A rundown of the fees involved in a UK mortgage — beyond the valuation fee and arrangement fee, what else is there?
Applying for a mortgage in the UK is very common — a buyer’s budget may be limited, so they want to use leverage to maximize the funds available. But beyond the property price, there are other costs to a UK purchase, and the same is true when applying for a mortgage: buyers shouldn’t judge their purchasing power on price alone. This article walks through the costs involved in applying for a UK mortgage, so buyers can plan their funds more accurately when investing in UK property.
Arrangement Fee
This is the fee for the mortgage product itself, sometimes also called a product fee or completion fee. It can be added to the mortgage amount, but doing so increases the amount borrowed, the interest and the monthly repayment. The fee ranges from £0 to more than £2,000.
Booking Fee
This fee is charged when the applicant submits the mortgage application, and is generally non-refundable regardless of whether the mortgage is ultimately approved. Some banks treat it as part of the arrangement fee, while others scale it with the mortgage amount. It’s typically around £99–£250.
Valuation Fee
The bank will value the buyer’s property to confirm its worth. Some lenders don’t charge this fee for certain mortgages. A buyer can also pay separately to have their own property surveyed, to identify any repairs or maintenance that may be needed in future — the lender’s own valuation only looks at the property’s value for lending purposes. The fee is typically around £250–£1,500, depending on the property’s value.
Telegraphic Transfer Fee
Also known as a CHAPS fee (Clearing House Automated Payment System).
This fee covers the cost of the mortgage-providing bank transferring the loan to the buyer’s representing solicitor. It is generally non-refundable whether or not the transaction completes. The transfer fee is typically around £25–£50.
Mortgage Account Fee
This fee covers the lender’s administrative costs in setting up, maintaining and closing the mortgage. If the buyer pays this fee, they generally won’t need to pay an exit fee — although an early-repayment charge may still apply if the buyer settles the loan early. The mortgage account fee is typically around £100–£300.
Mortgage Broker Fee
If a buyer chooses to use a mortgage broker, this fee applies to the broker who arranges the mortgage or advises the buyer. Some mortgage brokers don’t charge the buyer directly and instead take a commission from the mortgage provider. The typical fee averages around £500, or a commission based on the mortgage’s value.
Higher Lending Charge
Not all lenders charge this, and it generally only applies where the buyer has a small deposit — because if the buyer can’t repay the mortgage and the lender has to sell the property at a loss, this fee covers the lender’s insurance premium. The fee is typically around 1.5% of the mortgage — for example, £3,000 on a £200,000 mortgage.
Fee for Own Buildings Insurance Arrangements
Not all lenders charge this, so check with them first. It is sometimes also called a free-agent fee or an own-buildings-insurance fee. If the buyer decides to buy their own buildings insurance rather than the policy offered by their mortgage provider, this fee is sometimes charged. In the long run, paying this fee and shopping around for the buyer’s own insurance needs can still save money overall. It’s typically around £25.
Early Repayment Charge
This fee doesn’t apply to every mortgage product, so it’s important to check each mortgage provider’s terms — particularly if the buyer plans to repay early in future. If the buyer already has a mortgage, check the key facts illustration or the European Standardised Information Sheet (ESIS) document to see the fee amount. The charge is generally 1%–5% of the amount repaid early — for example, a £100,000 mortgage with a 3% charge would cost £3,000. This covers the lender’s costs if the buyer repays all or part of the mortgage before the agreed term or completion date. The mortgage provider may also require repayment of any incentive or discount given to the buyer, such as a discounted legal fee or cashback.
Exit/Closure Fee
This is the fee the buyer pays to the lender when the mortgage is repaid, even if it isn’t repaid early. If the buyer has already paid a mortgage account fee, this specific fee generally won’t apply, since that fee typically covers setup, maintenance and closing the account. It’s typically around £75–£300.
Summary
All of the above are additional costs involved in a UK mortgage, some of which apply only in specific situations, such as early repayment or opening a bank account. Others, such as arrangement fees and exit fees, are common costs, so buyers and owners should prepare the relevant funds before making a decision, checking carefully whether their current cash flow is sufficient — otherwise, being caught out by these smaller fees and losing the property would be a costly mistake. Buyers or owners wanting to understand UK property investment costs in more depth can first consult a solicitor or agent, or other relevant professionals.
Have a question about this guide? Leave a comment below, or ask Zagdim directly.
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