Mortgage Costs

Perhaps the most frequent question I am asked is 'How much is all this going to cost me?' The answer of course is that it all depends what you mean.

The most obvious piece of information most people want is the amount of the monthly mortgage payment, and so I have included a simple calculator on the right for you to use to work this out. The figure is only approximate, because each lender will have different charges, which may or may not be added to the loan, and everyone's circumstances will be different, but it will give you a very good guide as to whether or not the mortgage you have in mind will be affordable.

The lender will value the property to ensure that it is adequate security for the mortgage. This is quite separate from any valuation you may wish to commission, such as a 'homebuyers report' or structural survey, although it is normally possible to conjoin these with the lender's valuation so that they are done at the same time.

You should be aware that the mortgage valuation itself is solely for the benefit of the lender, although they often supply you with a copy, and that the valuer is working for the lender and is not responsible to you in any way (unless you also have one of the other types done at the same time). You should not, therefore rely solely on the contents when making your decision to purchase or remortgage the property. A typical valuation will cost between £250 and £350. A homebuyers report will cost about double this and a full structural survey the same again.

Solicitors fees can vary widely in different parts of the country and also with the price of the property. A typical conveyancing figure in the South West is between £350 and £400 + VAT for a house costing under £100000. On top of this there are the disbursements - the costs and fees your solicitor will have to pay on your behalf as part of the process. The total may well amount to £1000 or even more if unforeseen complications arise.

Search Fees - does the person selling the house actually own it - can the neighbours dig up your garden if their sewage outpipe lies underneath it - is the Council planning to build a motorway through your garden - who is responsible for maintaining the road outside - the list can seem endless at times.

Land Registry fee - On completion, your solicitor will pay the Land registry a set fee on your behalf. The amount depends on the purchase price and is typically about £100 - £200.

Telegraphic transfer - there may be a fee for telegraphic transfer of the advance - typically £25 - £50.

It would be wise for you to ask your solicitor in advance for an written estimate of the work he will carry out on your behalf spelling out the costs involved.

If the mortgage is on a special offer (usually but not exclusively a capped or fixed rate), lenders often charge a non returnable booking fee which is payable to them at the same time as the valuation. This could be anything from £50 - £300 and it can't normally be added to the loan.

Arrangement fees, on the other hand, are not normally paid to the lender until completion and can usually be added to the loan, although some lenders will not permit the total borrowing including fees to exceed 95%. The cost varies between lenders and recently there has been a trend to charge fees of between 1% and 2% or more, particularly for fixed rates....

Brokers are normally paid an introducer's fee by the lender to help defray their costs, but some Mortgage Brokers also charge a further fee for their advice, which is often a percentage of the loan, although they may return some or all of that once the mortgage completes. This fee can be charged up front or in some cases added to the loan on completion. If you have been charged a broker fee in excess of 1% and the mortgage Key Features Illustration (KFI) states that the broker will be paid for introducing the loan, you should query and negotiate the amount of the broker fee immediately. The broker is obliged to disclose the actual amount of any introducer's or other fee(s) to you prior to completion of any application form.

The Mortgage Shop does no longer offers direct advice or charges broker fees, but refers enquiries to other specialist firms. Before comitting youself to their advice, you should ensure that you agree the basis for future fees direct with the intermediary concerned.

Introducer fees are not added to your loan and are not a direct cost to you, but form part of the lender's marketing costs.

If the valuer is unsure of the construction method used or if there is any suspicion that the property has been constructed using defective materials (often referred to in Cornwall as 'mundic'), he or she may require that a further concrete screening test be carried out. This normally costs about £300 inc VAT. If the results of this test are inconclusive, a secondary test (also costing about £300) may additionally be necessary.

Since the total for this process alone (including the original valuation fee) may be close to £1000 without any guarantee that the property is mortgagable, you should not commit yourself to having the property tested without first establishing that the vendor is prepared to pay for it, or at the very least share the cost. Possibly, the vendor may even have an old report establishing that the construction has previously been tested and found acceptable.

Just as the valuer checks the construction and condition of the house in order to make sure that it is in sound condition and mortgageable, the solicitor checks the title deeds and other documents to ensure that the title of the house is equally suitable for mortgaging. The mortgage, incidentally, is the security you will offer the lender for the loan and it has to be seen to be suitable in every respect.

A typical cost for this in the South West is between £150 and £165.

Before you commit yourself to any remortgage, you should check whether or not there are still early redemption charges liable under your existing mortgage. These can last for several years, sometimes long after the original fixed rate or other benefit has expired. Furthermore, they can also be substantial. As much as 10% of the outstanding loan or more could be involved.

At the same time, you should ask your existing lender if they are prepared to improve the terms of your loan. You never know - they might even say yes. Providing you are not increasing the loan or the term, this could save you some or all of the above costs.

The Mortgage Shop is a retired IFA that no longer gives direct advice on or arranges Equity Release. Instead, it passes your enquiry to a fully qualified and licensed professional firm, in your local area, that will do this for you. This is a FREE referral service to you, without any obligation, and you are completely at liberty to negotiate with the firm concerned the terms for their advice and services. The information provided is on the basis of our understanding of UK tax law and Inland Revenue practice and is subject to change. This site is intended for persons aged 18 or over, resident or ordinarily resident, in the United Kingdom. email: bobstark@mortgagefor.me.uk

This is about Equity Release Plans. To understand the features and risks, ask for a personalised illustration. The actual APR rate available will depend upon your circumstances.

Mortgage Calculator
This calculator will tell you the approximate monthly cost of a mortgage and the total interest, based on the purchase price, deposit, interest rate and mortgage term. The actual APR will depend on the product chosen and your personal circumstances. If you require an exact amount, please ask us for a Keyfacts Illustration (KFI) from a particular lender.
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