Mortgage Banking Fees
These fall into 2 main categories, arrangement fees and exit fees or mortgage early repayment charges.
Mortgage Arrangement Fees
Most lenders including banks will now charge a mortgage arrangement fee, particularly if you are looking for a fixed or discounted mortgage. These mortgage aarrangement fees can vary from a few hundred pounds up to a full 1% of the mortgage amount (occasionally even more). Some lenders will ask you to pay this fee up front when you submit the application, others will add the fee to the loan. Don't forget to take the fee into account when assessing the attractiveness of the deal. many mortgage lenders will not refund Mortgage Arrangement Fees either in the event of you withdrawing, or them declining your application.
Mortgage Indemnity Premiums
THese protect the lender if you are unable to pay the mortgage. The lender / bank will use these mortgage indemnity premiums to purchase insurance that covers them in the event that they have to repossess the property and sell it.
Early Repayment charges
This takes into account the fact that the lender is getting its money in one go, earlier than it would have done if the loan had continued for the full fixed rate period. Some lenders then go on to discount that figure to give a net present value. To calculate the charge, the interest rate differential is then multiplied by the amount being repaid early and the unexpired term of the original fixed rate period. The movement is measured to some current rate typically either the current fixed rate at which the lender says it will lend money to new borrowers or the current fixed rate it says it can get by reinvesting the money on the money market.