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What fees do I need to pay when getting a mortgage

What fees do I need to pay when getting a mortgage

Category: Mortgages

When you're getting a mortgage it can seem that there are just fees, fees and more fees! Add into the equation that you're buying a house at the same time and there are even more fees to think about.

Here's our list of the mortgage fees you might have to pay, and what they mean…

Remember that with some fees you're given the option of paying them upfront or adding them to the mortgage balance. Although some lenders won't charge you interest on the lending fee if you add it to the loan (all heart aren't they!), you need to remember that you'll be repaying any fees you add (plus any interest), over the rest of the mortgage term. Therefore, if you can, it's a good idea to try and pay these charges upfront.

This guide only deals with the fees incurred in taking out a home loan or mortgage and getting out of it. Other costs are payable if you're moving (Stamp Duty, Estate Agents, etc.).

Before the mortgage starts…

  • Most fees and costs you have to pay before the mortgage starts should appear in Section 8 of the Key Facts Illustration (KFI) that your broker or prospective mortgage lender gives you before applying.
  • If your lender will allow it, you may decide to add these amounts to the mortgage balance. If you do, they will be included in the total of "fees to be added to the loan" in Section 3 of the KFI.
  • If you're looking for a buy-to-let mortgage you may not get a KFI. However, these fees may apply as well, so be sure to find out what you will need to pay before completing any mortgage application.

1. Booking Fee

  • Aka. Sometimes also called an Application Fee.
  • What is it? This fee is paid at the very start, usually when you complete the mortgage application. It is to "book" or "reserve" your mortgage funds whilst your application goes through.
  • How is it paid? Generally this is paid upfront by you; however, sometimes (if your lender allows it) you can add it to the mortgage balance.
  • Is it refundable if I don't proceed with the mortgage? Not usually.
  • Where can I find this fee on my KFI? This fee will appear in Section 8.
  • How much roughly can I expect to pay? This type of fee varies considerably so it's not useful to give a "typical" example. However, you should expect to pay at least £99.

2. Arrangement Fee

  • Aka. Sometimes also called a Completion Fee.
  • What is it? This fee can be paid at any point before the mortgage starts. It is the fee your mortgage lender charges to set-up your mortgage.
  • How is it paid? You usually have the option to pay this upfront, or add it to the mortgage balance.
  • Is it refundable if I don't proceed with the mortgage? If you are declined or decide not to proceed, you can normally get this fee refunded.
  • Where can I find this fee on my KFI? This fee will appear in Section 8.
  • How much roughly can I expect to pay? This will vary massively. It could be a cash amount, or could be a percentage of the mortgage you are applying for. Because of this it's difficult to give an idea of how much it might cost.

3. Valuation Fee

  • What is it? A fee charged by your mortgage lender for commissioning a mortgage valuation. A mortgage valuation is quite a basic inspection of your property, and its purpose is limited to whether your home is suitable security to lend on. If you want a more in-depth survey you will need to pay for a Homebuyers or Full Structural survey – this will cost significantly more.
  • How is it paid? You generally have to pay this upfront when you make your mortgage application.
  • Is it refundable if I don't proceed with the mortgage? It depends. If your mortgage application is declined or cancelled before the valuation takes place, you've a good chance of getting your money back (although you may not get your Valuation Administration Fee back if you've paid one). If however, you're declined or you cancel after the valuation, it's unlikely you'll get your money back.
  • Where can I find this fee on my KFI? This fee will appear in Section 8.
  • How much roughly can I expect to pay? Your lender will have a set price list for this, depending on how much your property's worth – you may be able to find this out on their website.

4. Valuation Administration Fee

  • What is it? A fee a lender will charge you for dealing with administration costs arising from processing the mortgage valuation. This is paid when you apply, together with your Valuation Fee.
  • How is it paid? You generally have to pay this upfront when you make your mortgage application.
  • Is it refundable if I don't proceed with the mortgage? It will depend on when the application was declined or cancelled. If the lender has done some work liaising with the surveyor to do a valuation for instance, you may not get this money back.
  • Where can I find this fee on my KFI? This fee will appear in Section 8.
  • How much roughly can I expect to pay? This fee is normally a flat amount, in the region of £50 - £100.

5. CHAPS fee

  • Aka. Sometimes called a Telegraphic Transfer Fee.
  • What is it? This fee is charged to you by the mortgage lender for sending the mortgage monies to your solicitor.
  • How is it paid? This fee is usually paid on completion – most often by being added to the mortgage, or being taken off the balance you receive.
  • Is it refundable if I don't proceed with the mortgage? No (but bear in mind that this fee isn't actually payable until completion – so you would be very unlikely to be declined or cancel at that point).
  • Where can I find this fee on my KFI? This fee will appear in Section 8.
  • How much roughly can I expect to pay? Expect to pay between £25 and £50.

6. Own Building Insurance Fee

  • Aka. Sometimes also called a Freedom of Agency Fee.
  • What is it? It's a fee that your mortgage lender charges if you decide not to take Building Insurance with them. They charge it for the work in checking your insurance policy is sufficient to protect them if your house ever needed to be re-built (if it was burnt down for instance).
  • How is it paid? This fee is usually paid on completion – most often by being taken off the balance you receive.
  • Is it refundable if I don't proceed with the mortgage? No (but bear in mind that this fee isn't actually payable until completion – so you would be very unlikely to be declined or cancel at that point).
  • Where can I find this fee on my KFI? This fee will appear in Section 9.
  • How much roughly can I expect to pay? Expect to pay around £25.

7. Mortgage Account Fee

  • What is it? This fee is charged by the lender for setting up, maintaining and closing down your mortgage account. When this fee is charged you don't have to pay any Redemption Administration fees (although you may have to pay an Early Repayment Charge if you repay the mortgage early – please see below).
  • How is it paid? This is normally added to the mortgage balance on completion, although sometimes you can pay it upfront.
  • Is it refundable if I don't proceed with the mortgage? Usually, if you've paid this upfront, it would be refunded.
  • Where can I find this fee on my KFI? This fee could appear in Section 8 and/or Section 10.
  • How much roughly can I expect to pay? This will vary a bit, but anything between £100 and £300 is normal.

8. Higher Lending Charge

  • Aka. Can be abbreviated to HLC.
  • What is it? A Higher Lending Charge can be made by the lender if your mortgage has a high loan-to-value. It's designed to cover any increased risk the lender might incur by lending to you – they may use it to buy an insurance policy called a Mortgage Indemnity Guarantee, which protects them if you default on the mortgage.
  • How is it paid? The Higher Lending Charge is usually paid on completion. It can sometimes be paid upfront, but could also be added to the mortgage balance.
  • Is it refundable if I don't proceed with the mortgage? Yes.
  • Where can I find this fee on my KFI? This fee will appear in Section 8.
  • How much roughly can I expect to pay? This will vary massively. It's usually a percentage of the mortgage you are applying for that's above a certain loan-to-value limit. So what you pay will depend on how much you borrow, and what loan-to-value this is.

9. Legal Fees

  • Aka. Sometimes also called a Conveyancing Charge.
  • What is it? These fees are payable to a solicitor or licensed conveyancer for undertaking the legal work involved with the mortgage or remortgage.
  • How is it paid? Normally you would have to pay these fees when the mortgage completes. However, you might have to pay an upfront deposit "on account" to cover the costs to the solicitor or conveyancer of doing preliminary searches and work.
  • Is it refundable if I don't proceed with the mortgage? You may have to pay some of the legal fees and costs for any work that the solicitor or conveyancer has undertaken.
  • Where can I find this fee on my KFI? This fee will appear in Section 8.
  • How much roughly can I expect to pay? How much you pay will depend on several things: the solicitor/conveyancer used, whether your property is a freehold or leasehold, whether you are remortgaging or purchasing as well as other things. Quite often, for remortgages in particular, your lender may offer free legal fees as an incentive. However, if this incentive isn't offered, it's a good idea to get several quotations – one word of warning here though: the solicitor/conveyancer you choose must be acceptable to the lender – so be sure to ask this before any money changes hands.

10. Mortgage Advice Fees

  • What is it? Charges and fees relating to the advice service provided by your Financial Adviser or Mortgage Broker.
  • How is it paid? Before you receive any advice you should receive a "Key Facts about our services" document which will provide information on the fees charged.
  • How much roughly can I expect to pay? All IFAs are required to explain how much their advice will cost and agree with you as to how it will be paid. All costs must be clearly presented to avoid any confusion or misinterpretations.
  • Payments can be a set fee which is payable upfront.

When the mortgage finishes…

1. Early Repayment Charge

  • Aka. Can be abbreviated to ERC.
  • What is it? A charge the lender will make if you come out of an introductory fixed, discounted or tracker deal early.
  • How is it paid? It will be added to the Redemption figure you are quoted when you come to repay the mortgage, or remortgage to a new lender.
  • Where can I find this fee on my KFI? This fee will appear in Section 10.
  • How much roughly can I expect to pay? The Early Repayment Charge is usually a percentage based fee. How much you pay will depend on the introductory deal you take and the size of your mortgage (either the original mortgage amount or the outstanding balance that that you're redeeming). Alternatively, you might have to pay some extra interest (anything from the equivalent of a few days' to several months' worth). If you are repaying your mortgage early (within a few years of taking it out), you might have to pay back any incentives – such as legal fees or cashback –that you received.

2. Redemption Administration Fee

  • Aka. Deeds Sealing Fees, Deeds Fees, Exit Administration Fees, Exit Fees.
  • What is it? A fee your lender charges for closing the mortgage account. This could be payable on top of any Early Repayment Charge, or even when you make your final mortgage payment at the end of the term.
  • How is it paid? If you're repaying your mortgage early or remortgaging it will be added to the Redemption figure you are quoted.
  • Where can I find this fee on my KFI? This fee will appear in Section 10.
  • How much roughly can I expect to pay? Expect this fee to be anything between £50 and £300.

My fixed rate mortgage has ended. Will I be charged arrangement fees if I stay with same lender?

If you continue with the 'revert rate' of your existing deal (the revert rate is usually the standard variable rate), you would not be required to pay an arrangement fee. However, if you choose to redeem this deal and go onto another deal with your existing mortgage lender, fees are payable as per a new deal.

Guide Updated: 14/03/14

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Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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