What?

 
Also known as a mortgage reservation fee or mortgage arrangement fee.

 
This is to cover the administration costs involved in setting up your mortgage.

 
They are charged by virtually all lenders and are therefore hard to avoid. While some fee-free deals do exist, the mortgage provider usually makes this up by charging a higher rate of interest so this is usually not a good option.

 
How much?

 
The cost of a set-up fee can varies between several hundred to several thousand pounds depending on the size and type of the mortgage.

 
Some lenders charge a flat fee while others charge a percentage of the loan amount. The latter option can end up being very expensive if you are borrowing a large amount so make sure you check exactly how much you are being asked to pay.

 
The current average is £800 so if you are being asked to pay much more than this you should ensure that the other benefits outweigh the additional cost.