When you’re hunting for a mortgage, more often than not, it’s the headline interest rate that grabs all the attention. Yes, those rates are important. Critical even. But lurking behind that big obvious number there are a whole load of other costs that are just as important to have a handle on. As a general rule of thumb, any other upfront and potential hidden costs are known as mortgage fees.

We get it, this whole mortgage thing can get confusing fast, but luckily for you this guide is here to demystify at least mortgage fees. We’ll break down the most common charges you might encounter before explaining what they’re for, typical costs and how you can pay for them.

 

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A Rundown of Common Mortgage Fees

It’s a bit of a minefield out there but don’t worry – not all mortgages have all these fees. However, it’s wise to know what you might bump into. Here’s a look at the typical mortgage fees you might see on your journey to getting the keys.

Arrangement Fee (or Product Fee)

This is often the biggest fee of the lot. It’s the lender’s charge for setting up your specific mortgage product.

  • Typical Cost: This can range from nothing at all to over £2,000. It’s often a flat fee like £999 but can sometimes be a percentage of the loan.
  • Good to Know: Deals with the most attractive super-low interest rates often come with the highest arrangement fees. It’s a classic trade-off.

Booking Fee

Think of this as a reservation fee to secure a particular mortgage deal while your application goes through.

  • Typical Cost:Usually between £100 and £250.
  • Good to Know: This fee is often non-refundable even if your mortgage application or property purchase doesn’t complete.

Valuation Fee

The lender needs to be sure the property you’re buying is worth what you’re paying for it so they instruct a valuation. This fee covers the cost of that basic survey.

  • Typical Cost: Ranges from around £150 to £1500+ depending on the value and type of property.
  • Good to Know: Many lenders offer a free basic valuation as an incentive particularly for remortgage deals.

Legal Fees (Conveyancing)

While not a fee charged directly by the lender these are an unavoidable cost of the mortgage process. You need a solicitor or licensed conveyancer to handle the legal work of transferring property ownership.

  • Typical Cost: Can vary widely from around £850 to £2,000+ depending on the complexity of the sale.
  • Good to Know: It’s always worth getting a few quotes. Some remortgage deals include a ‘free legals’ package.

Mortgage Broker Fee

If you use a mortgage broker for their expert advice and to search the market they may charge a fee for their service.

  • Typical Cost: Varies hugely. Some are fee-free as they are paid commission by the lender. Others might charge a flat fee (e.g. £500) or a percentage of the loan.
  • Good to Know: Always ask about fees upfront. A good broker can often save you more than their fee in the long run by finding you a better deal.

Exit Fee/Early Repayment Charges (ERCs)

These are fees for leaving a mortgage deal. An exit fee can be a small administrative charge for closing the account when it’s fully paid off. ERCs are much more significant penalties for leaving a deal early during a special rate period

Not sure what an early repayment charge is? Find out more with our guide

How Do You Pay for Mortgage Fees?

When it comes to paying your main arrangement fee you usually have a couple of options. Understanding how to handle your mortgage fees is key to managing your upfront costs

  1. Pay Upfront: You pay the fee directly from your own funds when the mortgage starts. This means you don’t pay any interest on the fee itself.
  2. Add it to the Loan: You add the fee to your total mortgage balance. This is a popular option as it avoids a large upfront cost but remember you’ll pay interest on that fee for the entire life of the mortgage making it more expensive over the long term.

Should You Choose a Lower Rate with a Higher Fee?

This is the big question. A super-low interest rate might look tempting but if it comes with a £2,000 fee is it really cheaper than a slightly higher rate with no fee?
The answer is (unfortunately and as always): it depends on your loan size.

  • On larger mortgages: The monthly savings from a lower interest rate can often outweigh the cost of a high fee over the initial deal period.
  • On smaller mortgages: A high fee can wipe out any savings from a slightly lower rate making a no-fee deal with a higher rate the cheaper option overall.

It’s all about doing the maths. An advisor can calculate the total cost for you over the initial deal period helping you see the true value.

Need help finding a mortgage broker? Read our guide – How do I find a mortgage broker? 

Tips for Managing Your Mortgage Costs

When you’re comparing deals, thinking about the total cost is essential. Here are some tips for managing your mortgage fees.

  • Look at the True Cost: Don’t be dazzled by a low interest rate. Add up all the fees over the initial deal period (e.g. 2 or 5 years) to compare the true cost of different mortgages.
  • Ask About Incentives: Look for deals that include perks like a free valuation, free legal work for remortgages or cashback on completion. These can help offset other costs.
  • Compare ‘Fee-Free’ Options: Always compare deals with fees against those without. Sometimes a ‘no-fee’ mortgage which might have a slightly higher interest rate can work out better overall.
  • Get Personalised Advice: A broker can sift through all these variables for you and present the best options based on the total cost and your personal circumstances.

OneDome is here to help

Choosing a mortgage is complex but OneDome is here to help. If you have any questions about the specifics of mortgages, the wider mortgage process or want tailored advice on the different types of mortgages that suit your situation you can:

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