Mortgage fees

Mortgage fees explained

Navigating the labyrinth of mortgage fees can initially feel daunting, but with the right guidance, it becomes manageable.
Written By: James Blackler
On Jun 19, 2024

Navigating the labyrinth of mortgage fees can initially feel daunting, but with the right guidance, it becomes manageable. We’re here to shed light on what you’ll need to budget for when securing a mortgage in the UK. From stamp duty to broker fees, understanding each cost can help you avoid surprises and ensure you’re financially prepared. Let’s break down step-by-step what mortgage fees you will face, relieving you of any initial stress.

Stamp Duty

Stamp Duty Land Tax (SDLT), or stamp duty, is a tax you must pay when purchasing property or land in the UK priced at £125,000 or above. The amount varies based on the property’s price, and it’s crucial to factor this into your budget early on. By doing so, you’re taking a proactive step towards financial preparedness. To make it easier, our stamp duty calculator can help you estimate the exact amount you’ll owe.

Arrangement Fee

This is an admin fee you pay to the lender to set up your mortgage. The typical arrangement fee is around £999, but it can range from £1,499 to £1,999 for larger mortgages. For instance, if you’re securing a mortgage of £300,000, you might expect to pay an arrangement fee of around £999. Don’t overlook this fee when comparing mortgage deals – a lower interest rate might come with a higher arrangement fee, impacting the overall cost.

Booking Fees

Booking fees, which range from £100 to £350, are paid to the lender when you apply for a mortgage to lock in your desired rate. This fee is usually non-refundable, so if you decide not to proceed with the mortgage, you won’t get it back. Some lenders might not charge or include this fee in the arrangement fee, so it’s worth checking.

Legal Fees

Legal fees cover the cost of a solicitor or conveyancer who handles the legal aspects of your property purchase. These fees depend on the property’s value and whether it’s a remortgage or a purchase, with leasehold properties often costing more. Solicitors usually have a fee scale based on the value of the property you are buying. Expect to pay between £1,000 and £1,500 for these services, which include property searches and contract exchanges. Some lenders will offer free legal when you are remortgaging, and your mortgage broker will discuss this with you, as stated in the mortgage illustration.

Valuation Fees

Before approving your mortgage, lenders require a property valuation to ensure it’s worth the loan amount. This fee, which you pay when submitting your application, is generally under £400 but can be higher if you choose a more detailed survey. However, some lenders offer free valuations, providing you with a sense of financial security. So, inquire about this when buying a mortgage.

Telegraphic Transfer (CHAPS) Fee

The bank charges a small but essential fee, usually £25 to £30, for transferring large sums of money. This includes transferring funds between your lender and solicitor and from your solicitor to the seller’s solicitor.

Broker Fees

Mortgage brokers can simplify the process by finding the best deals for you. They have access to a wide range of mortgage products and can help you navigate the complex mortgage market. Fees vary: some charge a flat rate (around £500), others take a commission based on your mortgage’s value, and some brokers are free. Always clarify broker fees upfront to understand what you’re paying for.

Conclusion

While mortgage fees can add up, understanding them helps you budget more accurately and avoid unwelcome surprises. For example, if you don’t budget for the stamp duty, which can be a significant amount, you might find yourself short of funds when it’s time to complete the purchase. Compare the interest rates and all associated fees when choosing a mortgage. And remember, it’s always wise to seek advice from a financial expert to guide you through the process. If you want to learn other essential keywords that may arise during your mortgage application, check out our A to Z of mortgage jargon.

Happy house hunting!

Written by
James Blackler

James Blackler is the founder of The Mortgage Blog
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