If you thought that home loans only came with “borrow a sum, pay that exact sum back,” you are highly mistaken. A loan is more or less a favour – and no one does favours for free. You’ll still have to somehow pay for them.
When shopping for home loans, you need to pay close attention to the fees you will be required to pay and how much the total amount of the loan is going to cost you.
Pro Tip: These fees can always go through changes, so you may want to contact the bank every now and then for updates.
Depending on the credit provider, the fees can also be different. Furthermore, the exact same fee may also be called different names by the provider – so you may want to check their descriptions as well. Here are some fees you are bound to come across.
As you may have guessed, this is the type of fee that you pay the moment you start up the loan. It also goes under the name of “up-front,” “application,” or “set-up” fee. In the event that you are not required to pay an establishment fee, keep in mind that this might cost you in interest or other ongoing fees.
Ongoing fees are also known as “administration” or “service” fees. These taxes will be applied to you every month during the length of your loan. Some fees will only have to be paid in certain situations.
Sometimes, people are just unable to repay a loan. The reasons for that may vary; still, they take a risk with you. To make sure that they remain protected even if you show up and tell them “sorry, can’t do,” the lender will charge an LMI fee.
This fee will usually depend on the value of your loan. Usually, the higher the equity, the less you will have to pay for the insurance.
If you break a fixed-rate home loan, you may be charged a fee – and that might be pretty high. The fee can also be variable. Usually, the more the interest rate goes down on a fixed rate home loan, the higher the fee will get. There’s no way that you can know that unless you check with the credit provider.
If you want to refinance your mortgage, you might be charged several fees by the lender. Keep in mind, however, that no lender is the same and that some of these fees may actually be negotiable.
Thought you could get rid of your home loan sooner and pay it all in full before the set time? Well, that won’t work for lenders, since they get money out of your “timely investments.”
Not all loans have exit fees, however, and some companies even banned their introduction. You may want to talk to your lender if the thought of paying everything off before due date has crossed your mind.
All these fees are different from one home loan to another, so you may want to talk to your provider and ask them to explain all the fees to you one at a time, very carefully.