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A Guide To Mortgage Fees

MORTGAGES | 22.06.2017

When applying for a mortgage, the fees required can be a little overwhelming. By familiarising yourself with the different charges in advance, you can prepare for these costs and shop around for the best deal. Here’s a rundown of the fees you may be expected to pay when applying for a mortgage.

Booking fee

This can also be referred to as an application fee. It’s usually paid at the start of the mortgage application process and is used to cover the cost of ‘booking’ or ‘reserving’ your mortgage funds whilst your application goes through. Generally, this fee is paid upfront by you but in some cases, a lender will allow you to add it to your mortgage balance. If you choose this second option, find out whether you’ll need to pay interest on the money. If you pay a booking fee and your sale falls through, you’re unlikely to receive this money back.

Arrangement fee

This can also be known as a completion fee. This fee is paid before the mortgage fee and is used to cover the cost of setting up your mortgage. Usually, you’ll be able to choose between paying this money upfront or adding it to your mortgage balance. The amount you’ll pay will vary depending on your lender. It may be calculated as a percentage of your mortgage or it may be a set fee. In most cases, this fee is refundable in the event that your mortgage doesn’t go ahead.

Valuation fee

The valuation fee is charged by your mortgage lender for commissioning a valuation of your property. A valuation will inspect the property and ensure it’s worth the amount you’re borrowing from your lender. For example, if you needed to borrow £100,000 from your lender but their valuation found that the property was only worth £95,000, the sale may not go ahead. The valuation fee is usually required upfront when you make your mortgage application. You may also choose to get a more thorough valuation of your own. A homebuyers survey or full structural survey will help you determine whether the building is structurally sound and there are no underlying problems.

CHAPS fee

This may also be referred to as a telegraphic transfer fee. This fee is charged by your mortgage lender for sending the money to your solicitor so that the transaction can be completed. This fee is usually paid on completion. It’s non-refundable but at this stage, you’re unlikely to withdraw from the sale anyway. This fee is usually around £25 to £50.

Mortgage account fee

This fee is charged by the lender for setting up, maintaining and closing your account. This charge is usually added onto your mortgage balance on completion but sometimes you may get the option to pay it upfront. The amount can vary but it tends to be £300 or less.

Higher lending charge

A higher lending charge can be applied if your mortgage has a high loan-to-value (LTV). Since high LTV mortgages are considered risky, this fee is designed to protect the lender. It may be used to purchase an insurance policy such as a Mortgage Indemnity Guarantee. The higher lending charge will usually be paid on completion. The amount can vary depending on the lender, but it’s usually a percentage of the mortgage you’re applying for.

Legal fees

Legal fees can also be known as conveyancing fees. This money is paid to a solicitor or licensed conveyancer to cover the time spent undertaking the legal side of the property purchase. These fees are usually paid on completion but an upfront deposit may be required. If the sale was to fall through, the deposit is unlikely to be refundable. The amount required can vary depending on the solicitor you choose, whether your property is freehold or leasehold, and whether you’re remortgaging or purchasing a new home.

Mortgage advice fees

If you use a mortgage advisor to help you find the right mortgage and guide you through the process, you may be required to pay mortgage advice fees. Before choosing an advisor, ask them to outline their charges so that you know what to expect. These fees are usually only payable on successful completion of your mortgage. Here at TaylorMade, we’ve helped hundreds of people purchase their own homes and remortgage existing properties. If you’d like our help finding a great mortgage deal, please get in touch with our team. We could save you thousands over the course of your mortgage term.
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