When you were younger and dreaming about finding and living in your dream home, you neglected the part where you first needed to get your finances and credit in order and then pay a range of fees to obtain a mortgage just to pay for the dream home.
And with good reason; It isn’t a very romantic part of the process to daydream about.
While you can’t go back and tell your younger self to save money for all of the fees you can expect to pay, it isn’t too late to start saving now so that you are prepared for when the day comes. Below is some information on the most common fees you can expect to encounter during a mortgage application.
The Establishment Fee
Also known as an application fee, this can be a hard pill to swallow for homebuyers who are trying to keep their budget low. However, while you might not like the idea of paying a fee just to apply, there is a reason why it is charged.
To process your application, a lender needs to complete their own due diligence, which often includes a number of checks and balances to ensure they can make an informed decision on your mortgage. This requires them to obtain items like your credit report, which will incur a cost.
All of these small costs add up, and you can bet that your mortgage lender isn’t going to cover them. Instead, they wrap these up and charge in advance as an establishment fee.
Property Inspection Fee
If you have already been looking at homes then you likely know that you will need to hire a property inspector. After all, buying a house isn’t like shopping on the Groupon Coupons page for Buckle where you can trust in the seller and the quality of the products. Instead, you will need a professional to inspect the property to make sure that it’s up to scratch.
Well, just as you want to ensure you are paying the right price for a property, so too will your lender want to ensure that, should you stop making your repayments, the property can be sold to recover any owed balance.
Early Repayment Fee
While the majority of homeowners are happy to simply stick to their mortgage repayments, you may be thinking of making additional payments, such as using any bonuses from work or additional commission to help you reduce your interest payments and the life of your mortgage.
While this is an admirable task, it’s also one which your mortgage lender isn’t going to be too happy about. When they are assessing your credentials, their decision is also based on how much money they will make from your repayments. As you can imagine, if you start to make repayments and reduce the interest you pay, you also reduce their projected income.
To both plan for and dissuade against this, most mortgage lenders will charge an early repayment fee each time that you make a payment over and above your agreed schedule.
There isn’t much that you can do to avoid paying fees such as the ones mentioned above, however, you can prepare and budget for them.