A Guide to Mortgage Fees
So, you’re looking to buy your dream home. You’ve found the house for you and you think that you’re ready to buy. Now, if you’re buying for the first time, you don't want to be looking over your shoulder to see what other fees you’ll have to pay. Find out all about mortgage fees, right here.
The truth is that buying a house has a whole host of other fees, aside from buying the actual property. But worry not, buyers! This guide is going to condense all these fees into one place, so you’re not left scrambling around trying to work out what you owe.
7 Mortgages Fees
1) Arrangement fees:
The first thing you should be looking at is arrangement fees. This is essentially the fee that you have to pay the lender to set up the mortgage. While it’s one of the easier charges to get your head around it can be difficult to pinpoint how much you’ll be charged.
Lenders tend to vary on how much they charge for arrangement fees. It can go as high as £2,000 although we expect you to be paying closer to the £1,000 mark, it’s down to the lender and product you choose. Therefore, we recommend that before you finally decide on which lender to go with double-check how much they’ll charge for this. It could be a deciding factor on which one you pick.
Arrangement fees can be paid upfront or added to the loan.
2) Booking fee:
Next, you’ll need to look at booking fees. This is a charge which is paid upfront and pays for booking your application while you wait for it to be processed. While this might seem like another fee that you’re not really seeing the benefit of, it's commonplace across all mortgage lenders.
Booking fees are usually priced around £100, but they can vary slightly. And, if you’re really lucky, you won’t be charged for a booking fee at all! So, we’re going to repeat our age-old advice that you’ll need to do your homework! The reason? You guessed it. It can be crucial to making vital savings.
3) Valuation fee
Before we continue, we know that all of these mortgage fees are probably causing you to scratch your head as you may not have considered them before. And as a result, they might be detracting from your budget. But don’t stress it. Our team of experts at Mortgages Online can help you every step of the way by comparing the prices and rates of various lenders.
So, where were we? Ah, valuation fees! This is another easy one to understand. This is a fee you pay for the lender to value the property you want to buy and make sure that it’s worth the amount that you’re wanting to borrow and suitable for lending purposes. This will involve a basic inspection of the property, so it can be assessed as a suitable security to lend on with the money you’re wishing to borrow.
Valuation fees tend to be between £100 - £2,000, but this will be largely dependent on the property price. But guess what readers? Again, depending on the lender and product that you go for, this is another fee that can is sometimes waived.
Though be warned, when you pay for the valuation, all this does is look at the value of the property and evades looking at any potential structural problems and future costs. Therefore, it might be worth your time to pay for your own homebuyers or full structural property survey to identify all the repairs and future maintenance costs.
4) Mortgage account fee:
A mortgage account fee is for the administrative responsibilities that the lender undertakes. This will include tasks such as setting up, maintaining and closing your mortgage. This commands another fee, typically ranging from £100 - 300. Though this might seem like another tedious fee to pay, it means that you will not have to pay an exit fee. This is basically a fee that goes to your lender when you repay the mortgage.
So, what’s the lesson to learn from this? Make sure you stay on top of your mortgage fees and charges! If you’re paying a mortgage account fee and you’re billed an exit fee, check over this with your lender. It can be an easy way of saving money.
5) Mortgage Broker Fees:
This, unsurprisingly, is the fee you pay for the mortgage broker should you hire one. While that revelation might shock you, please try and continue. While hiring a mortgage broker is optional, it’s by no means a luxury. They can provide invaluable advice and be a big help in arranging the mortgage.
On average a mortgage broker can charge around £500+ for their services. But, like paying for the services of any professional, this will vary on experience. Some brokers won’t charge a fixed fee and will instead just take commission from the mortgage provider. So, once you’ve found the broker for you, don’t be afraid to ask what payment procedure they operate.
However, Mortgages Online don’t charge you a fee for using our service! Another reason to use MO for your mortgage search – one less mortgage fee.
6) Higher lending charge:
A higher lending charge isn’t a mandatory fee charged by all mortgage lenders. Celebrate! A Higher Lending Charge is only applicable if you are borrowing a loan amount above the lender's 'usual' maximum Loan to Value ratio. In simple terms, you are putting down a very small deposit in comparison to the loan amount being requested, so the risk and liability to the lender are a lot higher.
It’s normally priced around 1.5% of your mortgage. While this might seem like a nominal fee, this will drastically vary from property-to-property and is highly likely to cost thousands of pounds. So, it will be VITAL to factor in whether you have to pay this charge or not.
7) Early repayment charge:
This fee might not apply either! But it’s an important one to go through to ensure you understand what it is, nevertheless. This may shock those of you who think you’re being super organised by paying your mortgage early. If you repay your mortgage early or pay over your overpayment allowance, this charge could then apply. Why might you ask? This is because the lender will incur a loss of income through interest not being paid if the borrower repays some or all of the loan sooner. This charge ultimately compensates them (the lender) for this cost.
This can be a VERY expensive mistake, so be wary. It can range from 1-5% of the value of the early repayment. Which means, that judging from the price of your property, can prove very costly.
So, there you have it! If you have any other questions about these mortgage fees or some other fees that you think we may have left out, don’t be afraid to contact our team. Happy house hunting!
To minimise your mortgage fees, use Mortgages Online. We’re completely free to use - so no need to use your credit card! MO have a range of fixed-rate mortgages, tracker mortgages and more, all for you to find the deal that's right for you.