What Are Mortgage Fees?
When you take out a mortgage, you don't just pay interest. There's a whole array of fees and costs that sit alongside your actual loan. Understanding these is crucial, they can add £2,000 to £5,000 or more to your overall cost of buying.
Some fees are paid directly to the lender. Others go to third parties, surveyors, lawyers, the government. But all of them come out of your pocket before you even move into your new home.
The Arrangement Fee (or "Mortgage Fee")
This is what the lender charges you for arranging the mortgage. It's a one-off fee, typically between 0.5% and 3% of the loan amount (some lenders charge up to 5%, though this is less common).
Example of an Arrangement Fee
You borrow £200,000. The lender charges a 2% arrangement fee. That's £4,000, paid upfront (either as a lump sum or added to your mortgage).
Paying Now or Adding to the Mortgage?
Most people add the arrangement fee to their mortgage rather than paying it upfront. This spreads the cost over 36 years. The downside: you'll pay interest on it too, meaning the actual cost is higher.
If you add a £4,000 arrangement fee to a 25-year mortgage at 4.5%, you'll pay roughly £2,000 in extra interest over the life of the loan.
Lenders often quote a headline interest rate and a separate arrangement fee. The APR you see is designed to include both the interest rate and the fee, showing you the true annual cost. Always compare APRs, not headline rates.
Early Repayment Charges (ERCs)
One mortgage fee that doesn't apply upfront, but can be eye-wateringly expensive later, is the Early Repayment Charge. ERCs are what your lender charges if you repay all or part of your mortgage while you're still inside a fixed, tracker or discounted deal period.
ERCs are typically calculated as a percentage of the outstanding balance, tapering down each year. A 5-year fix might charge 5% in year 1, dropping by 1% each year to 1% in year 5. On a £200,000 mortgage, that's £10,000 in year 1 or £2,000 in year 5.
ERCs apply when you remortgage to a new lender mid-fix, sell without porting, or overpay above your allowed annual limit (usually 10% of the balance). They don't apply once your fixed period ends, on overpayments within the allowance, or when porting your mortgage to a new property. Worth understanding before you sign, our full ERC guide walks through the maths for deciding whether paying an ERC is worth it.
Valuation vs Survey: What's the Difference?
These two terms get confused. They're different things, and you'll likely pay for both.
Valuation
The valuation is carried out by a surveyor appointed by your lender (not by you). The lender needs to know that the property is worth what you're paying for it. If you're borrowing £200,000 to buy a £200,000 property, the lender wants to confirm it's actually worth £200,000. If it's only worth £180,000, the lender may not lend the full amount.
Valuations are relatively basic, usually a visual inspection taking 30 to 60 minutes. They're not detailed reports of the building's condition.
Cost: £150 to £600 depending on property value and location
Who pays: You (the borrower)
Survey
A survey is something you arrange independently to check the condition of the property. The lender doesn't require this, it's for your protection.
There are three levels of survey:
- Level 1 (Condition Report): Basic walkthrough, mainly for new-builds or properties in very good condition. £300 to £500.
- Level 2 (HomeBuyer Report): More detailed examination, suitable for most properties. £400 to £800.
- Level 3 (Full Structural Survey): Very detailed, including tests and measurements. Suitable for older properties or if concerns arise. £600 to £1,500.
Most first-time buyers opt for a Level 2 HomeBuyer Report, which costs £400 to £800. For a full breakdown of each level, how to choose, and what to do if a survey finds problems, see our house surveys guide.
Many first-time buyers skip the survey to save money. This is risky. A survey can uncover major issues, subsidence, damp, structural problems, that could cost thousands to fix. A £500 survey today can save you from a £50,000 repair bill later.
Conveyancing Fees
Conveyancing is the legal process of transferring property ownership from the seller to you. A conveyancer (solicitor or licensed conveyancer) handles this.
Their fees typically cover:
- Reviewing the legal documents
- Conducting property searches (local authority, water, environmental, etc.)
- Negotiating the contract
- Arranging the mortgage funds
- Conducting the exchange and completion
- Registering you as the new owner at the Land Registry
Typical cost: £900 to £2,000 depending on property value and complexity
This doesn't include searches or Land Registry fees, which are separate.
Additional Legal Costs Beyond Conveyancing
- Property searches: £100 to £300 (Local Authority, water, environmental, coal, contamination)
- Land Registry fee: £40 to £220 depending on property value
- Mortgage deed registration: Usually included in conveyancing, but check
Lender's Legal Fees
Your lender needs their own solicitor to check the legal aspects from their perspective. This is a separate fee on top of your own conveyancing costs. For more details on conveyancing, read our complete solicitor and conveyancing guide, or get quotes from qualified solicitors using Digital Move.
Typical cost: £100 to £250
This is separate from your own conveyancer's fees.
Stamp Duty Land Tax (SDLT)
This is a government tax on property purchases. It's calculated as a percentage of the property purchase price and varies depending on the price and your circumstances.
| Property Price | SDLT Rate (England) | Tax on £300,000 property |
|---|---|---|
| Up to £250,000 | 0% | £0 |
| £250,001 to £925,000 | 5% | £3,750 |
| £925,001 to £1.5m | 10% | N/A |
| Over £1.5m | 12% | N/A |
Key point: SDLT is paid on a sloped basis. On a £300,000 property, you pay 0% on the first £250,000, then 5% on the remaining £50,000, so £2,500.
First-time buyers in England get relief on the first £300,000 of a property worth up to £500,000 (0% SDLT on that portion). This relief no longer applies above £500,000. Scotland, Wales, and Northern Ireland have different rates.
Mortgage Insurance
In the UK you don't pay mortgage insurance for having a small deposit. Instead, a smaller deposit simply means a higher interest rate and fewer lenders to choose from, a higher loan-to-value is more risk for the lender, and that's priced into the rate rather than charged as a separate fee.
Your loan-to-value (LTV) is the percentage of the property you're borrowing, a 10% deposit means 90% LTV. The lower your LTV, the better the rates you'll be offered and the more lenders will consider you. Nudging your deposit past a threshold (say from 90% to 85% LTV) can unlock noticeably cheaper deals.
Buildings Insurance
Your lender will require buildings insurance before they complete the mortgage. This protects the building itself (not contents).
Typical annual cost: £300 to £800 depending on property value and location
This is an annual cost, not a one-off fee, but you'll need to arrange it before completion.
Other Costs to Budget For
- Moving costs: Removal company, £800 to £3,000 depending on distance
- Council tax setup: Usually free, but there may be timing issues with payment
- Utility setup: Usually free, but you'll need to set up accounts
- Furniture and decoration: Variable, properties are often in need of work
Total Cost Summary: A Realistic Example
You're buying a £300,000 property with a 10% deposit (£30,000). You're borrowing £270,000.
| Fee | Cost |
|---|---|
| Deposit | £30,000 |
| Arrangement fee (2%) | £5,400 |
| Valuation | £400 |
| Survey (HomeBuyer) | £600 |
| Conveyancing | £1,200 |
| Searches and Land Registry | £400 |
| Lender's solicitor | £150 |
| SDLT (5% on £50k above threshold) | £2,500 |
| Buildings insurance (annual, estimate) | £500 |
| TOTAL (incl. deposit, excl. moving) | £41,150 |
In total you'd need about £41,150 to complete, that's your £30,000 deposit plus roughly £11,150 in fees, tax and first-year insurance. The fees and tax alone come to around 3.7% of the purchase price on top of your deposit.
Ways to Reduce Fees
- Shop around for arrangement fees: Lenders vary significantly. Some offer fee-free deals (but usually with slightly higher interest rates)
- Increase your deposit: A bigger deposit lowers your LTV, which unlocks lower interest rates and more lender choice, often saving far more over the term than any upfront fee
- Compare solicitors: Conveyancing fees aren't fixed. Get 2 to 3 quotes
- Avoid cash back offers: Some lenders offer "£500 cash back", this is just a rebate of the fee; it doesn't reduce the true cost
- Negotiate with the seller: Sometimes sellers will contribute towards buyer fees (though this is uncommon)
Understand Your Total Costs
A mortgage adviser can break down exactly what you'll pay in fees based on your specific situation and property. Get a complete picture before you commit.
Speak to an Adviser →Key Takeaways
- Mortgage fees typically add 3 to 8% to your total purchase cost on top of the deposit
- Arrangement fees can be avoided by choosing a higher interest rate (fee-free deals)
- Always get a survey, the £500 cost is insurance against major repair bills
- SDLT is a government tax, not optional, budget for it based on property price
- In the UK you don't pay mortgage insurance for a small deposit, instead, a higher LTV means a higher interest rate and less lender choice
- Compare costs from multiple lenders and conveyancers, fees vary significantly
Important: This article is for general information and educational purposes only. It does not constitute financial or mortgage advice. Fees and costs vary between lenders, regions, and individual circumstances. This article is factually accurate as of June 2026. SDLT rates are subject to government change. Before applying for a mortgage or committing to a purchase, speak to a qualified financial or mortgage adviser about the specific costs you'll face. For personalised guidance, contact DS Financial (Appointed Representatives of Stonebridge Mortgage Solutions Ltd, FCA Firm Ref: 835094, info@dsfinancial.co.uk or 0330 22 333 10).