What mortgage fee’s should I expect?
Published 6th December 2017
When you are considering a new mortgage, it's important to know what fee's might be payable and when, not only to make sure there's no surprises along the way, but also to help make sure you're not overpaying on your deal.
Look out for all types of fees through the life of your purchase life-cycle, from upfront costs -> completion and beyond.
- Potential upfront costs
- Potential costs on completion
- Potential costs after completion
Consultation fee - A fee charged by the financial adviser for the initial meeting and research. Nowadays it is rare for these fee's to be charged, when they are it is not usually more than £100.
Broker fee - A one-off upfront fee charged by the adviser to cover costs of administration and work carried out. This is more common than charging for consultation, and is usually non-refundable if the mortgage does not go ahead. However, some brokers don't charge any upfront fees at all, taking their fee on completion.
Booking fee - Charged by the lender to reserve the specific product you are applying for. This is not usually more than £200.
Valuation fee - This is required by the lender to cover the cost of valuing your property. It is usually paid upfront, and is non-refundable once the actual work has been carried out. Often there is an element of administration within this cost, which is non-refundable in any situation - check the small print. The costs of valuations can range from free to £thousands, depending on the location/type/value of the property, and the level of detail you require. Occasionally, products offer a free basic level valuation or a refund of fees paid on completion if the mortgage proceeds. See valuations page here for more info...
Solicitors (conveyancing) costs - You will need to instruct a solicitor to sort out your mortgage in terms of arranging contracts, searches to ensure the property and you are viable, and registering the property on the land registry. More often than not, the solicitors require a certain amount of payment upfront.
Solicitors (conveyancing) costs - Typical legal costs include:
> Searches - local authority / mining / bankruptcy / chancel etc…
> Stamp duty - see below
> Disbursements - solicitors admin/other costs
> Indemnity cover - sometimes required by the lender in certain non-standard or high risk applications
> Lenders legal fees - Usually you’ll pay the legal costs on behalf of your mortgage lender
The cost of total solicitors fees generally depends on location, complexity, and how much your house is worth. Typically the higher the value, the larger the fee. It can be free (with many remortgage products and certain special purchase deals) - £thousands.
Stamp duty land tax - Charged by the government for the privilege of buying a home in the UK. This varies depending on property price, borrower circumstances (i.e. certain borrowers such as first time buyers, currently (at time of writing) get relief on purchases), and the type of purchase you are making (tax can be higher for second homes and buy to lets).
For a detailed breakdown of the stamp duty you're likely to pay visit the .gov website here
Mortgage arrangement/product fee - A common fee associated with many mortgages these days. It is charged by the lender and the applicant usually has the choice to pay it up front or add it to the mortgage. The fee can range anywhere from £0 - £5000+ depending on the size of the loan and the type of product. This fee tends to be higher for most buy to let mortgages than on residential.
Telegraphic transfer costs - Also known as a CHAPS payment, this is a nominal fee to cover the cost of moving money from the lender's bank to the solicitors bank account. Usually no more than £40.
Early repayment charges (ERCs) - ERC's are found on most standard mortgages now - it would be a special feature of a mortgage to not have these in place, and can be specified for those who require the flexibility. They are usually charged either if the mortgage is repaid in full or if the borrower exceeds the over-payment allowance, within the defined tie-in period. Usually this tie-in period coincides with the initial rate period. It's typical for a 2 year fixed rate to charge a 3% ERC - that is, 3% of the remaining mortgage balance. Some longer fixed periods start at 5% for the first year and taper down to 1% in the final year. It's rare for a tie in period to 'overhang' a fixed rate period these days but it is possible.
Standard admin fees - Some lenders charge for additional admin costs in the event of a change of circumstance, supplementary correspondence requests, or even for late payment. Check your lenders policy on this if required as they are all different.
Mortgage account fee - This is usually illustrated in your initial quote but then charged at the point of paying off the loan when you remortgage/ sell/ finish the term etc. Certain lenders charge this 'upfront' and give you the option to add it to the loan. Typical account fee's range from £0 - £500, and rarely exceed this amount.
Have any other questions? ASK AN EXPERT...