Mortgage Fees Explained: What You Pay and How to Save

Thinking about buying a home? The big number you see – the loan amount – isn’t the whole story. Lenders add a handful of fees that can jump the total cost by a few thousand pounds. Knowing each charge helps you avoid surprises and find ways to keep the bill low.

Common Types of Mortgage Fees

Application fee: Some banks charge a small amount just to start the process. It’s usually refundable if your application is rejected, but not always.

Valuation (or survey) fee: The lender needs to know the property’s worth before they lend. Expect a charge from £150 to £500 depending on the size and location.

Arrangement fee: This is the lender’s profit for setting up the mortgage. It can be a flat fee (£300‑£1,000) or a percentage of the loan (often 0.5‑1%). Some “no‑fee” deals hide the cost in a higher interest rate.

Legal (conveyancing) fees: You’ll need a solicitor or licensed conveyancer to handle contracts, searches, and registration. Prices vary, but most people pay between £800 and £1,500.

Broker fee: If you use a mortgage broker, they may charge a commission or a flat rate. Many brokers are paid by the lender, but it’s worth checking before you sign up.

Early repayment charge (ERC): Break your mortgage within the early years and the lender may levy a penalty, often a percentage of the amount you’re repaying.

Other possible fees: These can include booking fees, underwriting fees, and postage costs. They’re usually small but add up if you’re not tracking them.

How to Reduce Your Mortgage Costs

First, shop around. Different lenders have different fee structures, and a lower arrangement fee can offset a slightly higher interest rate.

Second, ask for a “fee‑free” mortgage. Some banks waive the arrangement fee if you agree to a higher rate for a set period. Do the math – a higher rate might cost you more in the long run.

Third, negotiate. Many fees, like the valuation or legal costs, are not set in stone. A quick call to the lender or solicitor can shave a few hundred pounds off the bill.

Fourth, consider a broker who works on a fee‑only basis. They won’t earn a commission from the lender, so you know exactly what you’re paying.

Fifth, plan the timing of your move. If you can avoid the early repayment charge by staying in the mortgage for the minimum term, you save a big chunk of cash.

Finally, factor fees into your overall budget. Use an online mortgage calculator that includes fees, or ask your adviser for a full cost breakdown before you sign.

Understanding each fee and where you can cut back turns the mortgage process from a mystery into a manageable part of buying a home. Keep this list handy, ask questions, and you’ll walk into the deal knowing exactly what you’re paying for.