Fees Associated With Remortgages

While a remortgage can save you money in the long run, the fees and charges involved with the process often give a loan applicant significant sticker shock. Be savvy to the types of fees banks and building societies commonly charge during the remortgage process, so you are not surprised by the overall cost when it comes time to sign the loan documents. Common remortgage fees to leave your current lender include:

• Early Repayment Charges – These fees are assessed when you switch lenders before your current mortgage term is over. The purpose of these fees is to discourage borrowers from moving their account before the current lender has earned a profit for the loan. Higher fees are assessed early in the life of the loan, with the first year being the most expensive time to remortgage. In most cases, the early repayment charges will be one of the highest fees you will have to pay in the remortgage process and the one that should be most carefully scrutinized before going through with the application for a new mortgage loan.

• Mortgage Exit Administration Fee – These fees are used to offset the cost of releasing you from your current mortgage. They are listed in the fine print of your current loan documents. If your current lender charges this fee, make sure the amount they quote you matches with the amount on the loan document. Some lenders have tried to raise the fee by a significant amount to try to recoup some of the money lost during the latest economic slowdown. While the FSA has tried to prevent this practice, it is also best to check the numbers for yourself to ensure you are paying the amount you agreed to when you closed on your original loan.

In addition to fees charged by your current lender, your new lender will probably assess certain charges as well. The most common fees include:

• Arrangement Fees – These charges are also known as booking or initial fees, which are charged at the beginning of the loan process. These fees used to be relatively small, but increases have put them well over £1,000 in some cases. Some lenders allow the borrowers to finance the arrangement fees into the life of the loan, making the initial costs of remortgaging much more affordable. However, when you opt for this payment method, you will also be paying interest on the amount over the loan's term, which can end up costing you a lot more overall.

Some banks will also give you the option of paying part of your arrangement fees at the beginning and financing the rest, which is a good compromise for those who cannot pay the full amount of the arrangement fees at the beginning of the application process. A few institutions may also charge a separate booking fee on top of the arrangement fee. This charge is much smaller and is primarily used to hold an attractive interest rate until the loan is closed.

• Valuation Fees – This is the amount charged to assess the value of the property. Because this is an essential part of a responsible lending process, there is little doubt that you will be charged for the service. While the amount may vary from lender to lender, depending on the valuation company they use, most remortgage applicants spend around £300 for the service.

• Legal Fees – Legal fees are typically charged by the solicitor approved by your lender and range from £400 to £600. In some cases, mortgage companies will pay all or part of your legal fees for you to remain competitive in the market. It might be worth shopping around to see which companies offer this service, although other fees and interest rates will probably have a greater impact on the overall cost of the loan.

• Stamp Duty – Stamp duty is a charge paid to the government, and it varies depending on the value of the property. The higher your property is valued, the more you can expect to pay in stamp tax. The money is typically directed to your solicitor, who ensures it gets to the appropriate government agency.

• Brokerage Fees – If you work with a mortgage broker, you will also pay fees directly to this professional. Find out how much the broker charges in fees at the beginning of the process to ensure you don't get any surprises when the time comes to close the loan.

Most of the fees charged by your mortgage companies are set in stone and are not waived for many reasons. However, fees can vary somewhat from bank to bank, so it is worth evaluating the fees when comparing different companies.