Your mortgage is most probably your biggest outgoing. If you are thinking of taking advantage of the low interest rates and re-mortgaging your home, either to benefit from cheaper repayments or to release some of the capital locked up in your house then you need to consider the costs.
You can re-mortgage at any time; however, the most common time is once an introductory deal has come to an end, usually after 2 -5 years. This would typically mean re-mortgaging for the amount that is still owed on your current mortgage. You could also use it to release cash. You can re-mortgage for home improvements, to consolidate debts house or other for other purposes if you have enough equity in your current home or can borrow enough. In these cases, you would need to take out a bigger mortgage than you currently have and would drawdown the portion above what is needed to cover your own property for yourself.
The costs of re-mortgaging will partly depend on which of these options you choose:
- Some lenders might offer fee-free deals to tempt you, but if they don’t you’ll have legal, valuation and administration costs to pay.
- The arrangement fee may be a fixed amount or a percentage of the amount you are borrowing. Often the lower the mortgage rate offered, the higher the arrangement fee will be. It could be worth paying a higher fee to get a lower interest rate. You can usually pay the arrangement fee either upfront or by adding it to your mortgage. If you do the latter remember that you will pay interest on the fee over your whole mortgage term.
- Legal fees are the costs you must pay a solicitor or conveyancer to carry out the legal work involved in transferring your mortgage from one lender to another. They’ll also arrange for you to pay the outstanding debt to your current lender. Some lenders offer fee free legal work, in which case they’ll appoint a solicitor themselves.
- A new lender will require a valuation of your property. Fees vary depending on the size and value of the property but will typically cost from around £250 up to £1,500. Again, some lenders offer this service for free. There may be early repayment fees and exit fees to pay to your current lender. These can vary widely and depend on when in your deal you want to exit the mortgage.
If you are re-mortgaging to consolidate debt then it is worth considering that even though interest rates on mortgages are usually lower than rates on personal loans or credit cards you could easily end up paying far more overall by extending the term you are borrowing the money over.
Overall it is possible to get a good re-mortgage deal and use that benefits enhance your lifestyle. It is however important to be clear about the costs involved and how that might affect the attractiveness of an offer. It is worth taking time to investigate the options available. Get in touch to discuss your specific circumstances.
Your property may be repossessed if you do not keep up repayments on your mortgage.