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Switching your mortgage – how much will it cost?

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Switching your mortgage to a different lender has the potential to save you thousands over the term of the deal – however it’s also important to remember that remortgaging does come with a number of fees, so it’s vital to work out the overall charges to make sure that switching your mortgage is worth it.

Will it cost anything to leave my current deal?

If you are currently on your lender’s standard variable rate of interest, then you are free to leave your mortgage without incurring any additional charges. However if you are tied into a deal, then you’ll have to consider early repayment charges. This is a penalty that is applied if you break your deal early – it’s set by the lender so that they can recoup some of the interest payments that they’ll lose if you move your mortgage elsewhere. The charges you pay will depend how long you have left on your current deal – early redemption charges usually vary from around 1-5% of your outstanding balance – the longer you are into your deal, the less you will pay.

What will it cost me to move to a new deal?

There are a few different costs that you’ll need to calculate when switching your mortgage – we’ve covered the main ones below:

Arrangement fee

If you’re browsing mortgages, you’ll need to make sure you look at more than just the rate of interest. While low rates may seem tempting, these may come with a significant arrangement fee which could leave you paying more than other mortgages with a higher rate of interest but no fee.

When it comes to paying the arrangement fee, your mortgage lender will usually give you the choice of paying up front or adding the fee onto your mortgage. If you are struggling with disposable cash, then adding the fee onto your mortgage may seem like the sensible option, but don’t forget that you’ll pay interest on this so it could end up costing you a lot more in the long-term.

Valuation Fee

If you’re moving to a new lender, then they’ll want to know that your home is actually worth the amount of money that you’re borrowing, so like you did when you first bought the property you’ll need to arrange a valuation. Some remortgage deals will include this for free, however if it’s not included you’ll need to pay a fee which on average is usually around £300-£400.

Conveyancing fee

Legal work is required when switching your mortgage in order to remove the original lender’s interest from the property and register the new lender.

As with the valuation fee, many mortgage providers will include this for free as part of the remortgage package – although do bear in mind that the solicitor will be selected by the lender, so be prepared for a few delays on the way as they will be paying the bare minimum for the service.

If there is any other legal work required such as a change of name on the mortgage, this may take a little longer and any fees wouldn’t be included in the free package.

Broker fee

If you’re finding the whole remortgage process a little daunting, then it could be a wise move to consult a broker, who will be able to do the majority of the legwork for you.

Some brokers charge a fee which will vary from broker to broker. It could be a fixed fee (typically around £500) or a percentage of the loan amount – which if you are buying a high value property could work out to be quite expensive.

There are some broker however that won’t charge you a fee for their service which can be useful if you are trying to cut down on costs. Brokers are able to do this by claiming commission from the mortgage lender for every product that they sell.

Whilst there are a number of costs involved with remortgaging, these could actually be negligible if your repayments reduce as a result of switching to a new lender as the savings over the term of your mortgage could be huge. Always make sure you take the overall cost into consideration before making your decision.

If you’d like to know more about switching your mortgage, speak to a broker today.

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