A guide to mortgage costs and fees

Our guide to the main expenses of a mortgage can help you avoid nasty surprises in the process of buying your home… 

Our guide to the main expenses of a mortgage can help you avoid nasty surprises in the process of buying your home… 

Mark Gordon
From the Mortgages team
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Posted 3 JANUARY 2020

What are the charges associated with a mortgage?

There are many costs linked with a mortgage – some are charged when you set up the loan, others arise during the life of the mortgage. These fees are in addition to the cost of repaying back the loan and the interest charged on the debt.

A mortgage lender will include any fees associated with a mortgage within the overall cost of the deal. These are stated in a document that’s often called a European Standard Information Sheet (ESIS). Let’s take a look at some of the most common charges for mortgages.

Fee Explanation Cost
Booking fee This is charged by some lenders to secure a mortgage. It’s typically non-refundable, even if a property sale falls through and the mortgage is no longer needed. A lender might include this charge within an arrangement fee (see below).   £100-£200 
Arrangement fee Sometimes known as the completion fee or the product fee, this is the cost for the mortgage to be set up.   This varies depending on the value of the property. It can cost anything up to £2,000. 
Valuation fee

Covers the cost of a survey to find out your property's value, and to identify any issues and repairs that may be needed.

In Scotland the process is different as the seller must provide a Home Report, which includes a valuation before a property can go on the market.

Around £250-£750, but it could cost more depending on the property’s value. 
Telegraphic transfer fee Also known as CHAPS (Clearing House Automated Payment System), this is a charge by your bank to cover the cost of transferring the money used to buy the property to the seller’s solicitor. It’s typically non-refundable.  Around £25-£50. 
Mortgage account fee This covers the administration cost for your lender to maintain and close your mortgage. Typically charged at the start or end of the mortgage.  Around £100-£300. 
Missed payment and arrears fees If you miss payments on your mortgage, you’re likely to be charged by your lender.  Charges vary between lenders. For example, you could be charged at least £10 if a lender writes to you to inform you that you’ve missed a payment. If you fail to meet your mortgage repayments, then your home could be repossessed. 
Early repayment charges This is a penalty if you repay your mortgage (or overpay) during a tie-in period, such as during a short-term fixed rate deal. The charge is often a percentage of either the outstanding debt, or the value of the early repayment.   Around 1-5% of the value of the early repayment.
Exit fee This fee is paid to your lender when you repay your mortgage. This can be included within your mortgage account fee, so be sure to check.   Around £75-£300. 

What other fees might I have to pay?

If you arrange a mortgage through a broker, rather than a bank or building society, then you can expect to pay a mortgage broker fee of around £500 (this can vary depending on the value of the mortgage). Some brokers will take commission from the mortgage lender, rather than charging you directly.

Keep in mind that some of the costs listed above will be applicable each time you move, while others might not. When taking out a mortgage, you may be advised by the lender that some of the above costs can be added to the mortgage. Be aware, though, that this will increase your debt and you’ll have to pay more interest.

It’s also worth noting that there will be other expenses for you to consider, such as buildings and contents insurance and removal costs.

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