Remortgaging — switching to a new mortgage deal, either with your existing lender or a new one — is usually done to secure a better interest rate, but it isn't free. A range of fees can apply, and unless you work out the full cost against the savings on offer, you can end up switching to a "better" rate that actually leaves you worse off overall.
The fees that can apply
- Valuation fee: Some lenders charge for a valuation of your property, though many now offer this free as part of the deal
- Legal/conveyancing fees: Moving to a new lender typically requires legal work to register the new mortgage; many lenders offer "free legals" as an incentive, but check exactly what's covered
- Product/arrangement fee: Many of the best rates come with an upfront fee, often ranging from a few hundred pounds to over £1,000 — this can usually be paid upfront or added to the loan (though adding it means paying interest on the fee itself over the mortgage term)
- Broker fee: If you use a mortgage broker, they may charge a fee directly, receive commission from the lender, or both — always ask how they're paid
- Exit/early repayment charge: If you're leaving your current deal before its fixed or discounted period ends, an early repayment charge can apply, often a percentage of the outstanding balance
- Mortgage account/exit fee: A smaller administrative fee some lenders charge simply for closing your old mortgage account
Working out whether switching actually pays off
The key comparison isn't just the new interest rate against the old one — it's the total cost of staying versus the total cost of switching, over a realistic time horizon (commonly the length of the new deal).
| Cost/saving | Detail |
|---|---|
| Monthly saving from lower rate | New monthly payment minus old monthly payment, multiplied by months on the new deal |
| Minus: product fee | Often several hundred pounds |
| Minus: legal/valuation fees (if any) | Can be zero if the lender offers these free |
| Minus: early repayment charge on old deal (if switching early) | Can be substantial — sometimes enough to wipe out the benefit entirely |
| Net saving | What's actually left after all costs |
A worked example
Suppose switching saves £80 a month, or about £960 a year on a two-year fixed deal (£1,920 total). If the new deal has a £999 product fee and £300 in other costs, the net saving drops to roughly £621 over two years — still worthwhile, but far less dramatic than the headline rate difference suggested. If leaving the old deal early also triggers a £1,500 early repayment charge, switching now would actually cost more than staying put until the current deal ends.
Common mistakes
- Comparing only the interest rate, not the total cost including fees
- Adding the product fee to the loan without realising it then accrues interest over the whole mortgage term
- Not checking for an early repayment charge before switching mid-deal
- Assuming a "free legals, free valuation" deal is automatically the cheapest — sometimes a deal with fees and a lower rate still works out cheaper overall on a larger mortgage
What to do next
Get a redemption statement from your current lender showing exactly what you'd need to pay to leave now, including any early repayment charge, then compare the total cost of at least two or three remortgage options — including staying on your lender's follow-on rate — before deciding. A mortgage broker can run this comparison for you and often has access to deals not available directly.