Cost of switching your mortgage
This is all according to each individual lender. Some may decide to charge you for switching your mortgage, others may not. A redemption statement can be gained from your lender informing you of how much you still owe on your existing mortgage, and how much a switching charge may cost.
The types of charges that may occur are as follows: -
Early repayment charges.
Otherwise known as ERC. If you are paying a fixed, capped or discounted rate, then you are more likely to be issued with one of these. It is also possible that you will be expected to pay an ECR even if you are paying the lenders standard rate. The majority of early repayment charges hold the biggest cost for switching, often amounting to several hundreds or thousands of pounds. If the cost is this high, then it may not be worth switching in the first place.
Interest charges.
Some lenders charge interest until the end of the month, in which you actually switch your mortgage. To avoid this payment on two mortgages, you could ask your solicitor to arrange the switch to take place at the end of the month.
Additional charges.
The lender issues all deeds fee, discharge fee, admin fee and sealing fee. They can vary in cost, but on the whole cost around £80.00 in total.
Along with the costs of switching from your lender, there are other charges to calculate, such as how much it is going to cost to switch to a new one. This will be dependant upon lender and the deal you take up.
Here as follows are some costs you may come across: -
Arrangement/booking fees.
Most fixed and capped rate deals have a booking/arrangement fee. These can vary from deal to deal, which generally range from £100 to £450.
Brokers fees.
A fee will be payable if you seek advice from a mortgage broker or independent financial advisor.
Valuation fees.
Your lender will arrange a valuation (but you will pay for it, all depending upon the lender and value of your property), to make sure that your home is good security for the loan, and that it is worth at least as much as the loan.
Take this as an example, a £200,000 property of which you will be expected to pay between £360.00 and £430,000 in re-payments. However, a few re-mortgage deals will refund the valuation fee as an incentive to switch.
Legal fees.
You will need to appoint a solicitor to deal with the switch, whom will act on behalf of the lender to check that you have a title over the property, and that there are no reasons why the lenders shouldn’t lend on the property. You will be responsible for all legal fees, such as the cost of searches and land registry fees, although some lenders will refund the fees as an incentive to switch mortgages.
A Mortgage Indemnity Guarantee Fee.
If the amount you are borrowing is more than 75% of your property’s value, you may be expected to pay a Mortgage Indemnity Guarantee Fee, otherwise known as an MIG.
Before you decide to change your mortgage try contacting your existing one to give them a chance of offering you a better deal. Give them the details of what you wish to switch too, and negotiate. If you strike up a new deal with your current lender, then you wont need a new valuation, or need to pay a solicitor for the dealings.
If you do decide to switch, then make sure you choose the term of your new mortgage according to how long you’ve already had your existing mortgage. So, if your 10 years into a 30-year mortgage, take your new mortgage out for over 25 years. Many are tempted to increase their term in order to keep up with repayments, if they borrow more. But this is not advised, you should think carefully and seek professional advise before doing so.