What are mortgage exit / redemption fees?

Mortgage fees can comprise a large part of the overall cost of a mortgage. Most consumers will be aware of any initial set-up fees they are required to pay – and should ideally have chosen their mortgage based on the combination of interest rate and fees in the first place – but what they may not realise is that many providers also charge exit fees. Here’s everything you need to know about mortgage redemption fees so you know exactly what to expect.

What is a mortgage exit/redemption fee?

The mortgage exit fee – which can also be called a redemption administration or discharge fee – is an administration fee that can be charged when you close your mortgage account, either through repaying it or remortgaging to another lender. You’ll need to pay this charge whether or not you’ve reached the end of your mortgage term.

In some cases, the mortgage redemption fee will be included as part of the overall mortgage account fee, which covers any costs incurred in setting up, maintaining and eventually closing the mortgage. If you’ve paid this charge, then you likely won’t be expected to pay an exit fee as well. If not, you can expect to pay it on redemption of your mortgage.

This means exit fees should be carefully considered as part of the overall mortgage package before you make a decision. Additionally, if you are looking to change providers, you’ll need to carefully consider if it will provide any financial benefit, as the savings from a lower rate can soon be eroded when faced with the combined cost of exit fees from your existing mortgage and set-up fees from your new provider.

How much are mortgage exit fees?

The exit fee generally sits between £75 and £300, though it can vary greatly between lenders. Some lenders don’t charge exit fees at all, and others may include it as part of their general administration fee. This is why it’s so important to compare mortgage deals thoroughly before you make your decision, as the fees involved can make a huge difference to your overall costs.

Is a mortgage exit fee the same as an early redemption charge?

No. An early repayment charge (ERC) is often payable when you choose to pay off your mortgage early or remortgage during an initial term, and will normally be a percentage of your mortgage loan. Exit fees are paid when you close your mortgage, regardless of when that may be. It can become understandably confusing when lenders use different terms – mortgage early exit fees, early redemption fees and mortgage closure fees are just some you may come across – so if there’s anything you’re not sure about, make sure to discuss it with your provider.

Other mortgage-related charges

It’s always worth having a hunt through your mortgage documentation before signing on the dotted line to make sure you’re aware of every single charge that you may have to pay. Not all providers will charge the same fees, but some can include:

• Product fee. Otherwise known as the arrangement or completion fee, this is a charge for setting up the mortgage product. As with all other costs involved, the amount you’ll have to pay can vary hugely – you may come across fee-free products while others can charge £2,000 or more, so make sure you know exactly what you’re expected to pay.

• Broker fee. If you’re arranging your mortgage through a broker, make sure to ask about their fees. Some don’t charge fees directly and instead earn commission from the lender, whereas others might charge a fixed or percentage fee. Find out more about using a mortgage broker.

• Booking fee. This fee can be charged when applying for a mortgage deal, whether or not you complete. It can typically cost up to £300 though may not be charged at all, and in some cases can be included in the administration fee.

• Mortgage account fee. As mentioned, the mortgage account or administration fee covers the costs involved in setting up and maintaining the mortgage, and can include the exit fee as well.

• Valuation fee. Your mortgage provider will need to value your property to ensure they can lend on it. The costs involved can vary, typically ranging from £250 to £1,500, though some providers offer free valuation as an incentive. Note that a valuation isn’t the same as an in-depth survey, which you may want to pay for as well.

• Transfer fee. The telegraphic transfer or CHAPS (Clearing House Automated Payment System) fee is a nominal cost of around £25-£50 that’s incurred when the money is transferred from the mortgage provider to the solicitor.