Essential guide to mortgage fees

What are mortgage fees, and why do they exist?

Mortgage fees cover administrative costs, legal processing and risk assessment. Lenders assess your risk when providing loans secured against property, and the outcome may affect the interest rates offered. Mortgage fees can add thousands to the cost of buying a home, so understanding them is essential for financial planning.

When do you pay mortgage fees during the buying process?

Most mortgage fees are paid during the application and completion stages rather than throughout your mortgage term. When applying for a mortgage, you'll typically pay booking and valuation fees upfront, whilst arrangement fees can be paid immediately or added to your mortgage balance.

 

Completion fees, including CHAPS, Land Registry and conveyancing charges, are often paid when ownership transfers. Some mortgage fees may be refundable if your application fails, whilst others, such as booking fees, are usually non-refundable regardless of the outcome.

Are mortgage fees the same for everyone?

Mortgage fees can vary between lenders and mortgage products and are dependent on circumstances. The cost of buying a home through mortgage fees usually depends on your credit score, employment type and deposit size, all of which influence which products lenders offer.

 

If you only have a small deposit, your mortgage provider may require you to pay a higher lending charge (HLC), typically around 1.5% of the amount you borrow. They can use this to buy a Mortgage Indemnity Guarantee, an insurance policy that covers them should you fail to make your monthly repayments.

 

First time buyers can also often access products with reduced fees through government schemes. The First Homes scheme is an example of this, and can offer first time buyers the opportunity to buy a new build with at least a 30% discount.

Upfront mortgage fees explained

Since March 2016, mortgage providers have been legally obliged to give an Annual Percentage Rate of Charge (APRC) for every mortgage deal. This interest rate calculation shows you how much your mortgage is likely to cost in total. It includes lender fees, broker costs and legal charges.

 

It has made mortgage comparisons much easier than before. Your key facts document (also known as a European Standard Information Sheet (ESIS) or mortgage illustration sheet) includes details of the mortgage fees you will need to pay, so there should be no surprises.

Arrangement fees

The arrangement fee, also called a completion fee or product fee, is charged by your mortgage provider to set up your mortgage. The average arrangement fee is usually around £1,000, though it may cost up to £2,500. Some mortgage schemes have no fees. When deciding which mortgage deal to choose, you should consider both the arrangement fee and the interest rate offered.

 

A mortgage broker will most likely advise on the most cost-effective combination of arrangement fee and interest rate, depending on the size of the mortgage you need. However big or small your arrangement fee, you can pay it straight away or add it to your mortgage. This does mean you will have to pay interest on it for the life of the loan. If you decide not to take the mortgage or are declined, this money is usually refunded.

Booking or reservation fees

When applying for a mortgage, your provider may charge a booking fee (also called a reservation or application fee). This typically costs between £100 and £300.

 

It must be paid upfront and is non-refundable as it reserves your mortgage funds until your application is approved. It does not, however, guarantee that you will receive a mortgage from your provider. Some lenders do not charge a booking fee; others include it in your arrangement fee, so you don’t have to pay for it separately.

Surveyor and valuation fees

You can instruct a surveyor to check the property’s condition, highlight any concerns and suggest any repairs through a RICS Home Survey. Surveys typically cost £300 to over £1500.

 

The mortgage provider may also require a surveyor to assess the property’s value, which may incur a valuation fee. This can range from £50 to £1,500, depending on the property’s value, but typically costs around £300.

Mortgage broker fees

Some brokers are fee-free, while others charge a fee. On average, you can anticipate paying between £300 and £500 for your mortgage broker fee, depending on the value of your mortgage.

 

Brokers usually charge a fee for their service, which is either paid by you – the borrower – or the lender. Some mortgage brokers may offer free mortgage advice and receive a commission from your chosen mortgage provider.

CHAPS fee

A Clearing House Automated Payment System (CHAPS) fee pays for your mortgage money to be transferred from your provider to your solicitor. Typically, this fee is around £25-30, but CHAPS charges can vary by bank. It must be paid on completion and is often taken off the balance your solicitor receives or added to the mortgage.

Stamp Duty

Stamp Duty is an additional mortgage fee for homes valued at over £125,000. However, first time buyers are exempt from this duty on homes valued at less than £300,000. You can easily calculate your Stamp Duty using an online calculator, helping you plan ahead.

Land Registry fee

A Land Registry fee transfers the title and deeds of the property to you. This mortgage fee changes depending on the property’s value. You can work out how much your Land Registry fee would cost using an online calculator.

Conveyancing fees

Aside from your mortgage provider’s fees, you need to pay your solicitor or licensed conveyancer’s charge. These conveyancing fees, or legal fees, are typically around £800-£1,500, but the final price will depend on the property's cost.

Own building insurance fee

Some mortgage providers may arrange insurance for you, but you can find your own deal, which is often cheaper. If you go down this route, you may need to pay around £25, but this could still be the better option in the long run.

Ongoing mortgage fees and charges

Beyond initial setup costs, various mortgage fees may arise during your term, depending on your circumstances and decisions.

Monthly mortgage repayments

The cost of buying a home includes ongoing repayments. Your monthly mortgage repayment isn't technically a mortgage fee; it’s your primary ongoing cost that combines capital repayment and interest charges. They remain consistent with fixed-rate mortgages but fluctuate with variable rates.

 

Missing payments can incur additional charges and damage your credit score, potentially affecting future borrowing. Setting up direct debits ensures payments are never missed, protecting your credit rating and avoiding unnecessary mortgage fees for late or missed payments.

Early repayment charges (ERCs)

If you decide to exit a fixed, discounted or tracker mortgage deal early, you may have to pay an early repayment charge. This is added to the redemption figure provided by your existing mortgage provider. The amount you will be expected to pay will depend on the size of your mortgage, as it is a percentage-based fee.

 

You may also have to pay a redemption administration fee of between £100 and £300 to your existing mortgage provider for closing your mortgage account.

Exit and redemption fees

Exit fees (also called redemption or discharge fees) are charged by lenders when you pay off your mortgage completely, typically costing £50 to £300. These mortgage fees cover the administrative work involved in closing your account and removing the lender's charge from the property title. Some lenders may waive exit fees, whilst others charge regardless of whether you're switching providers or repaying entirely.

Fees for changing or extending your mortgage

The cost of buying a home may include modification fees throughout your mortgage term. Lenders charge fees if you modify your mortgage terms, such as extending the repayment period, switching from interest-only to repayment, or changing your monthly payment amounts. These mortgage fees typically range from £50 to £300, depending on the complexity of the requested changes and your lender's policies.

How much are mortgage fees in the UK?

Total mortgage fees typically range from £1,500 to £5,000, depending on your property value, mortgage size and chosen lender.

Typical mortgage fee ranges

When applying for a mortgage, budget £2,000 to £3,000 minimum for fees beyond your deposit. This may include:

• Arrangement fees, which average £1,000 but can range from £0 to £2,500, depending on your mortgage

• Valuation fees typically cost £300 to £600 for average properties, whilst conveyancing fees can range from £800 to £1,500

• Legal searches, Land Registry fees and other disbursements can add another £300 to £500

• Stamp Duty is often the largest expense for buyers, and can range from £0 for first time buyers purchasing below £300,000 to tens of thousands for higher-priced properties

Fixed-fee vs percentage-based costs

Some mortgage fees can cost the same for all borrowers, regardless of property value. Fixed fees usually represent smaller proportions of total costs for larger purchases. These fixed fees often include:

• Booking fees

• CHAPS charges

• Exit fees

 

Other fees may scale with property value or mortgage size. Percentage-based fees mean the cost of buying a home increases disproportionately for expensive properties. Percentage-based costs can include:

• Arrangement fees

• Land Registry fees

• Stamp Duty (which increases significantly with property value)

When comparing mortgages, calculate total fees in pounds rather than percentages. This can help you to understand actual costs.

How fees differ by lender and mortgage type

The cost of buying a home can vary based on which lender you choose. An identical property may cost more or less, depending on fee structures and interest rates. How fees may differ by lender:

• High-street banks often charge higher mortgage fees but offer competitive interest rates for borrowers with strong credit and substantial deposits

• Building societies typically have lower fees but may offer fewer products or require membership

• Specialist lenders serving self-employed borrowers or those with adverse credit often charge premium fees reflecting higher perceived risk and complex underwriting processes

Fees can also differ by mortgage type. For instance, first time buyer mortgages can sometimes feature reduced fees. When applying for a mortgage, compare total costs across lender types rather than assuming certain institutions are always cheaper.

How to reduce mortgage fees

Lowering the cost of buying a home is an aim for many soon-to-be homeowners. Strategic choices when selecting mortgages and professional advice may reduce the total mortgage fees you pay.

Choose a fee-free mortgage deal

Some lenders offer mortgages with no arrangement, booking or valuation fees. This can be attractive to buyers concerned about upfront costs. However, fee-free mortgages may have higher interest rates, which can cost more over time. You may want to calculate total costs over your initial fixed period rather than focusing solely on upfront fees.

Use a mortgage adviser or broker

Mortgage brokers have access to deals that are unavailable to consumers directly. This may include lower mortgage fees or better interest rates. Many brokers charge no fees, receiving commission from lenders instead, making professional advice free for borrowers. Brokers can identify options that match your specific circumstances, which you may miss when searching independently. You might find that the cost of buying a home is reduced through broker expertise.

Compare mortgage deals beyond the interest rate

It may be beneficial to focus on the Annual Percentage Rate of Charge (APRC) rather than just headline interest rates when comparing mortgages. APRC includes mortgage fees and often reflects actual costs. You may want to calculate total payments, including all fees, over your initial fixed period, to understand the actual costs.

 

You could also consider how long you'll stay in the property when evaluating mortgage fees. High arrangement fees on long-term mortgages spread over many years may deliver better value than low fees with higher rates.

 

Find out more about how David Wilson Homes can help make buying your ideal home a reality, with support from schemes such as the Own New Rate Reducer – where you could receive either 3% or 5% of the purchase price towards your move.