Early repayment charge – redemption penalty or tie-in – The lender may incur many forms of up-front costs (for example property valuation costs, if not charged explicitly; or by offering a lower interest rate in the first few years of the mortgage; or – not least – remuneration of intermediaries or sales teams). It would seek to recoup these costs by charging higher interest rates over the remainder of the mortgage term. Therefore, they typically impose a penalty if the borrower repays the loan earlier than planned in order to ensure that at least some of these costs are recouped. 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 that time. Subsequently, certain lenders have moved away from charging an explicit HLC, in favor of charging an increased interest rate on higher LTV mortgages.