Has anybody ever told you that applying for a loan was easy? How about telling you that all of the fees and charges were presented to you up front in a clear and understandable way? The reason you answered ‘No’ to both of these questions is that they simply aren’t true.
This isn’t to say that the mortgage process is so tricky that it can’t be navigated, however. It just means that there are some fees and charges which you should be aware of.
Account/Loan Setup Fee
Right before you have even been approved or denied or even had a chance to start looking for your dream home you need to pay a fee. This fee comes in the form of your Account/Loan set up or establishment fee. While, on the surface, it can seem like this is just a fee for fee sake, it actually represents work which needs to be completed.
For example, there are administrative costs associated with inputting your paperwork and obtaining the correct approvals from the required governing bodies, etc which are passed directly to you in the form of this fee.
Bottom line – expect to pay this fee. If your lender tells you that they don’t charge this fee, rest assured that it’s made up by way of other fees they will charge you along the way.
Ongoing Account Fee
Now that your mortgage has been approved and your account has been set up, the lender is legally required to undertake certain actions, such as providing you with timely statements and access to interest calculations. All of these requirements place a financial burden on your mortgage lender, and similar to the fee mentioned above, this burden is passed straight on to the customer.
Finally, a fee that you will benefit from! Even though this fee is largely for the lender’s benefit, you can also benefit. For example, when you purchase high-quality watches from the Groupon Coupons page for Fossil you know that they will be well made and are worth their value. This is a reassurance that every customer’s needs before handing over their hard earned money.
The same goes for a mortgage lender. After all, they won’t want to loan you an amount which is higher than the actual value of the property. For this reason, a lender will require you to pay for a property inspection undertaken by a provider of their choosing. This inspector will assess the property and provide their report to the lender directly.
Early Repayment Fees
Now it’s time for one which really does benefit only the lender. It’s the early repayment fee. While you are researching mortgage options you are likely thinking that you will try to make early repayment to help reduce your interest. This could be when you receive bonuses from work or hen investments mature.
However, your lender has other ideas. You see, when they agree to your mortgage, they make precise calculations about how much profit they will make from the interest you will pay. This calculation is taken into account before deciding on whether to approve your mortgage.
If you make early repayments then the profit that the lender expects to receive is affected. As you can imagine, your lender isn’t going to like this idea.
To dissuade you from making early repayments and to help the lender recover any lost interest, an early repayment fee is payable for each payment you make in addition to your scheduled repayment plan.
Whether you plan to make additional payments or not, it’s important that you find out whether this fee will apply to your mortgage before you apply and sign.
While there are plenty more fees which will need to be paid throughout the mortgage process, the above fees are the ones which aren’t likely to be advertised by the lender during the process.