Understanding mortgage fees and charges

Booking fees

You usually pay a booking fee upfront when you first apply for a mortgage. The amount varies from lender to lender, but it’s typically around £99 to £250 and is non-refundable.

Arrangement fees

Also known as product fees or completion fees. They are payable to your lender for setting up your mortgage and can go up to around £2,000. 

Deals with the lowest interest rates aren’t always the cheapest. You also need to consider how large the arrangement fee is, as this impacts the amount you’re charged in total. 

Some lenders let you add the fee to your mortgage balance, but remember, this will cost you more overall in interest and will increase your monthly repayments. 

Valuation fees

Your new mortgage provider will send someone out to do a basic survey of the property, to check they aren’t lending you more money than it’s worth. 

A valuation fee will normally be applicable, but some lenders offer it for free as an incentive. It’s normally around £150 to £1,500 depending on how much the property is worth. 

Unfortunately, if the mortgage falls through after a valuation has been carried out, it’s unlikely you’d get a refund for this fee.

Tip: Research other types of surveys that can look for potential problems and repair work needed to the property you’re buying.

Clearing House Automated Payment System (CHAPS) fees

You can expect to pay your lender an estimated £25 to £50 non-refundable CHAPS fee for transferring your mortgage funds to your solicitor upon completion.

Own Building Insurance Fees

Legally, you need to take out building insurance when you buy a house. If you get an insurance policy through a different company, your mortgage provider may charge you a fee of around £25 to check if it includes sufficient cover. (Not all lenders will charge you for this).

This extra fee should not put you off from shopping around different insurers though. There’s always the possibility that you could find a cheaper deal elsewhere and still pay less overall, even after adding this fee on.

Mortgage account fees

You pay this to the lender either upfront or add it to your mortgage balance when the sale completes. It’s normally around £100-300. It pays for the lender’s administration costs associated with setting up, running and closing your mortgage.

Higher lending charges (HLC)

Lenders may apply a higher lending charge (HLC) if you have a small deposit and a high loan-to-value. By buying an insurance policy with your fee, the lender can offset the risk to themselves if your house drops in value in the future. 

The fee is worked out as a percentage of the mortgage loan. So the more you borrow and the smaller your deposit, the higher the fee will be. 

You may have the choice to pay it upfront or add it to the mortgage balance. Remember, by adding it to the balance you’ll pay more interest overall. But it’s normally refundable if the mortgage falls through. 

Legal fees

Legal fees are payable to your solicitor for completing the legal paperwork. Some lenders pay all or part of your legal fees as an incentive. You can shop around for a good deal elsewhere, but your lender must give them their seal of approval. 

You usually have to pay a small amount upfront and then pay the rest upon completion. If the sale falls through, you could lose the funds you’ve paid up to that point.

Mortgage advice fees

Mortgage advice fees may be payable if you’ve hired a broker or Financial Adviser. Some of them charge a commission from lenders, while others will charge you a fixed fee upfront (of about £500). The amount you pay will vary depending on which adviser you choose.  

Fees to be aware of after your mortgage is approved

Missed payment fees

Some lenders may charge you for missing payments, depending on the terms and conditions of your contract. Remember, falling into arrears with your mortgage could lead to your home being repossessed.

Early repayment charges (ERC)

Before you sign up, check if you’d need to pay an ERC if you wanted to clear your balance before your mortgage ends. If so, you could face fees of thousands of pounds, as they are normally calculated as a percentage of your loan. Plus you may have to pay the lender back for any free incentives or rewards that you have benefited from.

Exit fees

Lenders will normally require exit fees of around £50 to £300 to close your mortgage. This could be payable if you are closing your account early, remortgaging or making your final payment, for example. (Unless it’s included in a mortgage account fee that you’ve already paid). 

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Mortgages are secured against your property. This means your home may be at risk if you fall behind with your mortgage repayments.

Note, the more you borrow and the longer your mortgage term, the more interest you'll pay in total.

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