Mortgage Fees Explained
10/06/2022
(Last Updated: 26/03/2024)
80
6 min read
When you get a mortgage, we tend to think only of the deposit, as its such a big chunk and will have been your main focus while saving to buy a home and the interest rate. There are lots of other, smaller costs involved in buying a property.
It can be hard to keep track of all the fees and costs when you're buying a house, so we've broken down the mortgage-specific ones here.
Other purchase costs, like legal fees, stamp duty, property searches, land registry, etc. are broken down for your property in our no-obligation conveyancing quote.
Do all mortgages charge a fee?
Not all lenders or mortgage products come with the same fees, so we'll answer this question for each of the following mortgage fees separately.
Mortgage arrangement fee
Also known as the mortgage product fee or mortgage completion fee. This is the fee for the product itself.
Cost | £0 - £2,500 + |
Paid to | Lender |
Always? | No |
Upfront or Included | Either |
Not all mortgages incur a product fee. If they do, it is non refundable. You can pay it upfront, but you should see if you can add it to your mortgage, so that you don't pay out if the purchase falls through.
You can usually 'overpay' by up to 10% of the outstanding balance per year. In order to avoid the added interest that the product fee would incur when added to the mortgage, try and pay off the arrangement fee asap, (if your lender allows).
When choosing a mortgage watch out for lenders who use low arrangement fees to sell a higher interest rate, or vice versa. You'll often do best to pick a deal which compromises between the two.
Mortgage booking fee
This is paid for the application, usually to reserve a fixed rate tracker or discount deal.
Cost | £99 - £250 |
Paid to | Lender, on application |
Always? | No |
Upfront or Included | Either |
This is not always payable. Some lenders will include it within their arrangement fee, in which case you may be able to include it in the mortgage, as explained above.
Otherwise, it will be payable on application and is non-refundable if the purchase falls through.
Mortgage valuation fee
This is a survey arranged by the lender to check what the property is worth.
Cost | £250 - £1,500 (avg. £300) |
Paid to | Lender |
Always? | No |
Upfront or Included | Upfront |
The valuation is always necessary as the lender needs surety that the property is worth what they are lending you, as they will have to recoup it by repossessing your home, if you default on your mortgage repayments. But, some lenders will pay for this themselves.
It is not the same as a Homebuyer Report or Building Survey. We strongly recommend that you have a RICS survey conducted to check for any defects which may seriously effect the value of the property or even your decision to buy!
Telegraphic transfer fee
This is for the electronic transfer of the money from your Lender to your Solicitor. Also known as CHAPS (Clearing House Automated Payment System).
Cost | £ 25 - £50 |
Paid to | Lender |
Always? | No |
Upfront or Included | Upfront |
If your lender charges this fee, it is non-refundable.
Mortgage account fee
This is essentially an admin fee for the administrative work involved in setting up, maintaining and closing your mortgage.
Cost | £100 - £300 |
Paid to | Lender |
Always? | No |
Upfront or Included | Upfront |
If you pay this fee, it is unlikely that you will be charged a separate exit fee.
Missed mortgage payment fee
Some lenders charge a fee if your account is in arrears.
Cost | See your lender's rules Failure to keep up your repayments could results in repossession |
Paid to | Lender |
Always? | No |
Upfront or Included | Upfront |
Late payments can also impact your credit score. If you are struggling to meet your payments, speak to your lender as soon as possible, as they may be able to help.
Mortgage Broker fee
This fee is for the broker to advise you on your mortgage, arrange your mortgage application, or both. You do not have to use a broker.
However, in the majority of circumstances we recommend that you do, as it is likely to save you money in the long run and can protect your credit rating from the adverse affects resulting from failed applications.
Cost | Avg. £500 |
Paid to | Broker |
Always? | No |
Upfront or Included | Upfront |
Not all brokers charge a fee - some simply take their commission from the lender. Usually those who do charge a fee, also get commission.
Access to whole of the Market | 100% Impartial advice | Terms apply
Higher lending charge
Usually payable when you have a very small deposit, to cover the lenders cost of taking out insurance. This protects them if they have to repossess and sell your property at a loss.
Cost | Avg. 1.5% of mortgage amount |
Paid to | Lender |
Always? | No |
Upfront or Included | Upfront |
Own buildings insurance fee
Sometimes payable if you don't want to use the insurance offered by your Lender. Also known as 'freedom of agency' fee or 'Fee for own buildings insurance arrangements'.
Cost | Avg. £25 |
Paid to | Lender |
Always? | No |
Upfront or Included | Upfront |
Most lenders don't charge this fee any more. If they do, you may well find that you can save more than the £25 fee, by rate shopping for your own choice of insurance provider.
Early repayment charge
Usually applies if you leave the mortgage before the end of the introductory period, but can apply to any early repayment, including overpayments exceeding your lender's limit.
Cost | Avg. 1-5% of early repayment |
Paid to | Lender |
Always? | No |
Upfront or Included | Upfront |
If your mortgage has an early repayment charge it will be outlined in your European Standard Information Sheet, or, ESIS. (This is provided when a lender or adviser recommends a mortgage and includes fees, monthly repayments, conditions, etc).
Exit fee (or closure fee)
This mortgage fee covers the administration costs of closing the account when you pay off the mortgage. Also known as a Mortgage closure fee.
Cost | £75 - £300 |
Paid to | Lender |
Always? | No |
Upfront or Included | When you pay off the mortgage |
If you've already paid a mortgage account fee, it is unlikely that you'll have to pay this as well.
Some specialist mortgages, such as Lifetime Mortgages, will have additional fees laid out in their terms.
Frequently Asked Questions
Yes, banks charge a number of fees for mortgages. The fee for the mortgage itself is called the product fee, arrangement fee or mortgage completion fee.
Your monthly mortgage payments are made up of three main costs:
- 1
A chunk of the loan amount
- 1
The interest fee
- 1
Your arrangement fee, if included in the total mortgage cost
However, as you can see from the article above, there are numerous additional fees which may apply to your mortgage upfront or during the mortgage term.
Lenders must include any Mortgage related fees in the annual interest calculation, called the Annual Percentage Rate of Charge, or APRC.
Which fees are included depend on the Lender and the Mortgage product. You can find all of the fees included in your mortgage on your ESIS document.
Written by:
Caragh Bailey
Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.
Reviewed by:
Andrew Boast
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
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