Mortgage costs and fees explained

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One of the most infuriating and confusing things about mortgages are the endless fees which have to be paid. In the old days you went for a mortgage and you would pay a survey fee then the next time the lender wanted money was probably when you came to repay the loan.

Nowadays there seems to be a bewildering list of fees to be paid for just about everything that you ask your Bank or Building Society to do. Our mortgage partner mform.co.uk have listed the most common charges now added to mortgages.

The important thing to remember is that not all the fees apply to every mortgage, so its best to check out the full details up front before signing up for the deal with the lowest interest rate. Often the most attractive rates come with the biggest fees.

Check out below the charges that clever borrowers try to avoid.

The booking fee

Lenders often borrow the money they lend to customers so they may have a restricted amount of money available at certain rates. Booking fees are often charged if you want to reserve a particular mortgage deal. fees of around £99 - £199 are common but you can find lenders who don't charge these fees.

The arrangement fee

Arrangement fees are charged to cover the upfront costs of setting up your mortgage. They can be quite large and need to be seen as part of the overall cost of any mortgage, rather than the actual cost of arranging it. These come in a huge range with fees of up to £6,075 currently on offer

The valuation fee

The valuation and administration fee

This fee has become more widely applied. It covers the cost of the lender receiving the valuation report and considering its contents. Not every lender will charge this but those that do average around £90.

Conveyancing fees

This is the money paid to the solicitor or licensed conveyancer to cover the cost of drawing up contracts, proving the property is owned by the seller and ensuring existing loans have been repaid.

They also check planning records for future developments. Generally speaking £350 will cover these charges.

Mortgage Indemnity Guarantee (MIG) premium

MIG is a one-off premium you may have to pay if you are borrowing more than 80% of the property's value. It covers the lender in the event of the property being repossessed and sold at a loss. The level it's charged at varies with some lenders applying it at 80% and others not charging it at all.

It's important to find out up front as it will directly effect the overall cost of your mortgage. The market leader would charge a £725 to a customer borrowing £195,000 ona house worth £200k. this fee is often added to the advance.

Redemption administration fee

When you pay off your mortgage either to become mortgage free or to move to a different lender, most lenders charge a fee, often called a deeds release fee which can vary from £25 to over £100

Discharge fee

This is paid when you close your mortgage and covers the costs of recording the clearance of your mortgage charge from the Registers. These are charged from £25 - £150

Early repayment fee

These are known as ERC's for short. If you are receiving a special interest rate there is normally a penalty to be paid if you redeem the mortgage before the end of the fixed or discounted period, the mortgage deal period. Expect to see fees of around 3% of the mortgage sum payable in the first year with a sliding scale for subsequent years.

N.B Unless otherwise stated all the example fees are taken using an average example of a £135,000 2 year fixed rate mortgage to buy a property worth £200,000 located in England. The fees are either shown as a range or are and average of those charged on the 5 best value deals shown on mform.co.uk for this category of advance as at Thursday 6th November.