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When it comes to getting a mortgage there are a number of associated charges you may have to pay. These range from mortgage arrangement fees to valuation charges and can dramatically increase the overall cost of your mortgage. Here we set out all the mortgage fees at a glance, explain what they are and what to watch out for.
Mortgage fees are the extra charges you need to budget for when you take out a home loan. These extra fees have been steadily rising in recent years and are now at the highest level in they’ve been since 2012, according to Moneyfacts.
When you take out a mortgage you can expect to pay an average of £1,078 in mortgage fees. That is a lot of money, so it is important that you understand the charges and fees that come with a mortgage and include them when you are comparing different deals.
You’ll pay mortgage fees whether you’re taking out a mortgage to buy a house or remortgaging.
| Mortgage Fees | How much you may typically pay |
|---|---|
| Arrangement fee | Up to £1,500 |
| Booking fee | Up to £250 |
| Mortgage valuation fee | Up to £300 |
| Telegraphic transfer fee | £25 to £50 |
| Mortgage account fee | £100 to £300 |
| Mortgage broker fee | £0- £1,000s |
| Early repayment charge | 1% to 5% |
| Exit fee | £75 to £300 |
This is the biggest mortgage fee that you are likely to pay. It can also be called the product fee. Lenders often use the mortgage arrangement fee to allow them to advertise a mortgage with a very low rate. The interest rate might be very attractive but the sting in the tail is an arrangement fee. These are commonly up to £1,500 however they can be more than £2,000.
It depends. In some cases it’s worth paying a high mortgage arrangement fee to get the best mortgage rate while in other cases you may find you’ll pay less overall if you choose a slightly higher interest rate and a lower mortgage arrangement fee. So check the costs carefully. But you don’t need to do this yourself, a fee-free mortgage broker will crunch the numbers for you and explain which is the best deal for you
Here’s an example of how it can work. This table shows how much you’ll pay overall by taking out a £200,000 mortgage on a 2 year fixed rate deal over 25 years and compares the overall costs of taking out a 4.49% rate with a £1,500 arrangement fee vs taking out a rate of 4.59% with no arrangement fee.
| Amount borrowed | Interest rate | Monthly mortgage payment | Mortgage arrangement fee | Overall cost of mortgage payments over 2 years plus arrangement fee |
|---|---|---|---|---|
| £200,000 | 4.49% | £1,110 | £1,500 | £28,140 |
| £200,000 | 4.59% | £1,122 | £0 | £26,928 |
In this example, you’ll save over £1,000 overall by choosing the higher mortgage rate which has no fee.
You’ll usually have the option to pay the mortgage arrangement fee up front or add it onto your mortgage balance.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
This is a non-refundable fee that some lenders charge when you apply for a mortgage. It can also be called an application fee or reservation fee. It is typically up to £250. You won’t get it back if your application is declined or the mortgage falls through for any other reason. However, many lenders will deduct any booking fee you’ve paid from the arrangement fee.
Some lenders charge a booking fee instead of a mortgage arrangement fee.
Mortgage lenders will need to value the property that you want them to lend money against. They need to make sure that the property is worth what you say it is. The lender wants to be sure that if, in a worst-case scenario, you aren’t able to keep up repayments on your mortgage, then they could repossess the property and sell it in order to recoup the money they lent you. Your lender will arrange a mortgage valuation survey.
Some lenders don’t charge a mortgage valuation fee but if they do they usually vary according to the value of the property and lenders will have their own fee scale. Typically though valuation fees cost up to £300.
The mortgage valuation fee covers the cost of them sending a surveyor of their choosing out to value the property. Don’t confuse it with your own survey costs which you pay for and organise yourself in order to get an expert report on the condition of the property. The mortgage valuation won’t go into as much detail as your own survey and you won’t get to see the results of it, only the valuation amount. For more information about building surveys, read our guide “What sort of survey should I have?”
This mortgage cost covers the CHAPS fee (Clearing House Automated Payment System) for transferring the money from the lender to your solicitor. These can cost £25 to £50.
This covers your lender’s administration costs for your mortgage. These can cost up to £300. You usually either have an account fee on a mortgage or an exit fee but rarely both.
This fee isn’t payable to your mortgage lender, but it is worth factoring it into your mortgage costs. This is what you may have to pay if you use a mortgage broker. Not all brokers charge a fee, some take a commission from the mortgage provider instead. But, be aware that brokers who charge a fee usually do so on top of any commission they receive from the mortgage provider.
A mortgage broker can help you find the right mortgage for your needs. Their expert knowledge of the market can be invaluable in ensuring you make the right choice when making the big financial commitment that is a mortgage.
We think a mortgage advisor is extremely useful in sifting through mortgage deals and finding the right mortgage for you. But we also don’t think you should have to pay a fee for the service.
Speak to our fee-free mortgages L&C or use the online mortgage finder service today.
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
If you fall behind with your mortgage repayments, then your lender may charge you a fee. How much you’ll pay is entirely dependent on your own lender’s rules. Remember though that missing a mortgage repayment won’t just result in an extra fee it can also have a significant impact on your credit rating and could ultimately result in your home being repossessed.
If you are having problems meeting repayments, speak to your lender as soon as possible.
Early repayment charges are what you pay if you repay all or part of your mortgage earlier than the agreed mortgage term or deal. Not all mortgages have early repayment charges (ERP). If there is an ERP, it will be outlined in the ESIS document you receive with the mortgage, so do check that. (You’ll receive an ESIS document when a lender of adviser recommends a mortgage. It tells you all the details of the agreement, like fees, your monthly repayments, and any conditions). A mortgage broker can be helpful in pointing out charges when you compare mortgage deals.
Typically, you may have to pay an early repayment charge if you want to leave the mortgage before the end of the introductory period. For example, if you want to repay your mortgage two years into a 5-year fixed rate deal.
Early repayment charges are usually charged as a percentage of the loan. So, if you have a £100,000 mortgage with a 4% early repayment charge you’d pay £4,000.
Some lenders reduce the rate you pay the longer you’ve had the deal. For example, if you take out a 5 year fixed rate mortgage, the EPC might be 5% in the first year, dropping to 4% in the second year, 3% in the third year, 2% in the second year and finally 1% in the last year.
While with others, the rate remains the same throughout. For example, Barclays offers a 10 year mortgage that has a 6% early repayment charge on the balance until the end of the term.
You may also face an early repayment charges if you overpay your mortgage. Most mortgages let you overpay a certain amount on your mortgage each year. This is often 10%, however it could be less – or more. If you overpay by more than the threshold you could face an ERC. So check your paperwork before making overpayments.
When you eventually repay everything that you borrowed from your mortgage lender you may also have to pay an exit or closure fee. This is usually to cover the cost of administering your mortgage over the years, so if you’ve already paid an account fee you probably won’t face an exit fee too.
While we have covered all the main fees your mortgage lender may charge you there are a couple that are more unusual. These are:
Speak to our fee-free mortgage partners at L&C or use the online mortgage finder service today.
HomeOwners Alliance Ltd is registered in England, company number 07861605. Information provided on HomeOwners Alliance is not intended as a recommendation or financial advice.
Mortgage service provided by London & Country Mortgages (L&C), Unit 26 (2.06), Newark Works, 2 Foundry Lane, Bath BA2 3GZ, authorised and regulated by the Financial Conduct Authority (FRN: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
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