This guide was last updated 21 February 2023
No one likes a fee they weren’t expecting…
Buying a property or switching lenders is a costly process filled with jargon that most of us don’t engage with on a usual day.
In light of this, here is a handy guide where we look at every possible fee we could think of, including when they are payable and roughly how much they will be.
When a lender takes a property on as security for your mortgage, they will need to verify that it is worth what you are paying for it or if you are switching lenders, how much you think it is worth.
The lender will probably want to know what kind of state it is in, for example – if there is a damp problem or subsidence then that could be expensive to solve.
Valuation fees are often based on a scale relative to the value of the property – not the size. For remortgages (switching property), valuation fees are often waived but for purchases, they are often charged. The amount of the fee can vary from £100 to over £1,000 and the valuation report itself is for the lender – not the applicant.
Valuation fees, if applicable, are payable upfront when the application is submitted to the lender.
When you take out a mortgage, there will be an introductory product or rate of interest. This could be a fixed rate or a variable/tracker rate for two, three, or five years, sometimes longer. That rate is cheaper than the lender’s standard rate and often it comes with a fee.
The size of the fee can vary but usually, they are £0, £495, £995, £1,495, or £1,995.
Some lenders still charge a percentage fee, which is directly linked to the loan size. This is often why people use professional brokers to navigate such complexities and advise them of the best options from the thousands of mortgage products out there.
Product fees can often be added to the loan so you do not have to pay them upfront but sometimes they do have to be paid upfront.
A general rule of thumb is that smaller mortgage products without a fee are of better value but with larger mortgages, the rate of interest being charged is very important, so the fee is less of a concern.
If a product fee is payable upfront, then sometimes it is refundable should the mortgage application not proceed to completion. This is worth checking out before you pay the fee to the lender.
These are less popular than they were in years gone by but some lenders split the product fee into two parts – a booking fee and a product fee. Booking fees are generally only £99 or £199 but they payable up front when you submit a mortgage application and they are often NOT refundable should the application not proceed. This is because the lender actually pays for the product you wanted to be reserved and if you do not use it then they will have lost out financially.
Administrative Fee (aka deeds closing fee, mortgage account fee, sealing fee, deeds release fee, etc.)
When you pay off or redeem the mortgage then there are administrative tasks the lender will have to perform. The main tasks are to notify Land Registry that the charge the lender placed on the title deeds is to be removed and to return any title deeds documentation they may be holding. Admin fees for such tasks are often charged at the end of a mortgage but not always. Some lenders just add the fee to the loan but charge no interest on it. Your mortgage illustration will show how much the fee is – usually up to £250.
When the purchase or remortgage is about to actually happen (aka completion) the lender will often send the money the day before to make sure it gets to the solicitor in time for them to finish the transaction. The banking system charges for the actual secure, guaranteed transfers of these relatively large sums of money. Lenders pass that charge onto the borrowers. Telegraphic transfer fees are generally quite low – £15 to £35 but they are often actually deducted from the loan amount that the lender sends to the solicitor as it is at that stage of the transaction that they become payable.
In the trade these are often referred to as Early Repayment Charges, (ERC’s) or you may know them as Mortgage Redemption Penalties. This is a fee that is usually only payable if you repay money in lump sums off the mortgage balance whilst you are in a set product term – e.g. during a two-year or five-year fixed rate. Early repayment fees are usually a percentage of the amount overpaid and tend to reduce over time. Most mortgage products allow you to overpay up to 10% each year without incurring penalties.
Also known as solicitors’ fees or conveyancing fees. This may well be shown on a mortgage illustration but is not paid by the borrower as a separate fee. Instead, it is usually included in the costs quoted by the solicitor to the borrower and is often only listed for purchase transactions, not remortgages. It has to be listed as it is a cost that is part of the transaction to cover the work the solicitor will do on behalf of the lender making sure that everything is as it should be. This can be a little confusing so nowadays many lenders do not show them at all.
Like legal fees, this is another older style fee that is sometimes listed if a lender makes a charge to check that you have an acceptable buildings insurance policy in place. Again, many lenders no longer make a charge for this so it is relatively rare to see them nowadays on illustrations.
Many mortgage illustrations have a sentence included saying something like ‘there may be other fees or taxes you have to pay’. This can be very worrying, especially if this is your first purchase or remortgage. In essence, this is to cover anything that a standard mortgage illustration does not include. Generally, there won’t be any extra fees or taxes and most of any extra costs will be a part of the solicitor’s work, not the lender. The most important thing for anyone using a solicitor is to look at everything on the quotation given by the solicitor and any ancillary list of potential charges to see if any are likely to apply to that transaction – e.g. lease checking fees for leasehold properties like flats or transfer of equity fees when adding or removing someone from the title deeds.
If you would like to know more about the fees associated with a mortgage or about anything else regarding a property purchase or remortgage then please contact us on 020 7220 5110 or fill our the form below to talk to one of our friendly, professional mortgage advisers.
Your home may be repossessed if you do not keep up repayments on your mortgage.
A fee of up to 1% of the mortgage amount may be charged depending on individual circumstances. A typical fee is £495