What costs are involved in taking out a Mortgage?

Posted on: January 18, 2023

Taking out a mortgage can be a complex experience. You’ll need to pay many associated charges, including arrangement fees, valuation charges, and more.

All of this can make your mortgage cost more than you anticipated. With this in mind, here’s some information you need to know about mortgage costs and fees so that you can be well-prepared before making your application.


What Are Mortgage Costs And Fees?

Mortgage costs are the fees and additional charges you’ll need to consider and budget for when you take out a home loan.

These costs may include:

Lender arrangement fees
Booking fees
Valuation fees
Solicitor conveyancing fees
Telegraphic Transfer fees
Mortgage broker fees
Early Repayment Charge
As you can see, even if you only have to pay some of these costs, they can seriously mount up. This is why it’s so important to get professional advice from a mortgage advisor before you rush into making a mortgage application.

Let’s look at these fees and charges in more detail.


What Are Mortgage Arrangement Fees?

Mortgage arrangement fees are usually the most significant additional cost you’ll have to pay. Sometimes known as a product fee, these costs are often seen with mortgages that have been advertised with a lower interest rate.

Sometimes, arrangement fees can be added to the loan, but that means you’ll owe more overall, resulting in higher interest and larger monthly payments. It’s important to always factor in the arrangement fee when you’re working out the real cost of your mortgage deal.

In some cases, a mortgage with a higher interest rate could offer you better value if the arrangement fee is lower. A mortgage advisor will help you make this decision.


Booking And Valuation Fees

A booking fee is non-refundable and is sometimes known as a reservation or application fee. This fee normally isn’t refundable if your mortgage falls through or is declined. The valuation fee, if there is one, is charged when the lender values the property you’ll be buying to ensure it’s worth the purchase price, this fee will normally need to be paid at the point of mortgage application.


Other Associated Fees

There are several other fees to bear in mind. The Telegraphic Transfer fee covers the cost of transferring funds between the lender and solicitor, while the mortgage account fee covers the lender’s administrative costs.

If you’re using a mortgage broker, there may also be a fee to pay. Some brokers will levy an additional charge for their services, while others take their commission from mortgage providers instead.

Some lenders will also charge you a higher lending fee if your deposit is minimal.

We like to be completely transparent with our fees here at Mindful Mortgages, to find out more, head to our fees page.


Early Repayment Charges

If you repay part or all of your home loan earlier than its agreed deal or term, you may need to pay an early repayment charge. Your mortgage advisor will be able to advise whether your chosen deal has this arrangement in place. Usually, an early repayment fee is charged as a percentage of your loan. For example, if your £100,000 mortgage has an early repayment fee of 4%, you’ll pay £4000.


Do Mortgage Fees Impact On Mortgage Deals?

If you’re seeking the best mortgage deal, you may fall into the trap of simply comparing interest rates. However, mortgage costs and fees need to be considered too, since they can make a massive difference to the amount you pay overall.

A mortgage of £200,000 at an interest rate of 1.49% that charges a fee of £2000 costs more overall than a mortgage that is fee-free with an interest rate of 1.55%.

We know that it can be difficult and overwhelming trying to determine which is the right mortgage deal for you, and that’s where we can help. You can book a free initial call straight into my diary, so we can have a chat and I can get to know your situation better here. Or drop us a message and we will get back to you as soon as possible.

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