Mortgage fees and costs: The complete guide

Buying a house involves more than a mortgage deposit and monthly repayments.

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When you’re buying a house, you’ll have to do more than scrape together enough money for a mortgage deposit. There are also several fees you’ll have to cover before becoming a homeowner.

These fees can vary significantly between lenders, which is why it’s recommended to compare the entire cost of a mortgage over the introductory period, rather than just the interest rate.

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Arrangement fee

This is the fee a lender will charge to arrange your mortgage.

Some mortgages have no arrangement fee attached, while others will cost you up to £1,500.

In fact, it’s a common strategy for lenders to advertise an eye-catching low interest rate and make up the costs with a huge arrangement fee.

It’s sometimes possible to add an arrangement fee onto your mortgage, but this isn’t recommended because you’ll end up paying interest on it for the entirety of your mortgage term.

Booking fee

This is similar to an arrangement fee, except you’ll pay it upfront after a mortgage has been accepted. You won’t be refunded if you pull out of the sale.

Some lenders don’t include a booking fee, while others charge upwards of £100.

Valuation fee

When you apply for a mortgage on a property, your lender will arrange a professional valuation of it to ensure it provides adequate security for your loan. The valuation fee covers the cost of this process and will usually set you back between £100 and £200.

If the valuation determines the property isn’t worth as much as what you’re borrowing, your lender will lower the amount of money it’s willing to lend you.

Then, you’ll either have to lower your offer or find another way to raise the remaining funds.

Telegraphic transfer fee

The cost for the mortgage lender to transfer money to the property’s seller. Typically between £30 and £60.

Mortgage account fee

The charge for managing your mortgage account. This is a one-off fee, which you may be able to defer until the end of your mortgage.

In this case, it’s often called an exit fee, closure fee or redemption fee. It’s rare you’ll have to pay an account fee and an exit fee.

Some lenders don’t charge this fee at all. Others charge up to £300.

Mortgage broker fee

Some mortgage brokers will charge a fee for finding you the best mortgage product. They might charge you a fixed rate, typically between £400 and £700. Some will charge a percentage of the mortgage they arranged, while others might charge a combination of both.

Take note of when you’ll be charged. Some brokers charge before completion, while others only charge if you complete the mortgage.

Our guide on mortgage brokers explains more about what they do and whether you should use one.

Higher lending charge

This is a one-off fee that lenders may choose to charge on high loan-to-value mortgages.

For example, it may be imposed on homeowners who borrow more than 80% of a property’s value. It’s typically charged as a percentage of the extra amount borrowed.

Take note of whether you’ll pay this and how much it will cost you, as this charge can easily be enough to make your mortgage rate uncompetitive.

Home insurance

As a condition of your mortgage, you’ll have to arrange buildings insurance when you buy a property. This covers the cost of damage that occurs to your property. You may also want to invest in contents insurance, which covers the cost of damage to belongings within the property.

A 2018 study by the AA suggests the average annual premium for home and contents insurance is £161.75 a year. Learn more about home insurance.

Early repayment charge

If you leave a mortgage before its introductory deal runs out, you’ll almost always face an early repayment charge (ERC).

In most cases, this is expressed as a percentage of the loan. It’s usually large enough to make it uneconomical to remortgage.

Survey fees

A property survey is a series of checks to ensure the building is structurally sound.

There are three levels of service.

  • Condition report. The most basic and cheapest survey.
  • Homebuyer report.
  • Building survey. The most in-depth and expensive.

The cost of your survey will depend on the size of your home and what level of service you choose. You can expect to pay anywhere between £400 and £1,500.

If you’re buying a newer building, you can be comfortable investing in a more basic survey. Our guide on house surveys explains which level of service is most suitable for your property.

This is the fee you’ll pay your solicitor for their conveyancing work. As a condition of your mortgage, your lender will demand you hire a solicitor. Even as a cash buyer, it’s highly recommended to do so. This guide explains everything your conveyancer will do for you. You can expect to be charged between £1,000 and £2,000 depending on the size of your home and the demand for your chosen solicitor.

Moving costs

The chances are you’ll need to pay a removals company to transport your belongings to your new property.

The fee will depend on how many items you need to move.

You can expect to pay around £400 to £500 when moving into a 1-bedroom property. If moving an entire family into a 5-bedroom property, be prepared to pay upwards of £1,200.

You can pay a removals company to pack your items into boxes. Expect this service to add an extra 30–40% to your fee.

Stamp duty

This is a tax charged to homebuyers.

The amount you pay is based on the purchase price. The system is tiered, meaning you’ll pay a different percentage of tax on different portions of the price.

First-time buyers will typically pay less, while those buying a second home will pay significantly more. The charges are different if you’re buying a property in Wales or Scotland.

Our comprehensive guide and calculator on stamp duty explains how much you’ll pay.

Late fees

If your monthly mortgage repayment isn’t paid, you’ll usually face a fine. It’s normally expressed as a percentage of the payment. You can expect to pay 4–5%. Most mortgage lenders will offer a grace period before this fine is charged. Late mortgage repayments will harm your credit score too.

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