Remortgages Fees Are Not Always a Bad Thing, Here’s Why…
Remortgaging offers lots of benefits. You can also take advantage of low rate fixed or tracker deals and you can take the opportunity to borrow additional cash to consolidate debts or to improve your home. And, of course, remortgaging can help you to save money on your mortgage repayments.
In order to maximise your savings, looking for a ‘fees free’ remortgage would sound like the logical approach. Surely, a lender paying for your valuation and your conveyancing will save you money? However, there are a number of situations in which paying some or all of the fees involved in a remortgage can actually leave you better off. We will show you 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 £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 £999. The lower rate saves you £750 per year in interest payments, so it’s worth paying the £999 fee as you will save significantly more than this over five years.
Go for the best deal, not the best remortgage deal: It’s also tempting to take a remortgage deal in which the new lender meets the valuation and legal fees incurred in the remortgage process. However, it’s not always automatically the best choice to take such a deal. On occasion, taking advantage of a very low rate and paying the valuation and conveyancing fees yourself might be worthwhile.
A lower interest rate mortgage deal where you pay for the fees yourself are very often cheaper over a number of years than if you pay the higher rate just to get the upfront fees removed. You may need to do some calculations in order to see which is the best deal, but it is worth it to save anywhere between £1,000 and £5,000 depending on the size of your mortgage.
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
Even though some mortgage brokers charge a fee for their services, you could still end up better off. Whatever remortgage deal they find for you, they will also have saved you time in sorting out your remortgage.
Early Repayment Charges: Sometimes it may actually be worth paying a few hundred pounds in early redemption charges in order to save money by benefiting from a lower rate of interest. A lower interest rate will save you more money over the long term, which is more important than short term savings.
In this instance, it would be advisable to use a mortgage adviser again, as they can help to calculate whether it is cheaper to pay the early redemption fee and go onto a lower rate of interest, or to continue on your existing mortgage deal.
Timothy Frodsham writes for JustRemortgages.com one of the UK’s
top sites for the latest remortgage rates and best remortgage deals.