Fees on mortgages – what are they and what will they cost you?
When you take out a new mortgage you will be faced with a large number of different fees. As well as charges to your solicitor, estate agent and removals company, you may also have a number of different costs to pay in relation to your mortgage.
Some lenders charge a fee at the point where you apply for a new mortgage. This 'booking fee' is generally payable when you submit an application to a lender and is not normally refundable, even if your mortgage falls through.
You will normally pay this fee up-front to secure or 'book' the mortgage funds. Booking fees can vary from £99 to over £300.
Most fixed and variable mortgage deals come with an arrangement fee; sometimes called a 'product fee' or 'completion fee'.
Arrangement fees can vary but you will typically pay around £999 on a fixed or discounted rate deal. However, you can find that some of the very lowest rates come with even higher arrangement fees - up to £2,000 in some cases.
Buy-to-let mortgages often charge an arrangement fee that is a percentage of the amount you borrow - typically between 0.5% and 2.5%.
You can generally add the arrangement fee to your mortgage but it will increase the amount you owe, meaning you will pay more every month and more interest overall.
Your mortgage provider will want to see a formal survey to ensure the property is suitable security for a loan and that it is worth the amount you want to borrow.
There are various different types of survey including a basic mortgage valuation, a Homebuyers Report and a full structural survey. The type of valuation you need will typically depend on the age and condition of the property.
Valuation costs vary and are based on the value of the property and how detailed a survey you require. They can range from £200 to over £1,000. Some lenders will meet the cost of a valuation, particularly as part of a remortgage package.
Other admin fees
Lenders charge a number of administration fees. These can include:
- Telegraphic Transfer Fee (sometimes called a CHAPS fee) - this fee pays for your lender to electronically transfer the mortgage money to your solicitor. It is normally around £25 to £50
- Buildings Insurance Fee - this fee is charged by some lenders if you decide to take your buildings insurance out with an insurer other than your mortgage provider. It is normally around £25
- Mortgage Admin Fee - some lenders make a charge for setting up, maintaining and closing your mortgage account. If you have paid this fee - typically £150 to £300 - you will generally not pay the 'exit fee' below
- Exit Fee - a fee you pay to your lender when you come to redeem your mortgage, even if you are not paying it back early. It is typically £150 to £300
If you have used a mortgage broker to arrange your new mortgage then you may pay a fee directly to the intermediary.
Some brokers take commission from the mortgage provider while others charge a fee for providing advice and looking after your application. The charges can range from a flat fee of £250 to a percentage of the amount that you borrow.