It's time to ditch mortgage fees!

Getting a great mortgage doesn't need to cost you a fortune.

Buying a house is an expensive process at the best of times. There’s the monthly mortgage payment to consider, estate agent fees, legal fees, the costs of surveys. And that’s before you even consider the costs of refurbishing the property, and getting it to feel like home.

On top of all that, you have the most irritating cost of all – the mortgage fee.

Forking out

Mortgage fees have all sorts of different names, from application fees to product fees to completion fees. They are all essentially the same thing – the money you have to hand over just to get your hands on the mortgage in the first place.

And they are hardly insubstantial. According to Moneyfacts, the current average mortgage fee is a whopping £957. So on top of everything else, you need to find an additional thousand pounds just to get hold of a decent mortgage.

I have some sympathy with those who argue that there’s no need for a mortgage fee in the first place. After all, the lenders make money from us by charging interest on the loan. There’s no need for an additional fee on top.

However, thankfully there are fee-free or low fee mortgage options out there. And thanks to recent changes, they are looking more competitive than ever.

Halving fees

Last week Nationwide Building Society announced it would be cutting its product fees by £500, effectively a reduction of 50%.

All products that would ordinarily carry a £999 fee will instead set you back £499. That’s still more than just a bit of loose change, but it’s pretty attractive compared to the rest of the market.

Nationwide has followed in the footsteps of Clydesdale and Yorkshire Banks, who have halved arrangement fees for any borrowers taking out a new mortgage with, or switching to, the banks before 2 July.

As with the Nationwide deal, this means you’ll be shelling out £499 for the lenders’ mortgages.

A world without fees!

However, a potentially even better deal is on offer from HSBC, which has ditched fees altogether for its range of variable mortgages. Variable deals are still exceptionally attractive to many borrowers, with ultra-low interest rates and little sign that base rate is going to rise by any meaningful amount for some time to come.

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And with HSBC offering some of the best trackers in the market anyway, many of their deals are now must-haves.

For more, check out HSBC axes fees for mortgage customers.

However, if trackers aren’t your cup of tea, fear not as ING Direct have ditched all fees on their fixed range.

Making the sums add up

Of course, by going for a mortgage with a low fee, or no fee at all, you will have to make a sacrifice – namely that the interest rate you’ll pay on the mortgage will be somewhat higher than the best rates you can secure by shelling out on a fee.

Let’s compare some of the best fee-free mortgages with their fee-charging counterparts to see how much you’ll end up paying over the initial term on a 25-year, £150,000 mortgage.

Two-year fixed rate

Five-year fixed rate

Two-year tracker

As the tables above show, fee-free deals in some instances will work out cheaper, even taking into account the higher interest rate you’ll face. So before you hand over thousands of pounds to secure that market-leading deal, be sure to do some sums – it may not be such a great deal after all!

This is one area where the advice of a decent mortgage broker can prove invaluable. To pick the brains of our fee-free mortgage team, head over to our mortgage centre where you can get some independent advice over the phone, by email or even via instant messenger.

Or if you prefer to go it alone, below I’ve put together some of the very best low-fee or fee-free mortgages in the market today.

Great mortgages that won’t break the bank!

*First-time buyers only.

More: You’re destroying the value of your home! | Seven reasons mortgage lenders turn you down

Use lovemoney.com's innovative new mortgage tool now to find the best mortgage for you online.

At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call freephone 0800 804 8045 or email mortgages@lovemoney.com for more help.

This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article.

Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.