Mortgage Costs and Fees

A Breakdown of all Costs and Fees Incurred with Mortgages

Monthly Mortgage Payments

The amount of the monthly mortgage payment depends on the type of mortgage, interest rate and term.

Mortgage Related Monthly Payments

Life Insurance - this will ensure that the mortgage is repaid in the event of death. Critical illness insurance can also be added if required. There is no legal requirement to take out this insurance with the lender although some may charge a fee if you don’t. For a review of the main UK insurers and a no obligation quote click here.

Home Insurance - the lender will require buildings insurance and contents insurance will be strongly recommended. There is no legal requirement to take out home insurance with the lender although some may charge a fee if you don’t. For a review of the main UK insurers and a no obligation quote click here.

Mortgage Payment Protection - this will ensure that mortgage and mortgage related payments are covered in the event of short term inability to work due to accident, sickness or unemployment. There is no legal requirement to take out this insurance with the lender although some may charge a fee if you don’t. For a quote from a leading provider of this insurance click here.

Repayment Vehicles

Anyone with an interest only mortgage will also need a repayment vehicle which will normally involve a monthly cost.

Lenders Fees

Whether you are a first time buyer, moving house or re-mortgaging there will always be some costs involved, although some lenders cover some or all of these fees as part of their offer. The main fees are:

Arrangement Fee - can also known as a product fee, reservation fee or booking fee. It is the fee charged for a particular deal and can be up £1000 or in some cases more. It may be charged up front or added to the loan. If charged up front it may not be refunded if a mortgage application is declined or a purchase falls through. If it is added to the loan it will mean a minimal increase to the monthly payment but interest will be applied over the term of the mortgage so the actual cost will be much more than the initial fee.

Valuation Fee - the lender needs to pay a surveyor to establish that the value of the property is more than is being lent. This is normally paid for by the lender with the cost being passed on to the borrower. On average the fee would be in the region of £250.

Lenders Legal Fees - when a property is purchased a solicitor will normally have to do work on behalf of the lender and these fees can be passed on to the borrower.

Buyers Legal Fees - to cover the work done by the buyer’s solicitor and associated costs for searches, registration at the Land Registry etc.

Higher Lending Charge - an insurance taken out by the lender to protect against falling property prices which lead to a property being worth less than the outstanding loan. It can be levied where the Loan to Value (LTV) percentage is high. It can be charged for a loan to value in excess of 75% but normally only needs to be considered for loans with a 90% or 95% LTV. It is also known as Mortgage Indemnity Guarantee.

Stamp Duty - a government tax on property purchased. Can also be called a land tax. The stamp duty threshold is currently £125,000 so for purchases below this threshold no tax is due. Above the threshold stamp duty 1% on the total purchase price rising to 3% for purchases in excess of £250,000 with even higher rates for very expensive purchases.

Transfer Fee - electronically transferring the money to the buyer’s solicitor will cost the lender and this charge can be passed on to the lender. Also called a Chaps fee.

Insurance Fee - most lenders prefer to keep the required insurances in house. For borrowers who decide to take out their insurances elsewhere a few lenders will charge a small fee, normally in the region of £25.

Exit Fee - when an existing mortgage is redeemed (repaid) most lenders will charge a mortgage exit administration fee. This has risen dramatically in recent years and can now be in the region of £200.

Early Redemption Penalty - also called an early repayment charge. Most discounted and fixed rates are for a set period and if a borrower wants to move their mortgage within the set period then an early redemption penalty will be applied. It can also be applied within the tie in period, if appropriate. A tie in period is the time a borrower is required to keep their mortgage with a lender following the end of the fixed or discounted period. The amount of the early redemption penalty will vary greatly and will be dependent on the competitiveness of the fixed or discounted rate. It is not uncommon for the charge to be up to 6 months interest.

Your home may be repossessed if you do not keep up repayments on your mortgage. Memigo Money provides information but does not sell or provide advice on mortgages or their suitability. There may be a fee for mortgage advice; the precise amount depends on your circumstances.

For adverse credit mortgages the overall cost for comparison will vary, the actual rate available will depend upon your circumstances. Ask for a personalised illustration.

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