When you make the decision to take out a mortgage, it is important to take into consideration the costs involved. Below is a glossary of the fees you might come across:
Product Fee (Arrangement fee)
This is a fee that you will pay to the lender for arranging the mortgage for you. In some circumstances it can be added to the mortgage, but bear in mind that if you do this, you will increase the amount to be repaid on a monthly basis and as a total sum, as the amount will attract interest. These fees can vary from lender to lender and product to product, but can be from £0 to several thousands of pounds.
Along with the arrangement fee there will also be a closure/exit fee that’s to be paid when you repay your mortgage, whether this be repaying early to switch to another lender or that you have paid off your mortgage at the end of the term. This fee is not charged by all lenders, so do check your paperwork. Lenders normally charge between £75 and £300.
Booking fee
Some mortgage lenders include this fee as part of the arrangement fee, but others will require an upfront payment to apply for a mortgage. This fee is not usually refundable in any circumstances and will be between £99-£250.
Valuation fee
Before confirming your mortgage, the lender will want to check the property to establish the value. It’s important to remember that a valuation is just that, it won’t necessarily pick up any problems with the property, you can choose from a range of more in-depth surveys called a homebuyers report (includes a survey and valuation) or a building survey which will look for any issues, but these do cost more. Costs for a survey (including valuation) will depending on the value of the property and will range from £150-£1500.
Transferring of funds
The mortgage lender will charge you a fee of between £25-£50 to transfer the funds to pay for your property to your solicitor, these fees are known as telegraphic transfer or CHAPS fees. The fee is usually non-refundable.
Missed payments
If you are in the unfortunate circumstances of missing a payment and your accounts goes into arrears most lenders will change a fee. It’s important to remember that if you fail to pay your mortgage you could end up losing your home.
Mortgage broker fee
If you choose to use a mortgage broker, most will charge a fee. The upside is that they will know which lenders will be most suited to your needs and requirements, they’ll be able to search numerous lenders with thousands of products available on both the high street and not, they’ll be able to pull all your documentation together to ensure that your application has the best possible chance of success and should there be any problems with your application, they’ll have the knowledge to advise you on your next best step. The mortgage lender will also pay the mortgage broker a commission once your sale/remortgage has gone through. This does not affect the price you have to pay as it is paid direct from the lender. Regulation means that mortgage brokers have to give you the best advice to for you and the amount of commission will not be a factor when choosing a product. Fee’s vary, but as an example, Wolsey Mortgage Company charge up to £275.
Fees for using your own Building Insurance Company
Some lenders will charge you a fee for using your own building insurance company rather than using the lenders recommended company. This fee is usually in the region of £25.
Early repayment charge
Details of this fee with be shown in your Keyfacts Illustration or European Standard Information Sheet (ESIS). Mortgage providers sometimes charge a fee if you pay up your mortgage early. This may be because you are in a financial position to clear your mortgage, that you move and want to start a new mortgage or that you want to change product. Before making any decisions to repay a mortgage, it is worth checking if there is a fee and if it is indeed worth settling it early. These repayment charges vary from 1% – 5% of the outstanding balance, most reduce over the term of the product but some remain at a static rate throughout. So, for example a £200,000 mortgage with a 3% early repayment charge would cost £6000 to repay early. If you were to repay your mortgage early, the lender is also able to ask for any incentives paid back, such as cashback or legal fees.
Apart from these fees, you will be paying interest on your mortgage which means over the full term you will pay back several thousands in interest (depending on the size of the mortgage).
Aside from fees it’s also important to have funds to pay for any moving costs, solicitors fees and building insurance. Buying a home is probably going to be the single biggest commitment you’ll take on, so making sure you get the right advice is really important.
