Your Complete Guide to Mortgage Fees and Costs

Posted 18 December 2017 by Nick Parkhouse

If you have a mortgage, then there will be fees and costs attached. Here’s your complete guide to what you might pay...

If you’re taking out a new mortgage, or you already have a mortgage, there are a range of fees and charges that you may incur.

Our guide looks at the fees you may pay when you take out a new mortgage, charges associated with an existing mortgage, and the costs you should consider when moving home. Keep reading to find out more.

Mortgage fees incurred when you take out a new mortgage

Application fee

Some lenders charge a fee when you submit your mortgage application. This is typically non-refundable and covers the costs of processing your application.

Booking fee

If you want to take advantage of a specific mortgage deal – for example a fixed or discounted rate – then some lenders charge a non-refundable ‘booking fee’ to secure the product.

Some lenders will let you add this fee to your mortgage, although this means you pay more interest over the term of the loan than if you had paid the booking fee up front.

Arrangement fee

Most mortgage deals come with some sort of arrangement or product fee.

This can vary significantly from lender to lender and it depends on the product you want to take out. For example, if you want to take out a low fixed rate deal, you could end up paying an arrangement fee of between £500 and £2,000.

Again, most lenders will let you add this fee to your mortgage but it means you pay more interest overall.

Valuation fee

When you take out a new mortgage, your lender wants to know that the property is suitable security for the loan, both in terms of value and condition. The valuation fee covers the cost of a surveyor valuing the property.

Your lender will typically charge a valuation fee which depends on:

  • The purchase price or the valuation of the property. Generally, the higher the value, the more expensive the valuation fee.
  • The type of survey you require. Your lender generally only requires a basic survey, but you may want to pay more to benefit from a homebuyer report or more detailed valuation.

In addition, if you decide to commission your own valuation you will have to pay this fee separately in addition to any fee you pay to your lender.

Some mortgages offer a free valuation as one of the perks – check the terms and conditions of your product for this.

Broker fee

If you decide to use a mortgage broker to arrange your home loan, then you may pay a fee for their services. This will often cover both the cost of advice and the costs of them looking after your admin for you.

Some brokers charge a fixed fee while others charge a percentage of the mortgage amount.

Ask your broker about their fee structure when you first speak to them.

Insurance fee

If you decide to take your own buildings insurance, rather than taking out cover through your mortgage lender, the lender might make a charge.

This charge covers the cost of them ensuring the insurance policy is acceptable to them.

Many lenders no longer charge this fee, and it can often be worth paying if you can find superior/cheaper insurance cover elsewhere.

Telegraphic transfer fee

Sometimes known as a CHAPS fee, this is a charge your lender makes to transfer your mortgage money to your solicitor.

Fees you may incur on your mortgage

Missed payments/arrears fee

If you fail to keep up your mortgage repayments, or you miss a mortgage payment, your lender may charge an administration or ‘arrears’ fee.

This charge is sometimes made on a monthly basis depending how many payments you have missed and how serious your arrears are. Other lenders charge a one-off fee to cover the administration incurred in managing your arrears.

Mortgage account or administration fee

All lenders have a tariff of charges which identify the various fees they levy to manage your mortgage account. These fees differ from lender to lender but are often charged for:

  • Giving you permission to take out a ‘second charge’ loan
  • Adding or removing one of the parties to the mortgage
  • Providing a duplicate mortgage statement
  • Changing your method of repayment – for example transferring from an interest only to a repayment mortgage
  • Revaluation – for example if you want to borrow additional money
  • Extending or reducing the term of your mortgage
  • Providing ‘consent to let’ if you want to let out your property but you don’t have a buy-to-let mortgage.

Most lenders also charge a mortgage ‘exit’ fee which is payable when:

  • Your mortgage term comes to an end
  • You pay off your mortgage
  • Your transfer your mortgage to another lender
  • You transfer the borrowing from one property to another.

This fee is generally paid on redemption of your mortgage.

Early repayment charge

If you have a special fixed, discounted or tracker rate product and you want to pay off part or all of your mortgage, your lender may levy an ‘early repayment charge’.

This is typically a percentage of the amount that you repay. Most lenders will allow you to pay off up to 10% of your mortgage balance each year without penalty, and will levy the early repayment charge on any amount over this.

Other charges to take into consideration

Removals

Paying a professional removals firm can take the stress out of your house move. The cost of this service will depend on how much work you want the movers to do – for example they will charge more if you want them to pack your belongings as well as transport them to your new home.

Stamp Duty

If you are buying a property in England and Wales, then Stamp Duty Land Tax may be payable.

Stamp Duty is based on the purchase price and is charged at a rate of:

  • Up to £125,000 – 0%
  • The portion from £125,001 to £250,000 – 2%
  • The portion from £250,001 to £925,000 – 5%
  • The portion from £925,001 to £1.5 million – 10%
  • The portion above £1.5 million – 12%

If you or anyone you’re buying with is a first-time buyer, you don’t pay any Stamp Duty on a property worth below £300,000. If you’re a first-time buyer and you’re buying a property for between £300,001 and £500,000, you’ll only pay 5% tax on the portion between £300,001 and £500,000.

Legal fees

When you are buying a home or remortgaging, you will need to hire a conveyancer to deal with the legal aspects of the transaction.

Legal fees differ from solicitor to solicitor and are typically based on the purchase price/value of the property and the likely complexity of the transaction (for example if you are both buying and selling a property).

Some remortgage deals offer free legal fees – speak to your lender for details.


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