Costs Associated with a Mortgage

To help you budget for the costs of purchasing or remortgaging a property, you will need to be aware of the following associated charges.

Higher Lending Charge (known as Mortgage Indemnity)

Mortgage Indemnity is insurance that the Society may take out for its protection in case, at some future stage, you fall significantly behind with your mortgage payments and the Society has to repossess your property and sell it.

If the property is sold for less than the amount of your outstanding mortgage, the Society can claim on the mortgage indemnity to recover some (or all) of its loss. The basic security for the mortgage is your property. The mortgage indemnity, therefore, acts as a form of additional security for the Society. It is not, however, additional security for you.

The Society is normally prepared to lend 80% of the value of a property or its purchase price (whichever is the lower). If you need to borrow more than this, your mortgage will be classed as high loan-to-value and a higher lending charge could be applied. Payment of this charge therefore enables you to borrow more than the Society would normally be willing to lend on the security of the property alone.

In most cases, the mortgage indemnity will cover the Society only for part of any loss it incurs. We may use this charge to purchase mortgage indemnity insurance from an insurance company. We may also choose not to purchase indemnity insurance from an insurance company, preferring to use the charge to make other arrangements to cover the risk. The charge is not, therefore, the cost of mortgage indemnity insurance. It is just the cost to you of taking out a high loan-to-value mortgage.

In the event that an insurance company pays a mortgage indemnity claim, it gains the right of subrogation. Subrogation means that the insurer can reclaim from you any money it has paid to the Society under a mortgage indemnity claim. Insurers always have the right to recover money they pay out under a claim where the loss has been caused by a ‘third party’. In the case of mortgage indemnity, you, as the borrower, are the ‘third party’ whose default led to the Society making the claim.

Subject to the terms and conditions of the mortgage product, the fee may be paid by the Society or may have to be paid by the borrower.

Application Fee

An application fee may be payable dependant on the mortgage product, which is non refundable. This charge, as shown in the Tariff of Mortgage Charges, is to help cover the assessment and processing of your application.

Valuation Fee

When you take out a mortgage, you will have to pay a valuation fee, subject to the mortgage product chosen. The valuation fees quoted in our Tariff of Mortgage Charges covers the Society’s standard report only. You will not receive a copy of the valuation report.

Product Fee

Some mortgage products also have a product fee which is payable upon application. Most product fees, depending on the mortgage product can be added to the mortgage account on completion, if required. Please note that by adding the product fee you will also pay interest over the mortgage term on the fee.

Legal Fees

You will also incur solicitor’s fees and other costs relating to the transaction. Normally, your own solicitor will act for the Society and these costs will be included in their charges. Your solicitor will advise you of the actual amount.

If you are buying and/or selling your property there will be other fees payable such as Stamp Duty Land Tax, search fees and Land Registry fees. Again, your solicitor will advise you of the costs involved.

Please note that for some of our mortgage products, you will not have to pay the usual legal fees in securing your new mortgage if the Society’s appointed solicitors are used. Our solicitors act for the Society only to ensure we have good legal claim over your property.(You will have to pay for any additional legal work that the solicitors do which is beyond the usual scope of a simple remortgage e.g. change of your name, transfers of equity, deeds of postponement, merger of freehold and leasehold, remedy of any title defect).

Early Repayment Charge

Subject to the specific terms of the mortgage product chosen, an early repayment charge may be payable if you repay the loan within a specified period. Where early repayment charges apply, they will be detailed in the mortgage offer.

Mortgage Exit Fees

These are payable either at the end of the mortgage term, or before the end of your mortgage term if you transfer the loan to another lender or another property (known as ‘redemption’). Details of the current charges can be found in our Tariff of Mortgage Charges. You may be charged a separate fee by your solicitor or licensed conveyancer for their work relating to redemption of the mortgage.

Other Costs

If you are moving house you also need to remember to budget for the following:

● Estate agents fees
● Property survey
● Stamp Duty Land Tax
● Removal cost
● Essential property repairs
● Redecoration and furnishing costs


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