Mortgage Costs – Final Payments / Exit Fees / Early Repayment Charges / Redemption Fees

Final Fees – The Sting in the Tail

Many lenders approach the end of the mortgage term believing that once the final month’s payment has been made, they won’t owe anything else.
Unfortunately, this is not true. In fact, the ramping up of so-called exit fees over the last few years has become something of a scandal, and is under investigation by the FCA (Financial Conduct Authority), the body formerly responsible for regulating finance products. Exit fees are also known as redemption fees.

Some examples of exit fees:

* Deed Release Fee
* Sealing Fee
* Final Administration Fee
* Final Redemption Fee

In addition to exit fees, there are a few other terminal fees you may have to pay, particularly if you end the mortgage before the end of its term, or during a deal period, when the interest rate is fixed or guaranteed in some way. These fees are known as early repayment fees.

Ending your mortgage during a fixed/tracker/discounted interest rate period can incur costly early repayment fees, with many lenders charging a percentage fee based on the amount outstanding on the mortgage – for example, 1% for each year still left to run, on a fixed or discounted rate deal.

If you are not confident that you will keep the mortgage for the length of such a period, it can be cheaper to opt for a higher interest rate mortgage with no tie-ins – get your advisor to do the sums and see which will be cheaper.

Some lenders apply Early Repayment Fees throughout the life of the mortgage, in an attempt to tie you to them for 25 years. These fees are known as overhanging lock in or early repayment charges. Make sure you know if these apply to your mortgage.

To find out more about early redemption penalties, read Early redemption penalties explained

and How to avoid paying an early redemption penalty.