Fees in the Mortgage Process
Fees are the reason why it’s not simply all about the interest rate when choosing the best, cheapest mortgage available to you. If you ever hear this from anyone, you might just want to nod along and then seek qualified, professional advice after.
When sourcing a mortgage, a broker will use the cost over the initial term to determine the cheapest product available. The initial term covers the duration of the mortgage product you choose, eg: 5-year fixed. Fees associated with choosing a mortgage product affect the cost over the initial term, as well as the interest rate.
This blog will look at the fees most commonly payable with a mortgage and explain what they are and when they have to be paid.
An arrangement fee is a charge from the lender which can be added to the mortgage or can be paid upfront. It is either a set figure, commonly £999.00, or with a specialist lender it’s often a percentage of the loan.
Banks will often offer mortgage products with a lower interest rate and a higher arrangement fee or a higher interest rate with a lower arrangement fee. Depending on the size of your mortgage will depend on which product is cheapest for you. There will be a tipping point when mortgage size increases that it will be worth paying the higher fee to get the lower interest rate.
A valuation fee is a charge from the mortgage lender for valuing the property. Most high street mortgage lenders do not charge valuation fees however specialist lenders often do. The valuation fee will be payable on application, and it is a non-refundable fee, regardless of whether the mortgage completes.
A booking fee, sometimes called an application fee, is a charge from the mortgage lender to cover the costs of underwriting your mortgage application. Again, most high street mortgage lenders do not charge booking/application fees however specialist lenders often do – this reflects the increased level of underwriting involved in the application process.
Mortgage Discharge Fee
A discharge fee is payable when you redeem the mortgage – either when you become mortgage free or you remortgage to a different lender. The discharge charge fee covers the costs of closing your mortgage account however there are any lenders who won’t charge you for this.
A CHAPS fee is often payable on high-value money transfers that are sent the same day. Naturally, a mortgage is a prime example of this. Many lenders will cover the cost of a CHAPS fee however sometimes it is the responsibility of you to pay for this. It will be payable on completion and sorted through the solicitors.
We do not charge you any fees for our advice or at any point in the process. However, there are mortgage brokers who will charge you a fee on application, offer or completion. All brokers are paid commission from the mortgage lender when your mortgage completes, and this is why many don’t feel the need to charge clients extra on top of this.
The fees mentioned in this blog are part and parcel of most mortgage products and the cheapest mortgage product available to you will likely include some of the fees we have mentioned. If you want to know more about the fees associated with a mortgage, what and when fees will be payable, get in touch.