All About the Lender's Fee
Mortgage fees are the extra cost of borrowing money, on top of interest – a separate charge that the lender levies to just agree to give you the money, or to check your property is worth what you’ve agreed. It’s a real sting in the tail and some fees are ridiculously high. In fact, mortgage fees have pretty much tripled in the last decade.
Originally the lender’s fee was to cover the administration costs sustained during the setting up of your mortgage, but lenders now see the fee as an additional form of revenue. As few people have the ready cash to simply buy property, it’s generally assumed most homebuyer’s will need a mortgage, so you are faced with little choice.
But like everything there is an element of competition amongst lenders to secure new borrowers so it’s worth shopping around to see the best rates. Your IFA can help with this. Beware of self-serving mortgage brokers though who have a particular loyalty to certain lenders. It’s not unheard of for brokers and lenders to split lenders fees so you might find yourself ‘guided’ in a particular direction!
Look out for mortgage exit fees too. This is yet another fee added by the lender when closing a mortgage either when it is paid in full or even when you move to another lender. They can even be applied if you simply decide not to go ahead with the mortgage after all.
How it WorksMortgage lenders will usually charge an arrangement fee which is the fee originally set up to cover admin. They will also charge you a valuation fee when they check out the property and there may be a booking fee if you have a special type of mortgage such as capped or fixed rate. The fees are normally incorporated into the overall borrowing amount too, so you will have to realize you’re paying the same rate of interest on those fees as you are for the actual mortgage amount.
If you can afford it, it is well worth asking if you can pay the fees up front as they are often quite big and can cost a lot of money over the mortgage term.
The fees will vary hugely between different lenders and you will need to sit with your IFA (or a trusty calculator!) to work out what is the best deal for you. Low fees can mean higher interest, or some lenders offset some fees by contributing towards legal costs – equally there are many incentives out there to tempt you in. Beware of those higher lending charges too! The deals change each week but you can find all you need to know by checking with your IFA or by looking online at lenders sites or mortgage comparison sites.