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Last updated: 27/10/2021 | Estimated Reading Time: 5 minutes

Mortgage charges, fees and costs

There are several factors to consider when deciding on a mortgage such as the interest rate, how long that rate is available and the type of mortgage it is. Something people often neglect is the added fees and costs that may accompany your mortgage. These have rapidly increased over the past few years and could add up to £2,500 onto the total cost of your mortgage. These extra fees can take many different forms and can be included both before and after your mortgage application process.

Our guide will look at the different types of fees that can be added to your mortgage so you can make an informed decision when you compare mortgages

In This Guide:

How do I find what extra fees I am being charged?

By law, extra fees associated with the mortgage must be included by your lender in the overall cost of the deal. These are found in a document known as the European Standard Information Sheet (ESIS).

Fees included during your mortgage application

  • Arrangement Fee: An arrangement fee is the fee you pay for the lender to set up your mortgage. This can cost anywhere between £0 and £2,000, the average is about £1,000. You can either pay this fee upfront or add it to your mortgage, but this will in turn increase the amount owed and therefore your interest and monthly payments. Arrangement fees can also be charged as a percentage instead of a flat fee, with a percentage fee you will pay more if you’re taking out a larger mortgage.
  • Booking Fee: A booking fee is payed up front when you apply for a mortgage deal and is often non-refundable even if your mortgage falls through. Usually this costs around £99 but you can pay up to £250 for this type of fee.   
  • Valuation Fee: A valuation fee covers the cost of the survey of the property arranged by the mortgage lender. This survey will assess the value of the property to make sure you are borrowing the correct amount rather than seek to identify any problems with the property. The cost of this fee varies widely with some lenders waiving the fee and others charging up to £1,500 depending on the property’s value.
  • Legal Fees: When negotiating a mortgage there is a large amount of legal paperwork to do, the legal fee pays a solicitor to do this for you. This is known as conveyancing and is often charged as a percentage of the cost of the mortgage. Some mortgage lenders will cover these fees, partially or in whole, as part of your agreement.
  • Higher Lending Fees: You will only have to pay a higher lending fee if your mortgage is particularly large in proportion to the purchase price. Your lender will then use this fee to purchase insurance in case you are unable to pay back the mortgage and they are forced to sell the property. This fee is around 1.5% of the mortgage and is usually refundable if the deal falls through.
  • CHAPS Fee: This fee, also known as a Telegraphic Transfer Fee, pays for your mortgage lender to transfer money to your solicitor. This fee is usually around £25-£50 and non-refundable if the deal is not completed.
  • Financial Advice Fee: When arranging a mortgage, it’s common to use a financial advisor who will usually charge a fee for their service.
  • Own Building Insurance Fee: Your lender may charge you a fee to check if you have taken out building insurance from a provider who isn’t them. This fee is between £25 and £50.

Fees charged after your mortgage application  

  • APR: Every mortgage will include an Annual Percentage Rate, this is calculated so you can know the total interest rate you will pay over the 25-year mortgage period. This is often not as helpful as it first seems as most people will pay off their mortgage before the 25-year period has ended. Instead it’s always better to check your initial rate as well as the Standard Variable Rate that your mortgage will switch to when your initial rate ends.
  • Early Repayment Charges: The fixed rate or discount period of most mortgages is between two and five years. If you come out of your deal before the end you will have to pay a charge which is a percentage of the loan. Depending on the size of your loan this fee can be quite sizeable so the length of your deal must always be factored into your decision.
  • Missed Payments: Most lenders will charge a fee if you are late on your outstanding payments. The cost will vary widely depending on the lender. If you consistently fail to repay your mortgage over a long period, your house may be repossessed.
  • Exit Fee: An exit fee is paid to your lender to close your account once your mortgage has been repaid or if you change lender. This cost can be anywhere between £75 and £300.

Other fees you might incur

  • Mortgage Account Fee: Some lenders will charge this fee for the costs involved in opening and closing your mortgage. If you pay this fee, then you probably won’t have to pay an exit fee at the end of your deal.   
  • Mortgage Broker Fee: If you have arranged your mortgage through a broker, instead of a bank, you will have to pay your broker a fee of around £500, the exact amount will vary depending on the value of the mortgage.