When buying a home, most people tend to only focus on the price of the property and what interest rate they can get on their mortgage loan. Knowing these costs is crucial. But, they aren’t the only expenses you’ll have to pay for on your home buying journey.
Some mortgage fees must be paid upfront and need careful budgeting before your home purchase. Other fees can be rolled into your loan and paid as part of your mortgage payment. Understanding mortgage fees and costs is important to ensure a successful home purchase.
Mortgage Fees and Costs
Below is a list of mortgage fees and costs you’ll have to pay before (and after) getting your hands on the keys to a new home.
This is also known as a ‘reservation fee’ or an ‘application fee’. A booking fee is charged upfront and pays for ‘booking’ the loan while your application is in progress. It is usually non-refundable even if your mortgage application falls through. Some mortgage providers will also include it as part of the arrangement fee. Others will only add it contingent on the size of the mortgage.
Also known as the ‘completion fee’ or the ‘product fee’, an arrangement fee is the fee for the mortgage product. The lender can provide you the option to pay the arrangement fee upfront or add it to your mortgage loan. However, adding the arrangement fee to your mortgage will raise the amount you owe, your interest rate, and your monthly payments.
Mortgage Broker Fee
If you choose to hire a mortgage broker, this fee is for them. This is for arranging the mortgage or giving you advice. Note that some mortgage brokers won’t charge a mortgage broker fee. They will instead take a commission from the mortgage provider.
A valuation fee pays for the lender’s assessment of the property that you want to buy. This is a basic survey done to check if the property is worth the amount you wish to borrow. Typically, they only look at the property value. They do not necessarily include future costs and potential problems. If you want, you can pay for your own property assessment to identify all maintenance and repair that might be necessary.
This is also known as a ‘mortgage completion fee’, ‘exit administration fee’, or a ‘deeds release fee’. An exit/closure fee is charged for closing your mortgage account – for instance, if you want to remortgage to another deal with the same lender. You can also be charged with an exit/closure fee when you finish paying off your mortgage.
A Reminder for Homebuyers
Please remember that mortgage fees may vary from one state to another. Some may not even apply to you. Regardless, you must understand what the fees and costs are and who is responsible for paying them.
Have more questions? Don’t hesitate to contact us! We’d be happy to help you better understand mortgage fees and costs.