Remortgaging can save you a considerable amount of money, but it is important to understand the costs involved before switching. In some cases, fees can eat into your savings or even make switching uneconomical. This guide breaks down every cost you may encounter and explains how to work out whether remortgaging makes financial sense.
For a full overview of remortgaging, read our complete guide to remortgaging.
Early Repayment Charges (ERCs)
Early repayment charges are typically the largest cost you may face when remortgaging. An ERC applies if you leave your current mortgage before the initial deal period ends. For example, if you are two years into a five-year fixed rate, you would likely face an ERC for leaving early.
ERCs are usually calculated as a percentage of the outstanding mortgage balance, typically ranging from 1% to 5%. They often reduce year by year during the deal period. For instance, a five-year fix might have ERCs of 5% in year one, 4% in year two, 3% in year three, 2% in year four, and 1% in year five.
On a £250,000 mortgage, a 3% ERC would cost £7,500. This is a substantial amount that would need to be offset by the savings from your new deal. If your current deal is close to expiring, it is often worth waiting until the ERC period ends before switching.
Check your mortgage terms or contact your lender to find out the exact ERC that applies to your mortgage. For guidance on timing, see our guide on when you should remortgage.
Arrangement Fees
An arrangement fee (also called a product fee or booking fee) is charged by the new lender for setting up your mortgage. This typically ranges from £500 to £2,000, although some deals carry no arrangement fee at all.
You usually have two options for paying the arrangement fee: pay it upfront as a lump sum, or add it to your mortgage balance. Adding it to the mortgage means you do not have to find the cash upfront, but you will pay interest on it for the life of the loan, which can significantly increase the total cost. For example, a £1,500 fee added to a 25-year mortgage at 5% would cost you around £2,630 in total.
When comparing deals, it is important to look at the total cost including fees, not just the headline interest rate. A deal with a slightly higher rate but no arrangement fee may work out cheaper overall than one with a rock-bottom rate and a £2,000 fee.
Should I pay the arrangement fee upfront or add it to the mortgage?+
Valuation Fees
The new lender will need to value your property to confirm it provides adequate security for the mortgage. This may be a physical inspection by a surveyor or a desktop valuation using property data and comparable sales.
Many remortgage deals include a free valuation as an incentive to switch. Where a fee is charged, it typically ranges from £150 to £500 depending on the value and type of your property. Higher value properties and non-standard constructions tend to cost more to value.
Legal Fees
Switching your mortgage from one lender to another requires legal work to transfer the charge on your property. A solicitor or conveyancer handles this process, including title checks and registration with the Land Registry.
As with valuations, many remortgage deals include free legal services provided by the lender’s appointed solicitor. If you need to arrange your own conveyancer, expect to pay between £300 and £1,000. Using the lender’s free legal service can save a significant amount and is perfectly adequate for a straightforward remortgage.
Exit Fees
Your current lender may charge a small administration fee when you leave, sometimes called a deeds release fee, account closure fee, or mortgage exit fee. This is separate from any early repayment charge and typically ranges from £50 to £300. Not all lenders charge an exit fee, so check your mortgage terms.
| Fee Type | Typical Range | Often Free? |
|---|---|---|
| Early repayment charge | 1–5% of balance | No — only avoidable by waiting until deal ends |
| Arrangement fee | £0–£2,000 | Yes — many fee-free deals available |
| Valuation fee | £150–£500 | Yes — frequently included with remortgage deals |
| Legal fees | £300–£1,000 | Yes — many lenders provide free conveyancing |
| Exit / deeds release fee | £50–£300 | Sometimes — not all lenders charge one |
Free Remortgage Deals
Many lenders offer remortgage packages that include a free valuation and free legal work. Some also waive the arrangement fee entirely. These “fee-free” deals can make remortgaging extremely cost-effective, particularly if you wait until your current deal expires and avoid any early repayment charges.
Keep in mind that fee-free deals may carry slightly higher interest rates than deals with fees. A broker can calculate the total cost of each option over the deal period to help you decide which approach saves you the most money overall.
How to Calculate Whether Remortgaging is Worth It
The key calculation is straightforward: compare the total savings from the new deal against the total costs of switching. Here is a simple framework:
- Calculate the monthly saving by comparing your current payment to the projected payment on the new deal
- Multiply the monthly saving by the number of months in the new deal period to get the total saving
- Add up all the switching costs: ERCs (if applicable), arrangement fees, valuation fees, legal fees, and exit fees
- Subtract the total costs from the total saving — if the result is positive, the switch makes financial sense
Use our mortgage calculator to estimate your payments on a new deal, or speak to a broker who can run a detailed comparison for your specific situation.
- Early repayment charges (1–5% of balance) are usually the biggest cost — avoid them by waiting until your deal expires.
- Many remortgage deals include free valuation and free legal work, making the cost of switching minimal.
- Always compare total cost over the deal period, not just the headline rate — a fee-free deal can beat a lower rate with fees.
- Adding fees to your mortgage is convenient but costs significantly more over time due to interest.
- If total savings from the new deal exceed total switching costs, the remortgage makes financial sense.