Mortgages often come with fees as well as interest, and these can make a real difference to the overall cost of a deal. This guide explains mortgage fees: the main ones to look out for, from arrangement and booking fees to valuation and legal costs, and how to weigh fees against the rate.
The main mortgage fees
A mortgage can involve several fees: an arrangement or product fee, a booking fee, a valuation fee, legal or conveyancing costs, a broker fee, a funds transfer fee, and, if you leave a deal early, an early repayment charge and sometimes an exit fee. Not all apply to every mortgage, and some are often waived, but knowing each one helps you work out the true cost of a deal.
Arrangement or product fee
The arrangement fee, sometimes called the product fee, is the main fee on many deals, charged for setting up the mortgage. It can range from nothing to around £2,000 or more. A deal with a low rate but a high arrangement fee is not always cheaper than one with a slightly higher rate and no fee, especially on a smaller mortgage, as our guide to comparing mortgage deals explains.
Booking fee
Some lenders charge a booking fee, a smaller upfront fee to reserve the mortgage product, sometimes called an application or reservation fee. It is usually non-refundable and paid at application. Not all deals have one, and where they do it is generally modest. Checking whether a deal carries a booking fee, on top of any arrangement fee, helps you understand the full upfront cost of taking it.
Valuation and legal fees
The lender usually values the property to confirm it is suitable security, and there is legal work to complete the mortgage. Many deals include a free valuation and free or assisted legal work as an incentive, especially on remortgages, so these are often covered. Where they are not, a valuation and conveyancing can add a few hundred pounds, which you should include when comparing the cost of deals.
Broker and transfer fees
If you use a mortgage broker, they may charge a fee, though some are paid by the lender instead. There can also be a funds transfer or telegraphic transfer fee for sending the mortgage money, usually small. These smaller fees add to the total, so it is worth knowing about them, even though the arrangement fee and any early repayment charge are usually the larger amounts, as our guide to remortgage costs explains.
Adding the fee to the mortgage
Many lenders let you add the arrangement fee to your mortgage rather than paying it upfront, which avoids a large initial cost but means paying interest on the fee over the term, so it costs more in the long run. Adding the fee can ease cash flow at the time, but it is worth knowing it increases the overall cost compared with paying it upfront if you can.
Fees versus the rate
The key when comparing deals is to weigh the fees against the rate together, not separately. A low rate with a high fee may cost more overall than a slightly higher rate with no fee, particularly on a smaller mortgage where the fee is large relative to the loan. Working out the total cost over the deal period, including fees, reveals which mortgage is genuinely cheapest, as our guide to the way mortgages work notes.
Free valuation and legal incentives
Many deals, especially remortgages, include a free valuation and free or assisted legal work as incentives, which can save several hundred pounds, as our guide to remortgage costs explains. When comparing deals, factor in these incentives, since a deal with a slightly higher rate but free valuation and legals can work out cheaper overall than one with a lower rate but those costs to pay.
Cashback deals
Some mortgages offer cashback, a lump sum paid to you on completion, which can offset fees or moving costs. Cashback can make a deal more attractive, but it is worth comparing the overall cost, since a deal with cashback may have a higher rate or fee. As with incentives generally, include cashback in your total-cost comparison rather than being drawn by the headline offer alone.
Early repayment and exit fees
If you leave a deal before it ends, an early repayment charge usually applies, often 1% to 5% of the balance, and when you fully repay a mortgage there can be a small exit or deeds release fee, as our guide to early repayment charges explains. These are not always relevant when taking a deal, but knowing about them helps you understand the full potential costs over the life of the mortgage.
Fees on remortgages versus purchases
The fees can differ between a purchase and a remortgage. A purchase involves more legal work and your own conveyancing costs, while remortgages often include free valuation and legals. So the fee picture depends on whether you are buying or switching. Bearing this in mind helps you compare deals appropriately for your situation rather than assuming the same fees apply in both cases.
A worked example of fee versus rate
Suppose deal A has a rate of 4.4% with a £999 fee, and deal B has 4.6% with no fee, on a £150,000 mortgage. The lower rate of A saves interest, but the £999 fee must be weighed against that saving over the deal period. On a smaller mortgage, the fee can outweigh the rate saving, making B cheaper overall, which shows why comparing total cost matters.
Reading the key information
Every mortgage comes with key information setting out the rate, fees and terms, which is worth reading carefully so you understand exactly what you will pay. The fees should be listed clearly, letting you add them to your comparison. Taking a moment to check the fee details, rather than focusing only on the rate, ensures no cost takes you by surprise and helps you compare deals fairly, as our guide to comparing mortgages explains.
When a fee is worth paying
A higher fee can be worth paying if the deal's lower rate saves you more than the fee over the deal period, which is more likely on a larger mortgage where the rate matters most. On a smaller mortgage, a fee-free deal at a slightly higher rate is often cheaper. Working out the total cost for your loan size, rather than avoiding fees on principle, is the way to judge whether a fee is worth it.
In the end, fees are simply one part of a deal's total cost, so treat them that way: add them to the interest over the deal period, compare the totals, and let the genuinely cheapest option win rather than being swayed by a low rate or a fee-free label alone.
In short
Mortgage fees can include an arrangement or product fee (often the largest), a booking fee, a valuation fee, legal costs, a broker fee, a transfer fee, and early repayment or exit charges, though valuations and legal work are often free on deals. You can sometimes add the arrangement fee to the mortgage, but that adds interest. Weigh fees against the rate together, comparing the total cost, to find the cheapest deal.
Where to get help and next steps
Read our guides to the APRC and comparing mortgages, remortgage costs, and how mortgages work. This is general information, not mortgage or financial advice.