This content is for information and educational purposes only. It should not be taken as financial advice or investment advice. To receive tailored, regulated financial advice regarding your affairs please consult us here at Hanson Financial Services (financial advice in Liverpool).
Getting a mortgage can feel like stepping into the unknown – especially for a first-time buyer. There are many different costs to consider including ongoing costs (e.g. the monthly mortgage repayment) and on-off costs nearer the beginning of the process. In this article, our team here at Hanson Financial Services (financial advisers in Liverpool) offers this overview of costs to look out for when applying for a mortgage. We hope you find this content useful and invite you to get in touch if you’d like to discuss your own mortgage or financial plan with us.
Getting a mortgage is not as simple as walking into a highstreet bank, choosing a product and paying the monthly mortgage amount. There are many other costs and hoops to jump through such as legal fees, CHAPS, booking, valuation, administration and arrangement fees. When you eventually complete your mortgage there may be further fees to pay (particularly if you want to end the agreement early). These various costs should be spelled out to you clearly by a lender, well ahead of time. However, it helps to be armed with information about these different areas before you sit down with different providers. Let’s examine these now.
This is also sometimes called the Application Fee. It is typically paid at the start of the process (when the mortgage application is finished) and you can expect to pay at least £100. It “books” the funds for the mortgage as the application is processed.
Often called an “Arrangement Fee”, this is what the lender charges to set up the mortgage for you. It can be refunded if you do not want to go ahead, and can be paid anytime before the start of the mortgage. The cost varies a lot across providers – often reflected as a percentage.
The lender wants to know that the home you wish to move into is a secure asset to lend on. So they charge a fee to inspect and value the property. This is typically paid when you start your application, and can be refundable in certain cases. The price should be outlined by the lender.
Valuation admin fee
After conducting the property inspection, the lender needs to process the paperwork and admin. They will charge you to cover this (typically £50-100).
Telegraphic Transfer Fee
This is also sometimes referred to as CHAPS, and is the cost to cover the sending of mortgage funds to the solicitor. It is typically paid at the end of the application process and can be added to the mortgage. The cost is usually between £25-50.
Freedom of Agency fee
Sometimes also called a “building insurance fee”, this is the cost charged by the lender if you decide to take out building insurance with another provider. This requires that they check your insurance policy to ensure it protects them if, say, your property is ever burned down. The cost is typically around £25.
Mortgage account fee
This charge is levied when they need to set up, maintain and close your mortgage account. It can range between £100-300 in cost and can be paid either up-front or on completion. When this is charged, you typically do not need to pay any redemption administration fees (explained more towards the end of this article).
This “higher lending charge” can be imposed by the lender if the loan-to-value (LTV) of your mortgage is high. It helps to protect them if you default on your mortgage. The lender may use the money to purchase a Mortgage Indemnity Guarantee, for instance.
Sometimes just referred to as “legal fees”, these are paid either to a solicitor or a licensed conveyancer for conducting the legal paperwork involved with a mortgage application. The cost depends on the solicitor. Be mindful that he/she must be deemed “acceptable” by your lender, so do not assume that the cheapest option is always the best.
Mortgage advice fee
If you seek professional advice from a mortgage broker or financial adviser about your mortgage then there will, eventually, be fees to cover their time. Here at Hanson Financial Services, our financial advisers in Liverpool always provide our costs up-front so you are clear about the work and commitment involved.
“End of mortgage” fees
When your mortgage naturally ends there may not be any additional fees. However, if you want to conclude the agreement early this will typically come at a cost. An early repayment charge may be imposed and this is usually a percentage-based fee. There can also be a redemption administration fee to cover the extra work involved with closing a mortgage account. This can cost between £50-300.
Conclusion & invitation
Are you interested in talking to a financial adviser about your mortgage and financial planning needs? We’d love to assist you here at Hanson Financial Services.
You can call us on:
Liverpool Office: 0151 708 7616
Manchester Office: 0161 401 0991
Chester Office: 01244 960 039Or email via: [email protected]