Do you know just how many different fees a mortgage application can include? A new mortgage or a remortgage, will rack up numerous different fees from different parties. These various mortgage fees can be confusing and overwhelming. This article starts from the initial mortgage search, highlighting each fee that could be involved in your mortgage, from application to completion.
Speak to your mortgage broker
Firstly, all fees involved during your mortgage process need to be explained by your mortgage broker. Make sure these fees are documented within your mortgage illustration, prior to proceeding to a full application. It is important you know what you are financially committing to when deciding to proceed with a mortgage recommendation as it needs to be affordable. Your mortgage broker should explain all aspects of each mortgage cost. This will help you make sensible financial decisions when taking on a new property through purchasing, or moving to an alternative lender by means of a remortgage.
Different mortgage, different mortgage fees
As there are different types of mortgages the fees can also vary depending upon the process you are looking to carry out. For example, if you are an existing mortgage customer with an existing lender it is likely you are on a product which will expire after a period of years. This could be a fixed rate mortgage, tracker mortgage or variable or discounted rate mortgage, usually over 2, 3 or 5 years and sometimes even 10 years.
Alternatively, you may decide to move home or become a homeowner for the first time, called a first-time buyer. This is usually a new mortgage based upon the loan to value, that is the house value against the new loan size. It tends to work that the more equity/deposit you have the better interest rate you will obtain. Lenders like security, the more security the better, should you default on mortgage payments. Homeowners with an existing mortgage can sometimes port their existing loan to the new property, depending upon the lender’s acceptance and criteria.
Our approach to mortgage lending
Already in 2021, Fortune Financial have advised and arranged over £45,000,000 million in mortgage lending. Our local mortgage broker work with customers across Hitchin, Letchworth, Stotfold and these surrounding areas. We always discuss the mortgage set up costs with clients. This ensures they are fully informed prior to committing to a full application. Nobody wants a surprise cost, it should be clear, fair, and not misleading.
Mortgage fees explained
Mortgage booking fee
Let us start with a booking fee, sometimes called an application fee from the lender themselves. The booking fee is paid at the very start, usually when you complete the mortgage application. It is to "book" or "reserve" your mortgage funds while your application goes through. It is not usually refundable, so committing and ensuring you meet lender criteria prior to applying is key. A good adviser will do this work for you, giving you confidence in choosing this lender for your mortgage borrowings. Generally, this is paid upfront by you; however, sometimes (if your lender allows it) you can add it to the mortgage balance. This type of fee varies considerably so it is not useful to give a ‘typical’ example. However, you should expect to pay at least £99. This is not a common fee; only certain lenders request this payment.
Mortgage application fee
Next up is an application fee, also known as a completion fee. This fee can be paid at any point prior to the mortgage starting. It is the fee your mortgage lender charges to set up your mortgage. You usually have the option to pay this upfront or add it to the mortgage balance. If you are declined or decide not to proceed, you can normally get this fee refunded.
So, how much would you expect to pay? This will vary massively. It could be a cash amount, or a percentage of the mortgage you are applying for. Because of this, it is difficult to give an idea of how much it might cost.
Our mortgage brokers assess products over the product period and give clients a true cost, not the full mortgage term. For example, if you could obtain a 0.5% fixed rate for 2 years with a large £1999 fee or obtain a 2 year fixed rate at 0.75% with no fee, it is likely a higher mortgage interest rate will work out more cost effective over the 24 months depending upon the loan size of course.
My point is, it’s not always about the lowest rate, it is simply about what is the most cost-effective mortgage when factoring in all costs whilst considering other features the lender offers and ensuring you meet their criteria.
Mortgage valuation survey fees
Everyone has heard about valuation fees, but do they know these are for the benefit of the lender, not you the customer. It is to give the lender confidence that the equity/deposit is there for them to secure the loan against the house. It is a fee charged by your mortgage lender for commissioning a mortgage valuation. A mortgage valuation is quite a basic inspection of your property, and its purpose is limited to whether your home is suitable security to lend on.
Property survey fees
If you want a more in-depth survey for your confidence in buying, you will need to pay for a Homebuyer Survey or Full Structural Survey. Each of these types of survey will cost significantly more than a valuation survey, an example would be £500-£1000. You generally must pay this upfront when you make your mortgage application.
Is a house survey refundable if you do not proceed with the mortgage? It depends. If your mortgage application is declined or cancelled before the valuation takes place, you have a good chance of getting your money back (although you may not get your Valuation Administration Fee back if you have paid one). If, however, you are declined or you cancel after the valuation, it is unlikely you will get your money back.
Your lender will have a set price list for this on purchase applications, depending on how much your property's worth – you may be able to find this on your mortgage illustration. For a remortgage many lenders offer a basic valuation fee free as an incentive.
Mortgage advice fees
A mortgage advice fee is a charge by your mortgage broker to spend time assessing your circumstances and tailoring advice to you. At Fortune Financial Planning we do not charge fees for our advice. Yes, our mortgage advice is no cost and no obligation. We simply put you in a position to make an informed decision about your mortgage recommendation and related costs.
A good broker will charge a fee on application, offer or completion and this varies case to case. Everyone’s circumstances are unique, so the work involved from application to completion can be little or excessive. Your home is the most expensive asset you will likely ever buy. It is worth paying for a company to arrange your mortgage as an experienced and knowledgeable adviser plus a team of case managers will take any stress away and ensure you receive the best advice. You could expect to pay fees from £500 to 2% of the loan depending upon whether the advice is specialist or standard.
You may see on your illustration a small change, usually around £30 called a CHAPS fee. Sometimes called a 'Telegraphic Transfer Fee'. This fee is charged to you by the mortgage lender for sending the mortgage monies to your solicitor. This fee is usually paid on completion – most often by being added to the mortgage or being taken off the balance you receive.
Higher Lending Charge
What is an HLC? It is a Higher Lending Charge. This can be made by the lender if your mortgage has a high loan-to-value. It is designed to cover any increased risk the lender might incur by lending to you. They may use it to buy an insurance policy called a Mortgage Indemnity Guarantee, which protects them if you default on the mortgage. The Higher Lending Charge is usually paid on completion. It can sometimes be paid upfront but could also be added to the mortgage balance. This will vary massively. It is usually a percentage of the mortgage you are applying for that is above a certain loan-to-value limit. So, what you pay will depend on how much you borrow, and what loan-to-value this is.
The arrangement of a mortgage is a legal process, so you will need a solicitor. Sometimes also called a 'Conveyancer’. These fees are payable to a solicitor or licensed conveyancer for undertaking the legal work involved in the mortgage or remortgage. Normally you would have to pay these fees when the mortgage completes. However, you might have to pay an upfront deposit ‘on account’ to cover the costs to the solicitor or conveyancer for doing preliminary searches and work.
At Fortune Financial, Hitchin we work with a panel of conveyancers that we have built a trusting relationship with. If you need a recommendation, we would be happy to tailor a quote for you. Many lenders offer free basic legal costs on a remortgage, whilst with a purchase you will need to appoint your own and the costs can be anything from £1000 upwards to carry out the works involved. It really depends on the company you are using and the process you are carrying out.
Mortgage fees in summary
In summary, when arranging a mortgage there are many fees to consider and receiving expert advice from a broker can ensure you are fully informed about not just the best product for your residential home or buy to let property but the most cost-effective product.
At Fortune Financial we can guarantee to save you time, give you confidence in the buying process and take added stress away. Not just at the start, but throughout your full mortgage term. We believe we are in the people industry not the financial services industry. For further reading Home Owners Alliance include a good breakdown of Mortgage Fees and Costs.
Speak to a friendly professional mortgage broker on 01462 510400 at your convenience via telephone, Zoom consultation or face to face at our offices in Hitchin.
Advising Director, Fortune Financial Mortgage Brokers, Hitchin