A guide to mortgage fees and costs
It’s important you understand all the various fees and charges you might have to pay when you take out a mortgage. Use our handy table to find out about mortgage fees and costs and how much you might have to pay.
Fees and charges
To estimate monthly repayments now and if interest rates rise, use our Mortgage calculator.
Lenders use different terms to describe their fees, so it’s important to properly check all the costs that come with the mortgage.
From March 2016, mortgage lenders will have to start including any mortgage related fees such as redemption charges and valuation fees, as part of the annual interest calculation. This way of calculating the interest is called the Annual Percentage Rate of Charge or APRC.
Some mortgage deals may seem attractive but the fees can quickly add up. When comparing mortgage offers, add up all the charges over the length of the deal as well as your monthly repayments.
For example, if your repayments are £1,000 per month on a two-year fixed-rate mortgage, plus £300 in fees, the total cost of the deal is £24,300.
|Fee or charge?||What’s it for?||Typical costs|
|Arrangement fee||This is the fee for the mortgage product, and is sometimes known as the product fee or completion fee. You can sometimes add this to your mortgage, but this will increase the amount you owe, your interest and your monthly payments.||Anything from £0 to over £2,000.|
|Booking fee||This is sometimes charged when you simply apply for a mortgage deal and is not usually refundable even if your mortgage falls through. Some mortgage providers will include it as part of the arrangement fee, while others will only add it on depending on the size of the mortgage.||Around £99-£250.|
|Valuation fee||The mortgage provider will value your property and make sure it’s worth the amount you wish to borrow. Some lenders may waive this fee on certain mortgage deals. You can also pay for your own property survey to identify all the repairs or maintenance that might be needed.
The lender’s survey only looks at the property value, not necessarily the potential problems and future costs.
See our guide to the different Survey types and costs.
|£150-£1,500 depending on the value of the property.|
|Telegraphic transfer fee||Sometimes known as CHAPS (Clearing House Automated Payment System), this fee pays for your mortgage provider to transfer the money to your solicitor. It’s usually non-refundable, so if the deal falls through you probably won’t get the money back.||Typically £25-£50.|
|Mortgage account fee||This pays for the lender’s administration costs in setting up, maintaining and closing your mortgage. If you’ve paid this fee, then it’s unlikely that you’ll need to pay the exit fee (see below) although an early repayment charge (see below) may still apply if you close the mortgage early.||Typically £100-300.|
|Missed payments||Some lenders may charge a fee or fees if your account is in arrears.||The penalty for missed payments depends on each lender’s rules. Failure to keep up with mortgage repayments could also result in your home being repossessed.|
|Mortgage broker fee||This fee is for a mortgage broker, if you choose to hire one, for arranging the mortgage or giving you advice. Some mortgage brokers won’t charge a fee and instead take commission from the mortgage provider.
Read our guide to Choosing a mortgage – how to get the right deal.
|On average £500 or a commission depending on the value of the mortgage.|
|Higher lending charge||Not all lenders charge this fee and it’s only likely to be a requirement if you have a small deposit, as this pays for the lender’s insurance if you can’t pay back the mortgage and they have to sell your property at a loss. The fee is often 1.5% of the mortgage – for example, £3,000 on a £200,000 mortgage.||If applicable, this is usually 1.5% of the mortgage.|
|Fee for own buildings insurance arrangements||Not all lenders charge this now, so check first. Sometimes known as a freedom of agency fee or own buildings insurance fee. This fee sometimes applies if you decide to find your own buildings insurance, rather than take the one offered to you by your mortgage provider.
It can save you more money in the long run by paying this fee and shopping around for your own insurance needs.
|Early repayment charge||This fee may not always apply, so be sure to check what the rules are with each mortgage provider, especially if you want to make an early repayment in the future. If you already had a mortgage, check your Key Facts Illustration or European Standard Information Sheet (ESIS) document to see what the cost is.
Typically the charges range from 1–5% of the value of the early repayment.
For example, a £100,000 mortgage with a 3% charge would cost you £3,000. This covers lender costs if you repay all or part of your mortgage earlier than the agreed term or deal period.
The mortgage provider may also ask for any rewards or incentives paid to you to be returned, such as discounts on legal fees or cashback.
|Typically 1-5% of the value of the early repayment.|
|Exit/Closure fee||This is a fee to your lender when you repay your mortgage, even if you are not repaying it early. If you’ve already paid the mortgage account fee then it’s unlikely you’ll need to pay this particular fee as it will usually include set up and maintenance, as well as the closure of the account. Check what your mortgage account fee covers to make sure.||Typically £75-£300.|
Other mortgage-related charges
Many of the other mortgage-related charges can also add thousands of pounds to your property-buying bill. These include:
- Legal and survey fees
- Stamp Duty on properties priced above £125,000
- Moving costs – Estimate your overall cost of buying a house and moving
From 1 April 2016, if you’re purchasing an additional home, for example a buy-to-let property over £40,000, you’ll have to pay an extra 3% on top of each Stamp Duty band.
Use our Stamp Duty calculator to work out how much Stamp Duty you’ll need to pay on a new home.
The cost of independent advice
It’s important that you get advice about mortgages in order to find one which is most appropriate for you:
Comparison websites are a good starting point for anyone trying to find a mortgage tailored to their needs.
We recommend the following websites for comparing mortgages:
- Comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision.
- It is also important to do some research into the type of product and features you need before making a purchase or changing supplier.
- Find out more in our guide to comparison sites.
Are you sure you can afford the mortgage?
All costs should be outlined in a mortgage Illustration document. Some lenders may call this the European Standard Information Sheet (ESIS). While others may call it an enhanced Key Facts Illustration with supplements of additional information as needed.
Once you’ve considered all these costs, look at whether you can still afford the mortgage.
It’s important to allow for the fact that your mortgage repayments could increase if, in the future, your circumstances change or interest rates go up.