Remortgaging can look simple: find a lower rate, switch lender and reduce your monthly payment. The part that often catches homeowners out is the collection of fees around the switch. In the UK, the total can range from very little on a fee-free deal to several thousand pounds, especially if you leave an existing mortgage early.
A useful way to budget is to separate what you may pay to leave your current mortgage from what you may pay to set up the new one. MoneyHelper notes that changing a mortgage can cost £1,000 or more, depending on your current deal and which costs the new lender covers.
What does it usually cost to remortgage?
For borrowers switching at the end of a fixed or discounted period, the main costs are usually a product fee, possible legal costs, a valuation charge and any administration fee for closing the old mortgage. If you switch before your current deal ends, an early repayment charge can become the biggest expense.
There is no single remortgage cost UK homeowners can apply to every case. A deal with no product fee and free valuation and legal work might leave you paying only a modest exit fee. An early switch carrying a penalty can cost several thousand pounds.
The main remortgage fees to budget for
Mortgage arrangement or product fee
A mortgage arrangement fee, often called a product fee, is charged on many new deals. MoneyHelper gives a broad guide of around £1,000 to £2,000 or more, although lenders also offer products with lower fees or no product fee.
You may be allowed to add the fee to your mortgage instead of paying it upfront. That can help cash flow, but it also means paying interest on the fee. A lower rate with a large product fee is not automatically cheaper than a slightly higher rate with no fee.
Early repayment charge
If you remortgage before the end of a fixed, tracker or other introductory deal, your current lender may charge an early repayment charge, or ERC. MoneyHelper says ERCs are commonly around 1% to 5% of the outstanding balance, although your contract determines the exact figure.
A 2% ERC on a £200,000 balance would be £4,000 before any new-mortgage fees. Check your mortgage statement or ask your lender for a redemption figure before committing to an early switch.
Mortgage exit fee
A mortgage exit fee is different from an ERC. It is an administration charge that some lenders apply when a mortgage is closed or transferred. Which? says these fees are often around £50 to £100, although your own mortgage documents are the figure that matters.
Valuation fee
The new lender will normally need a valuation to confirm the property’s value and loan-to-value ratio. Some remortgage products include a free basic valuation, while others charge. A lender’s valuation is for lending purposes, not a detailed home survey.
Legal and conveyancing costs
Switching lender normally involves legal work. A conveyancer may need to check the title, deal with both lenders and arrange repayment of the old mortgage. Many remortgage deals include free standard legal work through a lender-appointed conveyancer. More complicated cases can attract extra charges.
Broker or adviser fee
If you use a mortgage broker, check how they are paid. Some receive commission from the lender and charge no separate borrower fee, while others charge a fixed fee, a percentage or a combination. Include any broker fee in your total-cost comparison.
Are fee-free remortgages always cheaper?
A fee-free deal can reduce the cash needed at completion because the lender may offer no product fee, free valuation, free legal work or cashback. That can help, but the interest rate may be higher than on a fee-paying product.
The better comparison is the total cost over the period you expect to keep the deal. When reviewing products, compare mortgage arrangement fees and early repayment charges alongside the rate rather than treating them as separate details.
A practical example of comparing two deals
Imagine you have £180,000 left on your mortgage. Deal A has a slightly lower interest rate but a £1,499 product fee. Deal B has no product fee but a slightly higher rate. If Deal A saves only £20 a month, it would take roughly 75 months of £20 savings to recover the £1,499 fee, before considering interest on the fee or other differences.
If you plan to keep the new product for only two or five years, that simple calculation shows why the headline rate should not be viewed on its own. The exact result depends on your balance, rate and how long you keep the mortgage.
How to reduce the cost of remortgaging
Start comparing options before your current deal ends so you are less likely to trigger an avoidable ERC. Ask your existing lender about a product transfer as well as checking other lenders, because staying with the same lender can sometimes involve fewer legal or valuation steps.
Check exactly what each new deal includes. Free valuation, standard legal work or cashback can materially change the overall price. If you are thinking about adding a product fee to the mortgage, compare that with paying it upfront because interest can increase the long-term cost.
Finally, ask your existing lender for an up-to-date redemption statement. It should show the amount needed to clear the mortgage and any charges applying at the proposed switch date, giving you a more reliable budget than a generic estimate.
Frequently asked questions
Can I remortgage without paying any fees?
Sometimes. A new lender may offer no arrangement fee plus free valuation and standard legal work. You could still face a mortgage exit fee or early repayment charge from your current lender, so check both sides of the switch.
Is it cheaper to remortgage with my current lender?
It can be. A product transfer may involve fewer administrative steps and avoid some valuation or legal costs. Another lender may still offer a better overall deal, so compare total cost rather than convenience alone.
Should I add the mortgage arrangement fee to the loan?
Adding the fee reduces the cash needed upfront, but you will normally pay interest on that extra borrowing. If you can comfortably pay the fee in cash, doing so may reduce the overall cost.
When is an early repayment charge most important?
It matters when you want to leave your current deal before its penalty period ends. Because the charge can be a percentage of the outstanding balance, it can outweigh the savings from a lower new rate. Check the exact amount and the date it reduces or ends.
Work out the total before you switch
Remortgaging costs are best treated as part of the deal. Add together the mortgage arrangement fee, any early repayment charge, mortgage exit fee, legal work, valuation and broker costs, then compare that total with the interest and payment savings you expect from the new mortgage.
The lowest advertised rate is not always the cheapest option. A fee-by-fee calculation gives you a stronger basis for deciding whether to switch now, wait until your current deal ends or choose a product with fewer upfront charges.