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The Breakdown Of Cost For a Remortgage Vs Redemption


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Hi All, 

So i asked my bank for the cost i would incur for re-mortgaging my property. To give some context, i purchased the property 3 years ago off plan and got the keys on September 14th. Purchase Price £120k vs Current Market Value £170k. I probably wont re-mortgage within the 1 year prior of owning the property however i do plan to re-mortgage at some point. 

Is it a no brainier to go for option 2 as option 1 seem extortionate, especially the cost over the long term for the revised mortgage rate of 4.14%. Thanks

"1. Remortgage: noted you are looking to remortgage to raise capital. Please be noted that you have to be the legal owner for more than 6 months before we could consider this and also the capital raise has to be for another purchase of property. You advised that the market value of the property should be around £170,000. You are currently on tracker rate product with rate of 3.54% (2.79% +base rate (currently 0.75%)), loan started from 14 Sept 2018, Interest Only repayment for loan amount £81,897. So for remortgage to raise capital, it would be like a fresh application. So the valuation fee based on market value of £170K would be £240, there is also arrangement fee of £1,895 + funds transfer fee of £35. There is also discharge fee of £95 since you have to redeem the current one and then release the new loan. Please be reminded that there will be Early Repayment Charge of 1% of your original loan amount if you remortgage complete before 14 Sept 2019 since it is still within the 12 months tie in period. There would also be broker fee if you would like the promotion rate with broker (as our direct rate would be 4.14% (3.39% + base rate)), also the conveyancing fee with your solicitor to deal with the case. 

2. Redemption: If you would like to fully redeem your mortgage, then there will be £95 discharge fee from our side. Also there would be Early Repayment Charge of 1% of your original loan amount if you redeem within 1 year tie in period. "

Home Equity Gains Group 

Property Investor & Developer

http://www.hegg.info ;)

https://www.instagram.com/hegg_ltd/?hl=en B)

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Hi Eamon,

So it looks from what you have written, that they want to charge an arrangement fee for the new loan, plus a revaluation fee, broker fee and the early redemption fee?

There are lenders who you can arrange a remortgage through where you don’t have to wait 6 months from the date of commencement of legal ownership but it seems like you are beyond that time now anyway. 

I’d just remortgage it and factor the redemption fees in to your cap raise. 

If you need further guidance give me a message. 

 

John (mortgage adviser)

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Hi John, 

Would the prices i've pointed out above be fairly standard or are they excessive?

Paying in the region of 3.5k for a remortgage on a property seem a lot to me (especially the increased interest rate, do you believe this isn't the case? Additionally the bank will only let me re invest the money I've pulled out to purchase another property. I'm to get more clarification on this but this also does seem strange. (although this is where the tax benefits do come into play when remortgaging)

Cheers

Home Equity Gains Group 

Property Investor & Developer

http://www.hegg.info ;)

https://www.instagram.com/hegg_ltd/?hl=en B)

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Hi Eamon, what kind of LTV are you looking at after capital raising? The rate and fees do seem on the high side, particularly with the legal and valuation fees. Depending on your circumstances there may be other lender options available where you can get free legals and a free valuation. Again, there are BTL lenders that will let you capital raise for purposes other than buying other property. Sounds like your existing lender is more of a niche lender and you may be better served looking at alternatives.

Regards,

Richard

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