The financial website LoveMoney.com has disclosed that the average homeowner spends £5,000 in fees over his or her lifetime switching to mortgages that offer cheaper interest rates.
The November 2016 article shows the importance of considering charges when calculating the value of a remortgage deal.
Some low rate mortgages on offer charge a large fee and this could negate any savings, especially if the mortgages is on a short-term fixed rate. LoveMoney.com does not advise that looking for a cheaper mortgage is a bad idea, but suggests that homeowners should take into account the total cost of paying off the existing mortgage and arranging a new one, before accepting a new mortgage deal. If the sum remortgaged is low, the fees will represent a large percentage of the new mortgage.
The average mortgage length is 25 years and during this period, LoveMoney.com says that the average UK homeowner remortgages their house five times. To switch mortgages can cost fees of up to £2,000, along with £500 or more for legal fees.
To make switching mortgages worthwhile, some financial advisers recommend switching to a fixed rate mortgage of between 5 and 10 years. With interest rates at record lows, even with fees, borrowers can save money.
Insurance brokers have access to the best remortgage deals to save money for borrowers. They can also advise on mortgage protection insurance that covers the mortgage in case the main income earner in the household loses their job.