Mortgage fees and charges

Fees when applying for a mortgage

When you apply for a mortgage there are a range of standard fees that you can expect to pay, no matter what type of mortgage you choose. Not all lenders impose the full range of mortgage lender fees, and how much each of those charge costs depends on a range of factors. Your financial circumstances, the size and type of property you’re buying, and which lender you opt for can all impact the cost of your mortgage fees.

Many lenders offer low fee or even fee-free mortgage deals, however, keep in mind that this won’t always save you money in the long run. Reduced fee mortgages often come with higher interest rates, meaning you will often pay more over the duration of the loan, even if the initial outlay is smaller.

Here are the most commonly charged mortgage fees in the UK:

Mortgage arrangement fee

This charge, like many fees for a mortgage, is known by a number of different names. Some lenders will refer to it as a mortgage administration fee, whereas others may call it a set up fee, a product fee, an application fee or a completion fee. It’s also worth bearing in mind that this is not an exhaustive list of names, so if it's unclear, be sure to ask the lender if it's an arrangement fee.

Whatever the name, it's an administrative cost to arrange the mortgage and is likely to be one of the largest upfront fees you'll pay when you apply for a mortgage or remortgage.

Typically you could expect to pay £1,000 - £2,000 for a mortgage arrangement fee, but costs will vary depending on the value of the property you’re buying and by lender

Due to the size of the average arrangement fee, mortgage lenders often allow you to add this charge to your mortgage - but keep in mind that this means paying interest on it. It’s also a good idea to ask whether the fee is refundable in the case that the mortgage doesn’t go through. 

If not refundable, it may be best to ask for it to be added to the mortgage balance, as this will avoid losing out if the mortgage does not proceed. You can then usually overpay on your first monthly repayment to avoid paying interest on the arrangement fee. Just be sure this wouldn't exceed any overpayment limits imposed by your lender.

Booking fee

Not many lenders charge a booking fee on top of the mortgage arrangement fee these days, but some may still list this as a separate charge. Lenders usually require payment of this on submission of your mortgage application.

Look out for large booking fees, as they are not usually refundable and typically cost between £74-£300.

Legal and solicitor fees

There are a number of legal processes that take place as part of the mortgage application process, which are carried out by a specialist conveyancing solicitor. They do local searches and deal with the legal transfer of the title deeds of your new home. 

You may also notice a funds transfer fee included within the legal costs, sometimes shown as a CHAPS fee or telegraphic transfer fee. This is the cost the conveyancer charges to send the money from the mortgage provider to the seller. 

Legal costs can vary depending on the value of your property and complexity of your circumstances, however, typical legal fees for a mortgage cost around £1,500.

Government-based mortgage fees and charges

When buying a home in the UK, you'll need to pay certain government charges in addition to those charged by the lender, solicitor and surveyor during the application process. 

Although these charges go directly to the relevant government department, they are usually collected and disbursed on your behalf by the conveyancing solicitor. They include:

Land Registry fee

This is payable to HM Land Registry on the completion of your purchase, to register ownership of your property and/or land.

The cost of land registry is based on the property value, for example, a mortgage between £100,001 and £200,000 costs £200 to register, but can be as high as £500, for higher priced properties

It’s worth asking for the conveyancer dealing with your purchase to make the land registry fee payment online, as this can work out cheaper for you.  

Stamp Duty

Stamp Duty Land Tax (SDLT) is payable to HM Revenue & Customs when you purchase a new home of £250,000 or above. Not all first-time buyers in England and Northern Ireland will need to pay stamp duty, however, as there is relief available for your first residential purchase.

Stamp duty is charged at a percentage of the value of the property, usually 5%, with an additional 3% payable for second and all subsequently owned properties in England and Northern Ireland. There are similar charges in Scotland and Wales, more information can be found using our stamp duty calculator.

Valuation fee

All mortgage lenders will instruct a valuation to be carried out on the property you’re buying, as they want to ensure it’s worth the amount you want to borrow. This is often done remotely nowadays, which is known as a desktop valuation.

Not all lenders charge for this - many include a free valuation as an incentive. However, those that do charge a valuation fee base it on the value of your property. It can, therefore, range from as little as £100 to £2,000 or more

If you’re buying in Scotland, it’s worth noting that sellers are obligated to provide a home report including a valuation. If this document was produced within the previous 12 weeks, some lenders will accept this as a valuation, saving you forking out on another fee.

Is this the same as the survey fee?

No, it’s not. The valuation is a simple costing exercise to gauge the true market value of your new property. It's an essential part of the mortgage application process, so you must have one.

A survey is non-essential, but it's highly recommended for those buying a new home, as it looks at the structural integrity of the property and identifies whether there may be any issues in the future. It's purely for the benefit of the home buyer, whereas a valuation is for the lender.

A basic survey can cost £150-£250, but a full structural survey would usually be upwards of £500, depending on the size and value of your home

As well as making you aware of any potential issues or snags with your new home, information gained from a survey can be a powerful renegotiation tool. If the surveyor highlights issues that will cost you to fix in the future, you may be able to persuade the seller to knock these costs off the selling price - potentially saving more than the survey cost you!

Other fees

Mortgage discharge fee 

This can also be known as the deeds release fee or mortgage account fee and not all lenders charge it. It’s the charge for the set up, maintenance and closure of your mortgage account, but is typically charged at application stage.

A deeds release fee is usually around £50-£75, however it varies depending on the lender

If you pay this mortgage fee, it’s unlikely you'll also need to pay a mortgage exit fee, as you have essentially pre-paid for it.

Higher lending charge

Not all lenders impose a higher lending charge, but those that do typically charge customers borrowing 90% LTV (loan to value) or more. 

This type of fee can be as much as 1.5% of the mortgage size, so it’s worth considering whether you would be better to save a larger deposit to reduce your LTV and avoid paying it

Mortgage broker fee

Mortgage brokers help you get the most suitable and competitive deal for your circumstances. In the current climate, their experience is more valuable than ever, so it's worth considering their services.

Most mortgage brokers base their fees on a percentage of the value of the mortgage (usually 1-2%), however, some offer fee-free brokerage services, such as our partner, Mojo Mortgages.

Own buildings insurance fee

Another fee that's not often seen nowadays, but is still worth looking out for is the own buildings insurance fee, otherwise known as the freedom of agency fee. 

This charge is to allow customers to compare buildings insurance themselves to find a competitive deal, rather than using the lender’s recommended insurance provider, who won’t necessarily be the cheapest or best for your needs. 

Mortgages do typically require the buyer to have buildings insurance in place, so it’s important to budget for this ongoing cost, however you decide to arrange it. Home insurance cost depends on the size, value and location of your property.

Fees payable at the end of a mortgage

Most mortgage fees are payable at application stage, but there are a few fees that could apply throughout the duration or at the end of your mortgage, depending on your circumstances. These include:

Exit fee

This is another charge that's known under many names, including the discharge fee, closure fee, deeds release fee, repayment administration fee, redemption fee, or simply the mortgage exit fee. You won’t usually need to pay this if you paid a mortgage discharge fee during your application.

The exit fee is usually between £75 and £300, but varies from one lender to the next. Not all lenders charge one, but where chargeable, it applies whether or not you leave the mortgage deal early, and is entirely separate from early repayment charges (ERCs).

Early repayment charge

Almost all mortgages allow for overpayments, up to a certain amount - usually around 10% of the mortgage value per year. This can save you hundreds, if not thousands of pounds in interest, each year.

If you repay more than the allowed overpayments, however, then you'll usually be charged a fee known as the ERC (early repayment charge). ERCs are also payable if you remortgage to a new lender before the end of a deal with a fixed end date. This is because when you remortgage, you're repaying your entire mortgage early with the funds from the new lender.

Early repayment fees are typically charged at between 1-5% of the amount you’ve overpaid by, or in the case that you repay the entire loan, 1-5% of the remaining mortgage balance. It could, therefore, be multiple thousands of pounds - especially if you have a long time remaining on your fixed-rate mortgage term.

ERCs can be avoided so long as you stay within the overpayment terms of your lender and only remortgage at the end of a deal (usually it’s possible to lock in a remortgage deal within the last six months of your fixed term).

It’s also worth noting that if you're on your lender’s standard variable rate (SVR) you won't need to pay any ERCs to remortgage and can do so whenever you like.

How mortgage fees affect which deal is best for you

When you compare mortgage deals you'll usually find that those products with higher mortgage fees offer more competitive interest rates. Whereas the low fee or fee-free mortgages charge higher rates of interest.

It’s therefore important to understand the true cost of each deal, incorporating both the interest charges and associated mortgage fees. Using the APRC (Annual Percentage Rate of Charge) can help you to do this - but keep in mind that it won't anticipate future remortgages. It’s, therefore, also a very good idea to speak to a mortgage broker for guidance on properly comparing deals.

Remember: interest is payable throughout the duration of the mortgage deal, whereas mortgage fees are one off payments. This means that if you're able to save a few thousand pounds in fees at the outset, it’s perfectly possible that you'd benefit more in the long run from paying higher mortgage fees to get a lower interest rate for the next two, five, or ten years.