fees, simply because the bank calculates that there is less risk. When the Bank of England base rate goes up, the mortgage rate rises as well, and this means that the bank is protected against a loss of earnings.

Valuation Fee: With every loan secured on a property, even a remortgage, you still must get a completely new property valuation carried out. This is necessary for two key reasons. Firstly it is necessary because when you are moving to a new lender, the bank or building society will want to have the property accurately valued to ensure that the new loan is not higher than the property is supposed to be worth.

The second is that the worth of your home is likely to have increased or decreased since the valuation you had done on the property. Even if you are sticking with the same lender, they will still want to be sure that the property is worth what you think it is worth.

You can opt for various types of valuation, from very basic to full structural surveys. Usually the lender will only require the basic level, but if you want peace of mind you may wish to go for something more thorough. Of course, the more thorough and detailed the survey, the more money it will cost to do.

Fees for the Legal Part: A solicitor will need to do all of the legal parts of the remortgage, such as land registry and checking the legal ownership of the property to ensure that you can enter into a contract with the lender.

Sometimes a lender will offer in-house legal services, whereas others will require you to have them done yourself. If this is the case, try to use your own solicitor or someone who has been recommended.

Financial Advice Fees: It is recommended when you are planning to remortgage that you make good use of a broker to get the best deals available for you. This will save you a lot of time and hopefully equally as much money. However, these services invariably come with a charge. Either a lender will pay the brokers fee or you will, and in many ways the latter is preferable, you initial outlay will be recouped by savings over time, and you'll probably get sounder advice if you are paying for it.

Early Redemption Penalties: Even though you are holding on to your home when you remortgage, you will still have to pay an early redemption charge if you are within the first few years of the mortgage deal. These normally apply to fixed, discount or capped rate mortgage deals and when you are being offered a preferential rate. Check what penalties could potentially apply to you with your lender and factor these figures into the deal, as they could fundamentally alter the relative profitability of your remortgage.

Though costs will probably vary from lender to lender, there can be no escaping the above charges, so budget accordingly and never forget to shop around for the best remortgage product.