10 Dec, 2019/ by Homeward Legal /Remortgage
Homeowners could face hidden costs with the "weekend penalty" when they remortgage by switching to a new lender.
The problem arises when their old mortgage deal expires on a Friday or a Saturday or even on a bank holiday.
Their new deal can only start on the next working day as they are switching from one lender to another. And that means the homeowner will be put on their existing lender's standard variable rate (SVR), paying a much higher rate of interest on the outstanding loan even if only for a couple of days.
Martin Lewis' moneysavingexpert.com site is highlighting the weekend penalty and the potential cost of a remortgage that can't kick in instantly.
Its guide to avoiding the issue says: "This issue only affects homeowners switching to another lender. This is due to the fact that when you change lenders, you need to transfer your mortgage debt from your old lender to a new one via a solicitor.
"This is not the case when you simply go for another deal with your existing lender."
Weekend penalty can add up
Figures show around 9,000 homeowners remortgage every week. Therefore, the weekend penalty can add up to thousands of pounds unnecessarily paid every week.
For example, anyone switching a mortgage around Christmas might be hit by the two bank holiday of Christmas Day and Boxing Day.
Next year Christmas Day is on a Friday, shifting the Boxing Day holiday to the Monday. That adds up to four days on which a homeowner might be paying hundreds of pounds extra in interest.
The same applies to the Easter weekend.
Plan ahead to avoid issue
To get round the weekend penalty, you need to plan ahead. Lenders often offer a specific date for completion on fixed-rate deals. Get the calendar out and check which day of the week your expiration date will fall on.
You might need to change the start date to avoid your finishing date falling on a Friday or weekend.