A Remortgage is never a Purchase with no Associated Fees
A remortgage is not unlike many other services offered by banks or lending institutions. By its very definition, a loan product, the possibility that it is free should never be mistaken. The seller of the loan product, whether it is a bank or lending institution, has only a few means of making a profit on items that it offers. One of those ways is by collecting fees which in essence are the fees necessary to sell those loans to prospective buyers in the market. These fees include:
Exit Fees
When the remortgage process starts, the first step is to pay off the existing mortgage which is currently outstanding. Regardless of the amount of the outstanding balance, banks or lending institutions which issued the original mortgage loan have a predetermined fee for the cost of ending the relationship early. This early pay off fee is referred to as an exit fee. This exit fee is sometimes also referred to as an Early Redemption Charge, or ERC. Checking with your current lender to see if this applies is necessary, because as long as there is an outstanding balance, it is impossible to continue the process.
Arrangement Fees
Arrangement fees exist for the bank or lending institution to be reimbursed for the time it takes them to set up the new remortgage loan. There are special steps to be taken and these special steps have to be paid for. Many employees are involved in the arrangement process and these man hours have to be paid by someone. Sometimes a lender will include the cost of arranging a loan in the total mortgage cost, but usually not.
Legal Fees
A team of people from a law firm will oversee the legality of the negotiation and subsequent agreement of terms followed by the signing of all official documentation. This is necessary for the future and any implied unlawful practices acted upon by the lender or borrower. The signed documentation forms a binding contract and is imperative for the remortgage loan product to be a blueprint of how payments will transpire in the future and the resulting consequences if the payments are not made in the agreed upon time. Overseeing this aspect of the remortgage loan process is done by an individual often referred to as a conveyancer.
Survey Fees
Survey fees involve having an appraiser come to the property to be remortgage and place a value on that property. This is necessary for the lender to make a decision on how much they intend to offer as a loan amount. Without an appraisal, there would be no standard for the amount of loan which could be agreed upon. Sometimes, the appraisal fees are used as a bargaining tool to obtain more business. Some lenders like to sweeten the pot a little and throw in free survey fees with their deal to try and push a borrower over the edge toward going ahead with a remortgage.
Finally, remortgage loan products must have an associated cost as broken down above in order for the bank or other lending institution to make a profit from the sale. Profits are the sole reason a business survives or fails and lenders are simply another type of business.