According to Kinleigh Folkard and Hayward, a fully qualified reputable solicitor in London offering a fixed fee for the conveyancing process is likely to charge between £850 and £1,500, including VAT at 20 per cent. As the cost of living continues to put pressure on buyers and homeowners’ finances, it is easy to see why the prospect of free legal advice is a tempting one, particularly as it removes a barrier to switching to a more affordable rate.
With time increasingly of the essence to lock in rates, the use of free legals to streamline the process will undoubtedly be appreciated by borrowers. However, as borrower circumstances become increasingly varied and complex, professional mortgage advisers should be consulted to understand if using a free legal service is the most suitable option.
Reduced costs
Conveyancing is an essential part of remortgaging, and free legals work to streamline this as much as possible. Not only does it save the borrower a significant lump sum, but it also reduces the hassle of finding and employing the services of an appropriate solicitor for every case.
With an estimated 2.5 million fixed rate mortgages set to expire throughout 2023 and 2024, refinancing is taking up a larger share of brokers’ time. Clients must now navigate a higher rate environment and decreased disposable income, meaning affordability challenges remain front and centre.
There can often be hidden costs associated with remortgaging, such as early repayment charges, deed release fees, arrangement fees, booking fees and conveyancing fees, on top of potentially higher monthly mortgage repayments.
However, free legals offer clients the option to change lenders without needing to appoint a solicitor or a conveyancer, which reduces expenditure.
They also remove a barrier to customers looking to remortgage onto a more favourable rate, giving them more financial leeway to shop around. A free legal service is often added to a product by the lender with the hope that it will speed up the time between mortgage offer and completion thus releasing any funds quicker.
Unfortunately, we have seen delays with suppliers of these services due to the volumes of business.
Time incentives
As the Bank of England interest rate currently sits at 5.25 per cent, and looks likely to increase incrementally throughout the year, people looking to remortgage have an incentive to move quickly to secure a new mortgage deal. With average rates for fixed deals remaining relatively high, brokers and borrowers will be working together to lock in deals quickly.
Choosing a lender that offers in-house legals is one avenue which can speed up the remortgaging process.
For example, Tandem Bank can offer a 15-day commitment from decision in principle to a remortgage. As a result, buyers who are remortgaging may be able to save themselves some money, not only through eliminating solicitor or conveyancing fees, but also by benefitting from a quicker and smoother transaction.
There are other lenders who use title insurance and this will also speed up the time between the mortgage offer being issued and release of the funds and completion.
Although free legals can offer great savings and time efficiencies for the right borrowers, it can be valuable for borrowers to find out if the proposed lender offers either the in-house legals or use title insurance and whether this will fit their situation.
While free legals are effective when dealing with straightforward cases, they may not be suitable for more complex ones. For borrowers who wish to make changes to the title deeds of the property, i.e. removing/adding someone, or those who own a property which was originally purchased through a scheme such as Help to Buy, a specialist conveyancer or solicitor may be more suitable.
Therefore, it is important that those considering using free legals take the time to fully understand what they will require from their legal adviser.
At TMA Club, we have seen customers with less complex cases make huge time-and cost-savings through the use of free legals, in-house or title insurance and greatly encourage their use when suitable. For more complex cases, a cashback incentive might be a more sensible option, which can then be reinvested into independent legal advice at the borrower’s discretion.
