Mortgage fees & charges explained

30 July 2018, by Matt Stevens

There are a variety of mortgage fees and charges you may have to pay at different stages in the process, both before and after completion. These can range from small admin fees to larger costs covering essential services, but it’s important that you’re aware of each one in order to properly plan your finances.

In this guide, we aim to outline the various fees and charges you may need to cover when applying for a mortgage, including when and who you’ll be due to pay, as well as an estimate of how much.

We will cover:

Please note: The costs included here are given as an estimated range and they could vary depending on your lender or the type of services you need, so it’s always worth checking ahead of paying them.

Before completion

There are a number of fees and charges that you may need to pay before completion. Many of these are payable to your lender, though some will be paid to a broker, surveyor, or solicitor for their services. We’ve taken a look at the main types below.

Booking fee

Who is it paid to? Your lender.
When is it paid? Upon application.
How much? £100–£300
Do I always need to pay this? Possibly, it depends on the type of mortgage applied for.

If you’re applying for a fixed-rate, tracker, or discount mortgage (see our guide to mortgage types to find out more about these) a mortgage lender is likely to charge a booking fee to ‘lock in’ the deal.

This fee, sometimes known as an application or reservation fee, is usually payable as soon as you submit your application and isn’t refundable should your application fall through. Some lenders will include it as part of the arrangement fee, though this can depend on the size of your mortgage loan.

Mortgage valuation fee

Who is it paid to? Your lender.
When is it paid? When you apply, at the same time as your booking fee and arrangement fee (if applicable).
How much? £300–400
Do I always need to pay this? Yes, unless it’s offered for free or you’re buying property in Scotland with an up-to-date Home Report.

The mortgage valuation fee covers the cost of the lender valuing the property you wish to purchase. They do this to ensure that the property has not been overpriced, so that their loan is sufficiently secured, and they won’t make a loss should they need to repossess.

Some lenders may charge an additional valuation administration fee to cover the process of arranging the valuation, while others may waive any fees as part of the mortgage deal on offer.

It’s important to note that this valuation is different to the property survey you can have carried out on your own behalf: the valuation survey checks the home’s value only for the lender and won’t assess potential problems or costs you may face.

In Scotland, the seller needs to provide a Home Report, which includes a valuation of the property. Should the Report be less than 12 weeks old, the lender may agree to use this figure and forgo a new valuation — you can find out more in the Scottish Government’s guidance.

Mortgage arrangement fee

Who is it paid to? Your lender.
When is it paid? Once you’ve accepted a mortgage offer (it may be added to your mortgage balance).
How much? £1,000–£2,000 depending on product type and rate
Do I always need to pay this? Yes.

The mortgage arrangement fee is the main fee that a lender will charge for arranging your loan, sometimes known as the product fee or completion fee. You’ll find this fee is part of all mortgage products.

It is a significant cost that you need to factor into your mortgage affordability calculations to ensure you can afford a product and that it’s the best choice for you.

The arrangement fee is usually linked to the interest rate on offer: mortgage products with a low rate typically have a higher fee, while deals that have high interest will usually be offered with a low fee. Generally, paying a higher fee to access lower rates can be beneficial if you want to take out a large loan, as it will work out cheaper over the long-run.

You will also need to think about how you want to pay the fee: either upfront or by adding it to your mortgage. Because you will be charged interest on the fee if it’s added to your loan, paying upfront is the most cost-effective option. However, if it’s paid upfront, there’s a chance you’d lose all or some of the fee if your application falls. Depending on the overpayment terms on your mortgage, you may be able to get the best of both worlds by adding the fee to your loan, and then overpaying by this amount as soon as your mortgage goes through.

Mortgage account fee

Who is it paid to? Your lender.
When is it paid? Once you’ve accepted a mortgage offer (it may be added to your mortgage balance).
How much? £100–£300
Do I always need to pay this? Depends on the lender.

A mortgage account fee is often charged by a lender to cover the cost of creating, maintaining, and closing your mortgage account.

If your loan provider adds this fee to your application, it means that you won’t need to pay an exit fee later, but you may still need be charged an early repayment charge if you settle the balance ahead of schedule. How and when you pay this fee also depends on the lender: most will add it to your balance, but some may give you the option of paying it upfront.

Own building insurance fee

Who is it paid to? Your lender.
When is it paid? Once you’ve accepted a mortgage offer.
How much? £25–50
Do I always need to pay this? Depends on the lender and whether you take out their insurance.

An own building insurance fee, often known as a freedom of agency fee, may be charged by your lender if you decide to forgo their own building insurance and instead choose a policy from another provider. It covers the cost of checking whether this alternative policy is comprehensive enough to protect the lender if the property you’re buying suffers damage.

Not all lenders will charge this fee but, if they do, you will only need to pay it if you want to choose your own buildings insurance. It’s worth considering whether it will be more cost-effective to pay the fee and find a better deal elsewhere, or to simply go with your loan provider’s cover.

If you’re looking to find the best deal on your home insurance, The Mortgage Genie can help you find alternatives to the policy offered by your lender from some of the best insurance providers on the market. Our team are ready to provide expert advice and make the application process simple.

Mortgage broker fee

Who is it paid to? Your mortgage broker.
When is it paid? Depends on the mortgage broker — it can be upfront or when you accept a deal.
How much? £0–£500 depending on mortgage broker
Do I always need to pay this? Hiring a mortgage broker is optional. It also depends on whether the mortgage broker is ‘fee-free’ or charges upfront.

A mortgage broker fee may be payable if you hire a mortgage broker to find you the best deal on your loan. If you’re unsure about the mortgage market and how to secure the right deal for you, a broker can help to find the most suitable product and support you through your application. You can find out more in our mortgage broker guide.

Whether you pay a mortgage broker fee all depends on whether the broker is ‘fee-free’ or requires upfront payment for their services.

At The Mortgage Genie, we offer total transparency on fees for our mortgage services. After a free consultation — so we can understand your needs and what type of product will be suitable — we’ll work out if an upfront fee is necessary or not, agreeing any charge in advance of your application. This way, you’ll have all the information you need to make smart budgeting choices as you move.

House survey cost

Who is it paid to? Your surveyor (or lender if they arrange it).
When is it paid? Between the property has been taken off the market and the contracts being exchanged.
How much? £400–£2,000 depending on level of survey.
Do I always need to pay this? No, a survey is optional.

A survey fee will be payable if you choose to have a survey carried out on the property you’re thinking of buying. There are three levels of survey, and they can get progressively more expensive as they increase in detail (find out more in this guide from the Royal Institute of Chartered Surveyors). Paying this fee will see a surveyor visit the property and inspect it in detail to find any issues or potential problems down the line — this differs from your valuation fee, which pays for a check on behalf of the lender that the property is worthy of a mortgage.

Having a survey done is completely optional, though it will give you peace of mind you’re purchasing a property in good condition. It can also pay off if it spots any issues, such as damp or structural problems, as these can give you room to renegotiate the asking price.

Telegraphic transfer fee

Who is it paid to? Your lender.
When is it paid? Upon completion, when funds are transferred from the lender.
How much? £25–£50
Do I always need to pay this? Yes.

The telegraphic transfer fee, often known as the CHAPS (Clearing House Automated Payment System) fee, covers the cost of your mortgage lender transferring the mortgage funds to the seller’s solicitor. The fee is usually paid once you’re ready to complete the deal and is commonly added to the mortgage amount or taken off the balance received.

Conveyancing fees

Who is it paid to? Your solicitor.
When is it paid? Upfront at various stages of the mortgage application process.
How much? £400¬–£1,500
Do I always need to pay this? Usually yes, but some lenders offer this as part of the package.

When buying a home, you will need to employ the services of a solicitor to take care of all the legal work associated with the process, and they will charge fees to do so. Usually, a solicitor will require payment for each service as they perform it, so expect to pay various fees throughout the process.

Your solicitor will take care of several key matters. This includes conveyancing, which involves managing the transfer of ownership from the previous owners to yourself, as well as checking all paperwork is present and correct and finding out whether there are any potential issues, such as planning restrictions or environmental problems.

Some loan providers will offer to cover the conveyancing and legal fees (especially for remortgages), usually by providing the services of their own associated solicitor or by offering remuneration after you’ve closed the deal.

Your solicitor may also conduct legal work on behalf of your lender, so you need to check that they’ll accept your choice before making any agreements or payments. Lenders usually have a panel of approved solicitors that you can consult, although it’s worth asking if you want to engage a third party.

After completion

After you’ve completed your home purchase and secured your mortgage, there are still fees and charges that you may need to pay through the lifetime of your deal. Some are avoidable, while others are a necessity of paying off your loan.

Missed mortgage payment fee

Who is it paid to? Your lender.
When is it paid? When your mortgage account to fall into arrears.
How much? Depends on the lender.
Do I always need to pay this? Only if you miss a repayment, though some lenders don’t use them.

If you miss a repayment during the course of your mortgage, your lender could charge you a missed mortgage payment fee. Typically, this fee will be applied to the balance of your missed payment after a period of grace.

Should you face difficulties repaying your mortgage, you should always let your mortgage provider know, as they may be able to work with you to get things back on track. Sometimes it’s possible to put a reduced payment plan or repayment holiday in place to help you manage your finances, so be sure to get in touch if you’re facing financial difficulties.

Early repayment charge (ERC)

Who is it paid to? Your lender.
When is it paid? When you pay off all or some of your mortgage early, exit an introductory deal, or wish to switch lender.
How much? Depends on the size of the repayment and percentage charged by lender.
Do I always need to pay this? Yes, if you repay early, though some lenders don’t use them.

Should you wish to make a significant overpayment on your mortgage; exit a minimum term deal; or switch lender, you may be subject to an early repayment charge (ERC) to ensure the lender doesn’t suffer a loss.

The charge is typically 1–5% of the early repayment, though this may depend on any introductory deals and the size of the mortgage. If you repay your mortgage very early, you may need to pay back incentives like any legal fees covered or cashback from your provider.

Most lenders have a mortgage overpayment limit that allows you to repay a limited portion of your mortgage every year without incurring a fee, so it is still possible to overpay some of your mortgage.

Additionally, all mortgages have an early repayment charge period, usually when an introductory deal ends or at a certain length of time after you completed on your loan — after this date, you will be able to repay as much of your mortgage as you like without an ERC.

Mortgage redemption fees

Who is it paid to? Your lender.
When is it paid? When you close your mortgage account.
How much? £50–£300
Do I always need to pay this? No, you may have already paid a mortgage account fee that covers the cost of closing your account.

Your mortgage lender may charge you a redemption fee — sometimes known as a mortgage exit fee, deeds release fee, or mortgage completion fee — for closing your account with them.

This can be payable when you remortgage to another lender or switch to another deal with the same lender, as well as when you finish repaying your mortgage — even when you aren’t repaying early. If you are repaying early or remortgaging, this fee will typically be added to the redemption figure you’re quoted (that could also include an early repayment charge).

It’s worth noting that if you’ve paid a mortgage account fee during your application, you will have already paid the necessary charge for closing your account.

Government fees and charges

As well as the charges you have to pay to your mortgage lender and services associated with your mortgage application, you will also need to make sure you budget for important government fees and taxes that are payable when you’re buying a property. We’ve taken a look at these below.

Land Registry fee

Who is it paid to? HM Land Registry.
When is it paid? Upon completion.
How much? Up to £500 depending on property price.
Do I always need to pay this? Yes.

When you complete the purchase of your new home, you need to pay a Land Registry fee to the HM Land Registry, the department of the Government that registers the ownership of land and property in the UK. This fee is mandatory, as it will provide you with proof that you own the house in a title guarantee. Your solicitor will use your funds to pay this as a disbursement on your behalf.

You can find out what the latest Land Registry fees are on the Government’s website.

Stamp Duty Land Tax

Who is it paid to? HM Revenue & Customs.
When is it paid? Upon completion.
How much? Depends on property price and your circumstances
Do I always need to pay this? It depends on the price of the property you’re buying. There’s no charge on properties in the lowest price bracket set by HMRC.

Stamp Duty Land Tax is the tax that you pay to HM Revenue & Customs when you purchase a new home. You will pay your solicitor the required amount, then your solicitor will pay the Tax to HMRC on your behalf. You can find out more about this in our Stamp Duty Land Tax guide.

Applying for and securing a mortgage is a process that requires a lot of careful budgeting to ensure you can comfortably afford your move. We hope this guide has introduced you to the various fees and charges you need to include in your plans for a successful property purchase.

If you’re new to the whole mortgage application process or you just want to get the best deal, get in touch with the team here at The Mortgage Genie, who can walk you through every stage of the process. Whether you’re a first-time buyer, moving home, remortgaging, or looking to secure an adverse credit mortgage, our team are on hand to help.


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