Watch out for these extra mortgage costs!

Valuation fees vary enormously between lenders and can make a big dent in your finances.

If you read lovemoney.com regularly you will know that one of the things we like to emphasise is the importance of calculating the true cost, or total cost, of mortgages.

Working out what a deal will really cost you over a set period is invaluable when it comes to choosing the right mortgage. And the true cost often conflicts with the headline rate because it takes into account other charges, such as an arrangement fees for example.

At lovemoney.com we think the best way to work out true cost on a mortgage over a set period is by adding up all the monthly repayments over that period, adding any arrangement fee and subtracting any cashback -- if it's a remortgage add in any exit fees and early repayment charges.

But there are other charges imposed by the lender and they can run into hundreds of pounds. So perhaps a true 'true cost' calculation should include these too.

The buying game

This really struck home recently when I applied for my mortgage and NatWest, told me that its standard valuation fee is £275 on a property of £175,000. I could choose to upgrade to a more in depth Homebuyers Report or a full survey through the lender at a cost of £475 or £780.

Or I could get a Homebuyers Report or full survey elsewhere, but I would still have to fork out the £275 for NatWest to do the standard valuation. It still worked out cheaper for me to do this as I shopped around for a surveyor.

But it gave me the motivation to check other lenders' fees and their policies on letting you use your own surveyor to do your survey and provide the lender with a valuation.

One leading mortgage broker told me he deals with lenders that will accept a valuation done by a surveyor of the borrower's choice and simply charge an admin fee for this, rather than making the borrower fork out for a separate mortgage valuation. Though he pointed out that the surveyor would usually have to be approved by the lender in this case.

So I asked a dozen lenders to send me their fee scales and the details of what they will and won't allow -- and boy did I open a can of worms!

Lenders' responses

Some quickly got back to me, a few didn't respond, and one bizarrely refused to divulge the information -- despite the fact I pointed out they must surely tell every mortgage borrower going through an application process what the valuation fee is (if anyone knows the Co-operative Bank's valuation fee scale, please share). 

Even with the information I did receive it became quickly apparent that valuation fees are all over the place, which makes them hard to compare between lenders.

Most lenders operate a sliding scale for fees based on the property's price, but their tiers are all very different. As well as having tiers for standard valuations they may also have additional costs if you want to upgrade to a Homebuyers Report or full survey through them. In this case you don't usually have to pay for a standard valuation as well (though not all lenders arrange these upgraded surveys for you).

What happens if you want to use your own surveyor's survey, rather than one arranged by your lender?

Many will not accept your own surveyor's valuation under any circumstances - like NatWest. Others will accept this if the surveyor is one that they recognise. For instance it might be the one they use anyway, or a surveyor on their panel. If you're lucky your lender may have no restrictions on who you use to value the property.

But it gets even more complicated than that.

The mysterious admin fee

When you get a valuation you obviously pay the valuation fee but some lenders also charge an administration fee for this service. And to muddy the waters some lenders quote the valuation fee including the administration fee, while others quote them separately. Sometimes the admin fee is very small (£35 with HSBC) and other times it can be large (£100 with Halifax).

If you are looking on a lender's website at its fee scale be sure to look in the notes underneath as it may mention an additional admin fee. NatWest's fees are listed without the £75 administration fee for example.

I told you it was confusing!

Why does any of this matter?

Because these are charges that homebuyers have to pay and the rules and methods of displaying the information differ greatly from lender to lender. So it's easy to misunderstand the cost implications. Plus these costs often come to light when you are either financially or emotionally committed to the purchase.

But more importantly the actual fees differ massively between lenders -- we're talking hundreds of pounds.

So you could spend time working out the best deal for your needs, taking into account rate and arrangement fees, only to find that the steep valuation fee completely invalidates your choice.

The fees

Below are the standard valuation fees of a range of lenders. If there is a compulsory administration fee charged with the standard valuation I have included it in the cost.

HSBC is clearly the cheapest by a mile across the tiers (and that price does include the admin fee). Abbey looks cheap at the lower end of the scale but is average on higher property prices. Halifax and Lloyds TSB look pretty pricey across the board - nearly twice as expensive as HSBC in some value tiers.

Remember this is just for standard valuations; they may also have tiered charges for Homebuyers Reports and sometimes for full surveys.

On a positive note, many lenders waive standard valuation fees on remortgages and some offer first-time buyer deals with free a valuation (though you may sacrifice the rate on these deals).

Finally, remember to check ALL the costs before you commit to any mortgage.

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