Mortgage Exit Fees Explained

What Is a Mortgage Exit Fee?

A mortgage exit fee (also known as a deeds release fee, discharge fee or account closure fee) is a small administrative charge that your lender may apply when your mortgage is paid off or transferred to a new lender. It covers the cost of closing your mortgage account and releasing the charge on your property.

This fee is separate from and much smaller than an early repayment charge. While an ERC can run into thousands of pounds, a mortgage exit fee is typically a fixed amount ranging from £50 to £300, regardless of your mortgage balance.

Not all lenders charge an exit fee, and those that do have been under increasing pressure from regulators and consumer groups to justify the charge. Some lenders have abolished exit fees altogether in recent years.

How Much Are Mortgage Exit Fees?

Mortgage exit fees in the UK typically range from £50 to £300, with most falling between £75 and £200. The fee is usually a fixed amount set out in your mortgage terms and conditions, so it doesn't vary based on your mortgage balance or how long you've had the mortgage.

While this might seem like a relatively small amount in the context of a mortgage, it's still worth factoring into your overall remortgage costs. Every pound counts when you're trying to work out whether switching deals will save you money.

The fee is usually deducted from the redemption payment when your mortgage is paid off, so you won't receive a separate bill. Your solicitor will handle this as part of the completion process.

Exit Fees vs Early Repayment Charges

It's important not to confuse a mortgage exit fee with an early repayment charge, as they are very different things. An early repayment charge is a penalty for leaving your mortgage deal before the agreed period ends and can cost thousands of pounds. A mortgage exit fee is a small administrative charge that applies whenever you close your mortgage account, regardless of timing.

You may face both charges simultaneously if you remortgage during your deal period. The ERC would apply because you're leaving the deal early, and the exit fee would apply because you're closing the account. However, if you wait until after your deal period ends, you'd only pay the exit fee (if applicable) and no ERC.

Some lenders have different names for these charges, which can cause confusion. If you're unsure what fees apply to your mortgage, request a redemption statement from your lender, which will itemise all charges.

Can You Avoid Paying an Exit Fee?

If your mortgage terms include an exit fee, you'll generally have to pay it when you close the account. It's written into your contract and lenders aren't obligated to waive it. However, there are a few situations where you might be able to avoid or reduce it.

If you're doing a product transfer (switching to a new deal with the same lender), you won't pay an exit fee because you're not closing your mortgage account. This can be one advantage of staying with your current lender rather than remortgaging to a new one.

When choosing a new mortgage, you can also look specifically for lenders that don't charge exit fees. While this shouldn't be the primary factor in your decision, it's worth considering alongside other costs when comparing deals. Over the lifetime of your mortgage, if you remortgage multiple times, these small fees can add up.