When you are looking at arranging your next remortgage, it is often a given that you will use the lenders ‘Free Legal’ service. As long as you kick off the process in good time, that will be the best option for the vast majority of mortgage holders. However, as with anything ‘free’ it is never as simple as that. Here are the key factors you should consider when getting to this point.
Is a free legal service really ‘Free’?
In some cases, no. If there are ANY material changes, they will be passed onto you. Down to very small things like changing your name (post marriage). Correcting a title deed. Transferring money if you are borrowing extra money and any additional costs called ‘disbursements’ in legal speak. For the tiny margins these companies run on, they simply can’t absorb a penny of extra costs to you, so anything outside the norm will be passed onto you. That said, if there are no extra changes, no extra money being borrowed and you allow plenty of time, you should indeed get the ‘free’ legal service.
How long does a free legal service take?
Free service is worth every penny, so the saying goes. So don’t be surprised if it takes MONTHS for the legal work to be done. We pick up with our clients 6 months ahead of the product end date so know all too well how painful these “services” can be. To be safe, I would allow at least 3 months. Otherwise you run the risk of the lender having issued the formal mortgage offer, but the legal work not being done.Then you roll onto your current providers Standard Variable Rate (SVR), which are normally between 4% – 5% which will double most people’s normal monthly payments.
There is also a double punishment of missing the month end. New redemption statements are required, and you go to the back of the queue again to go back around this process. This issue is making a lot of industry press and you can see our quote here on the subject.
Do Free Legal services Cover Buy-To-Let mortgages?
Most of the major high street lenders do cover the legal costs, but the more specialist providers tend not to offer this. It is worth factoring in this costs as part of the overall deal. As if a lender is only marginally lower on rate, but doesn’t cover the legal work, it may prove cheaper to go with a lender that does.
In a simple example, if your loan is £250,000 and a lender offers a rate 0.05% cheaper on a 2 year fixed rate, but no ‘free legal’ service. It would probably be cheaper to pay the higher rate (which would equate to being £250 more expensive on interest) as that would save you circa £500 on legal costs (around £250 saving to you).
What if my situation is Complex?
That depends on your definition of complex. As mentioned above, any little change will incur costs, so when you start going down that path, you may find it more practical to pay for your own firm. Key things that would lead you to using your own firm would be. Taking someone off the Deeds, Name changes, ownership changes, Divorce, using a Limited Company (or other vehicle to own the property). This list is by no means exhaustive. Point is – if there is any change to your mortgage/property from what you last arranged your mortgage, it may be best to pay for your own firm (some lenders do offer a cash back when not using their free service so that may be a better option overall for you in this situation).
What if I need to move Quickly?
It will be apparent by this stage that if you need to move fast, by that I would mean within 3 months of completion needing to happen. DO NOT USE these firms! If you do, understand that you are not in control of the process and you could be in for a very stressful journey…