What mortgage fees will you pay?

Stamp duty, arrangement fees and more

A property's price isn't the only figure you need to consider when buying a home. There is also a raft of fees, charges and taxes you'll have to pay before (and after) you can get your hands on the keys to your new pad. This guide explains what extra costs you'll need to factor in when arranging a mortgage. We've included a list of what you'll have to shell out, when you'll need to pay the cost, and who you'll need to pay it to.

Costs before completion

It's not just about the deposit you'll be putting down and the cost of the property you're looking to buy. When saving up, you'll also need to take into account different fees and charges that'll be payable to your mortgage lender, solicitor and HM Revenue & Customs.

Here are the various fees to consider before you complete:

  1. Mortgage arrangement fee

    Most mortgage deals come with what's known as an 'arrangement' fee – sometimes referred to as a 'product' fee instead. This is charged by lenders for setting up a mortgage deal. Because it can set you back in excess of £1,000, the arrangement fee should be treated as a key part of the true cost of a mortgage (along with the interest rate). 

    Before you choose a mortgage, always look at the fees. There are two things you need to think about:

    • Beware low rates disguising high fees. Cunning lenders often use high fees to make their interest rates look more attractive, so they rise up the best buy tables. Some charge fees of £2,000+. Expect to pay a fee of at least £1,000 to secure an attractive rate.

    • Is a low or high fee best? Whether it's best to go for a high fee/low-rate deal, or a low fee/high-rate deal depends on the size of the loan you need. Generally speaking, higher fees work better for larger loans. Benchmark some top rates (with and without fees) using our Mortgage best buys tool, then use our Compare two mortgages calculator to see the effect on the repayments.

    The lender will usually offer you the option to pay the arrangement fee upfront, or you can add the fee to the mortgage. The disadvantage of adding the fee to the mortgage is you'll pay interest on it, as well as the mortgage, for the life of the loan. But if you pay the fee upfront, there's a chance you could lose it if anything went wrong with the purchase.

    So what should you do? Luckily, there's a trick you can use here to ensure that you don't lose the fee, but also don't pay interest on it.

    "Add the arrangement fee to the loan – but pay it off immediately."

    This is how it works...

    If you add the fees onto your mortgage, it protects you from losing any part of the fee paid upfront if your mortgage (or property purchase) doesn’t go ahead for any reason. Don't worry about it affecting your loan-to value band, adding it won't. Saying that, if you are at the top of a band, particularly if it's 95%, the lender might not allow you to add it. So do check.

    To avoid paying interest on the fee, if you can, quickly 'overpay' after the mortgage completes. Lenders usually allow overpayments of 10% of the oustanding mortgage balance each year without penalty, so you should be fine – but, again, it's best to check so you're safe not sorry.

    • How much? £0 to £2,500.
    • Who do I pay? Your lender.
    • Will I always have to pay this fee? No.
    • Do I need to pay upfront or can I add it to my mortgage? Either.
  2. Mortgage booking fee (rare these days)

    A few lenders charge a separate 'mortgage booking' fee to secure a fixed-rate, tracker or discount deal, though it's far less common these days than it used to be. It can also be called a 'reservation' fee. It's unlikely you'll be charged more than £100 to £300.

    If you do need to pay this fee, it'll be charged as soon as you submit your application. This booking fee's non-refundable, so you won't get it back if the property purchase falls through.

    • How much? £100 to £300.
    • Who do I pay? Your lender.
    • Will I always have to pay this fee? No – most lenders don't charge this fee.
    • Do I need to pay upfront or can I add it to my mortgage? Upfront.
  3. Valuation fee

    Lenders charge this to check how much the property you're buying's worth – which can be different to what you've offered for it. They do this for their security, so they can be sure that if things go wrong and you fail to repay, they can repossess the property and get a decent amount for it when sold.

    The cost of the valuation survey varies according to lender and purchase price, but budget for about £300. It'll likely be more if you're buying an expensive property, while in other cases the lender might chuck in the valuation for free.

    (Don't confuse this valuation fee with a proper survey, which is conducted for your benefit as opposed to that of the lender.)

    • How much? Typically around £300, but can be significantly more.
    • Who do I pay? The lender.
    • Will I always have to pay this fee? No, some lenders will pay it for you.
    • Do I need to pay upfront or can I add it to my mortgage? Upfront.

    Special rule in Scotland

    Here, the seller must provide a Home Report, which includes a valuation. If it's dated within the last 12 weeks, your lender may accept a re-type instead of a new valuation, so ask.

    You might be able to persuade the seller to get an updated version of the valuation if it's old. It may cost them, but it can help them entice buyers. Make sure the lender you're planning to use accepts reports from the valuer the seller used, as each lender has an approved panel.

  4. Cost of a survey

    No, we haven’t repeated ourselves here. While a valuation is for the lender’s benefit to confirm the property exists and is satisfactory security for the loan, a survey is a more thorough inspection of the property for your benefit.

    You don't have to get a survey done (it's entirely your choice), but doing one can be useful to check you're buying a home in good condition. Plus many buyers use the information gained in the survey to renegotiate on the property price. A survey would hopefully flag the following:

    - If damp exists in your property
    - Any structural issues with the property
    - Plumbing problems
    - Other potential snags

    If you don't get a survey and something turns out to be wrong with the property at a later stage, you'll have very limited options. The lender's valuation will offer you no protection, in fact the valuer might not even enter the property – they might just drive past to make sure the property exists.

    You can pick your own surveyor but it’s worth asking the lender how much it'll cost to upgrade the valuation they will instruct to a survey. As you should only need to pay the difference in price, it should theoretically be cheaper. You need to make this clear at the application stage so ask the lender or your broker to check for you.

    Frustratingly, you could fork out for the survey only for the purchase to fall through, so an advantage of organising it yourself separately is you can leave it until the last possible moment. Ideally you'd do it after the mortgage offer is in place but before you contractually commit to buying the property (in other words, exchange of contracts).

    Even if you are unlucky enough to end up paying for two or three surveys, the consequences of buying a property that turns out to have structural problems can be devastating. So think very carefully.

    • How much? £400 to £1,500 depending on survey type.
    • When do I pay? When you commission the survey.
    • Who do I pay? The surveyor (or the lender if they arrange it for you).
    • Will I always have to pay this fee? No, surveys are optional.
  5. Broker fee

    If you're using a broker, it may charge you a fee. But there are many brokers who get their cash only from the commission a lender pays them, so are fee-free for you to use.

    Where you do pay a fee, it can be anything from a fixed fee of £300 to 1% of the loan amount (£1,000 per £100,000), which can be expensive. What you pay can also depend on whether the broker is going to keep the commission it gets from a lender. A good broker may be willing to reduce your fee if they are getting decent commission. Always ask.

    Beware of brokers who ask for the fee upfront, as with most fees paid in advance, you could lose it if you later decide not to go ahead. Our Cheap mortgage finding guide takes you through how to find the right broker for you.

    • How much? £0 to £500 (though could be more).
    • When do I pay? Varies depending on broker, usually completion.
    • Who do I pay? Your broker.
    • Will I always have to pay this fee? No, some brokers are fee free.
  6. Stamp duty

    Stamp duty is the tax you pay to the Government when you buy a property. You'll need to pay any stamp duty that is due to your solicitor, who will then pay it to HM Revenue & Customs once your property purchase has completed. In Scotland, stamp duty is known as land and buildings transaction tax, while in Wales it's known as land transaction tax.

    The easy way to find out how much exactly you'll need to pay is to use our Stamp duty calculator – this guide also has information on how you can pay it. 

    • How much? Depends on the price of your property and if you're a first-time buyer.
    • When do I pay? On completion.
    • Who do I pay? The Government (usually via your solicitor).
    • Will I always have to pay this fee? No, not if the price of the property you're buying is below the relevant stamp duty threshold.
  7. Conveyancing fee

    You'll need to pay a solicitor to cover the cost of all the legal work associated with buying a home. This includes conveyancing (dealing with the transfer of ownership), checking paperwork is in order and checking whether environmental factors, planning permission issues or other hidden nasties could cause you problems.

    Some lenders (in England and Wales) will cover these fees – but only if you use one of their chosen solicitors that's on their panel. Others might give you cashback once the mortgage has completed. If you use your own solicitor, this will need to be okayed with the lender, as your solicitor usually does the legal work for you and it.

    Expect the legal fees for your solicitor to cost between £800 to £1,500 (includes legal searches the solicitor has to order and add to your bill). The final price will depend on how much your property costs. You might have to pay the solicitor at several points during the buying process, as they incur costs on your behalf.

    • How much? Ranges from circa £800 to £1,500.
    • When do I pay? Throughout the process & on completion.
    • Who do I pay? Your solicitor.
    • Will I always have to pay this fee? Usually, but some lenders will pay it for you.
    • Do I need to pay upfront or can I add it to my mortgage? Upfront.
  8. Don't forget the Land Registry fee

    The Land Registry's job is to register properties under their owners' name. When you buy a property from someone else, the Land Registry charges a fee to transfer their register entry into your name.

    This fee's dependent on how much your property is worth. Houses sold for between £100,001 and £200,000 will face a fee of up to circa £200, and those sold between £200,001 and £500,000 will need to pay up to circa £300. This fee is another one that your solicitor will call a 'disbursement' and he or she will ask for money to pay it for you when you complete the property purchase.

    Ask your solicitor to make the payment to the Land Registry online, as this works out significantly cheaper than paying via post.

    • How much? Up to £500 (but can be more depending on property price).
    • When do I pay? After completion.
    • Who do I pay? The Land Registry (via your solicitor)..
    • Will I always have to pay this fee? Yes

Costs after completion

Now you've got the keys and you're ready to move in – hooray! However your costs probably won't end there (you probably weren't expecting them to anyway).

Here are the costs to look out for once you've completed:

  1. Removal costs

    Unless you can pile your belongings into the back of a car, factor in the cost of a removal van. These start at £100 for small local moves, but can easily cost up to £1,000+ for shifting a family's worldly goods long distances.

  2. Service charges, ground rent and upkeep

    Once you've bought, there are likely to be further fees to pay. If you buy a leasehold property (where you don't own the land – you effectively pay the property price to rent it from the freeholder for many decades), you'll almost certainly pay a service charge for the upkeep of the property and shared areas, plus possibly ground rent to the freeholder.

    Even if you own the freehold or are a joint freeholder with other neighbours, factor in maintenance costs as you will need to clean communal areas or fix the roof etc.

    For a detailed breakdown of the differences between a leasehold and a freehold property, see our Leasehold versus freehold guide.

  3. Furniture and extras

    Currently renting a furnished place? Remember you'll need to buy everything, from beds and sofas to lawnmowers and carpets.

    Don't leave anything out – curtains and paint cost way more than you think they will. Don't forget about the cost of white goods too, these can cost large. If the seller's including them and any other items in the sale, make sure your solicitor has them noted down in the contract. If it's not noted down, don't rely on it being there.

    Then there are boring but essential extras: light bulbs, lamp shades, toilet brush, washing up bowl, door mats, hooks and extension leads. See how to furnish your pad for free using Freecycle and Freegle.

  4. Monthly mortgage repayments

    To work out your exact monthly repayment, you need to know the size of your mortgage and rate you'll be paying. Even if you haven't started looking yet, you can use our Mortgage best buys tool to benchmark a realistic rate.

    Need help searching for the right mortgage deal? See our Cheap mortgage finding guide. Once you’ve got a rate, enter the details into our Mortgage calculator to find out the monthly repayment. Try adjusting the mortgage term (typically 25 years but can be longer) up and down to see the difference it makes to your monthly payment, as well as the total amount you'll repay over the full mortgage.

    Your mortgage payment's an ongoing cost and the first payment's also likely to be higher than your normal monthly payment as you pay interest in the month you get the mortgage, as well as for the upcoming month. So factor that in.

    Carefully decide whether you can afford a mortgage

    Don't over-stretch yourself or you risk financial ruin. And crucially, don't push too hard. Remember, not having a mortgage isn't as bad as getting one then being repossessed. Factor the fees into your calculation, so you'll know how much you have left to spend on the property itself.

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