When you were younger and you were thinking about your dream home, you didn’t give any thought to the mortgage that you would have to take on just auto afford it. As you grew up, however, you became more and more aware of just how important it was to be in a position to get a mortgage and to be able to afford a new home. If you had, you probably would have saved more for your fees!
And while you can’t go back and educate the childhood version of you about the process of a mortgage application or the fees involved, you can take the time now to prepare yourself and your budget for what is ahead.
Application or Establishment Fee
That’s right, you will need to pay a fee before the lender has even had a chance to look at your information. In fact, the fee that you will pay covers the cost associated with them reviewing your application.
Just as you will be performing your due diligence when looking for a property, so too will the lender need to do theirs. This includes accessing a number of services and records to obtain a clear picture of your financial situation, along with administration charges for their services along the way. As much as it isn’t pleasant to pay a fee just to apply, it’s the reality of the process. So be prepared.
This one can often seem like an unnecessary double up of work, given that you will have also obtained your own property inspection and report. However, just as you have confidence in the items you see on the Groupon Coupons page for Kohl’s, so too does a lender want to ensure the quality of the home they are lending against.
The reason for this fee is simple; The lender wants to make sure that they can sell your property and make their money back in the event that you cease to make your repayments.
Early Repayment Fee
The first thing that every homeowner wants to do as soon as they have the new hoes keys in their hand is to pay off their mortgage. It’s the shared goal of millions of homeowners just like you. However, this isn’t always as easy as it seems. And not just due to you making more money.
When a lender is deciding whether or not to loan money to you, then take into account the amount of interest they will earn throughout the lifetime of your loan. This figure can often be the decider of your mortgage application.
However, should you start to receive a pay rise or a bonus and make additional payments, then you are effectively reducing the amount of interest that you pay, in turn reducing the amount of income the lender can expect to receive.
As you can imagine, most lenders aren’t’ happy with this and will often charge a hefty fee just for making an additional repayment. Whether you plan to make additional payments or not, it’s best to ask about this fee before you sign.
There is no avoiding fees when it comes to applying for a mortgage, so don’t let this list turn you off. Instead, consider yourself forewarned and forearmed.