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Mortgage Fees Explained

Your guide to understanding mortgage fees

published: 27 January 2023
Read time: 5 minutes

When you take out a mortgage, you may also have to pay an arrangement fee, valuation fee, booking charge, legal expenses, and so on. Here, we detail all you need to know about mortgage fees.

When choosing the right mortgage for their needs, most people base their decision on the interest rate being charged, the number of years the rate is available, and the type of deal. But before you plunge ahead, you should stop and look at the fees. While interest rates have tumbled over the past few years, mortgage-related fees have shot up and can now easily add another £2,000 onto the overall cost of your mortgage.

To make matters worse, there’s a whole list of charges, and different lenders can have different names for each. Here’s a rundown of what you need to know.

Fees charged when you apply for a mortgage

Booking fee

A booking fee is charged upfront and pays for ‘booking’ the loan while your application goes through. It can also be known as an ‘application’ or ‘reservation’ fee. It won’t be refunded if you end up not taking the mortgage out.

Arrangement fee

An arrangement fee is what you pay for the lender to set up your mortgage. Arrangement fees vary significantly.

You can usually choose between paying the arrangement fee upfront and adding it to the mortgage. Ultimately, though, it will cost more to do the latter as you will pay interest on it.

Some arrangement fees are charged as a percentage of the loan rather than a flat fee. Percentage fees are bad news for those taking out a large mortgage.

It’s really important not to overlook the arrangement fee when you’re comparing mortgages, as it can have a significant impact on the total cost of the deal. In some cases, it can be worth opting for a deal with a slightly higher interest rate in return for a lower fee. In fact, it may not be worth going for the lowest rate if the arrangement fee is really high.

Valuation fee

This pays for your lender’s survey on the property you want to buy. This is a basic survey which is only to check the property is adequate security for the loan. The cost of a valuation fee varies considerably, and some mortgages even come with free valuations.

Legal fees

Legal fees pay for a solicitor to do the legal paperwork for you, which is a process known as conveyancing. Usually, they are charged as a percentage of the mortgage price. If you're buying a home, the legal fees will include the cost of Stamp Duty and search fees. Mortgage lenders often have offers where they contribute to these fees or will pay the standard legal fees.

Higher lending charge

Higher-lending fees were commonly charged on mortgages that cover a particularly high proportion of the purchase price, known as a loan to value (LTV). The money from the higher lending charge is often used by the lender to buy an insurance policy which protects itself (not you!) should you default on the mortgage. Since the amount you have deposited is only small, this covers the lender if your property falls in value after you buy it.

The higher-lending charge is usually refundable if you don’t go ahead with the mortgage. It’s generally expressed as a percentage of the loan.

Other fees

  • Advice fee: You may have to pay a fee for mortgage advice if you use a financial advisor. But it’s also possible to find one that doesn’t charge. For example, our mortgage partner, London & Country, is an independent mortgage broker that offers fee-free telephone advice whether you proceed with the application or not. You can contact them on 0800 170 1943

  • CHAPS fee: This covers the lender’s costs when sending the mortgage funds over to your solicitor

  • Own-building insurance fee: This is charged by your mortgage lender for checking you have taken out building insurance if you choose not to buy it from them. The fees are fairly small – around £25 to £50 each

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Do I need a survey?

While it’s not compulsory, it’s always wise to carry out a survey before buying a property and taking out a mortgage. More than anything, a survey is an inspection of the house that will give you much-needed peace of mind.

In fact, the seller isn’t obliged to highlight issues with their house when putting it on the market. This means if you don’t arrange for a house survey, you could end up with unpleasant surprises once you move in. What’s more, if you find something wrong with your new home, in the long run, it may be too late to complain and seek compensation.

Fees charged after you have a mortgage


All mortgages have an annual percentage rate (APR). The APR is calculated to factor in the total interest cost over the 25-year term, plus any fees. In theory, this should help you to compare deals.

However, mortgage APRs can be a bit confusing, as they only give you the average cost if you were to keep your mortgage for the full 25 years. Generally speaking, this is quite unlikely.

You might, for example, have a two-year fixed-rate mortgage at 1.65%, which then moves to the standard variable rate (SVR) of 4.49%. This would give you an APR of 4.2%, but you’d never actually pay that rate.

So, it’s always better to simply compare the initial rate you’ll pay. Also, make sure to check what the SVR will be when that rate comes to an end.

Early repayment charges (ERC)

Most mortgage deals tend to have a short life. For instance, fixed-rate, discount, and tracker mortgages usually only run for between two and five years. Though, it is possible to find deals over ten years.

Whatever the term, if you come out of the deal before it ends, you will have to pay an early repayment charge (ERC). In most cases, this is charged as a percentage of the loan. These can add up to thousands of pounds, so make sure you think carefully about how long you tie in for in the first place.

Late fee

If you don’t pay your monthly instalments on time, you’re likely to face a fine. This is known as a late fee, which is usually expressed as a percentage of the payment. Generally, you can expect to pay anything from 4% to 5%.

Before charging you, most lenders will offer you a grace period in which you can make the payment without any additional costs. But bear in mind that any late repayment will have a negative impact on your credit score.

Exit fee

An exit fee is charged for closing your mortgage account. This could be, for example, if you switch to another lender or remortgage to another deal with the same lender. But it can also be charged when you just finish paying off your mortgage. This is also known as a mortgage completion fee, deeds release fee, or exit administration fee.

You can also visit our house buyers hub to find our home-moving tips and tools.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Compare mortgage deals with MoneySuperMarket

Using a mortgage comparison tool can help you get a good idea of the kind of mortgage deals available. When you enter your information into MoneySuperMarket’s mortgage comparison tool, you’ll be able to compare example mortgage quotes from different providers.

Just tell us a bit about yourself, your financial situation, and your plans. We’ll help you scour the market in search of the mortgage deal that is right for your pockets and requirements. Then, feel free to use our mortgage calculators to find out how much each deal would cost you overall.

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