UK Mortgage Terminology - Fees

Fees

• Product fee - a fee payable by the borrower to obtain a (usually incentivised) product.

• Early repayment charge, redemption penalty or tie-in - With each incentive the lender may be offering a rate at less than the market cost of the borrowing. Therefore, they typically impose a penalty if the borrower repays the loan within the incentive period or a longer period (referred to as an extended tie-in). These penalties used to be called a redemption penalty or tie-in, however since the onset of Financial Services Authority regulation they are referred to as an early repayment charge.

• Valuation fee, which pays for a chartered surveyor to visit the property and ensure it is worth enough to cover the mortgage amount.

• Higher lending charge (HLC) - a fee levied by lenders in respect of mortgages exceeding a pre-defined loan-to-value (LTV) percentage threshold. Until the 1990s these were typically levied on all mortgages with an LTV percentage over 75%, but the market generally moved to a 90% threshold at this time. Subsequently certain lenders have moved away from charging an explicit HLC, in favour of charging an increased interest rate on higher LTV mortgages. It can justifiably be claimed that this is the same thing by another name.