What Mortgage Fees You Need to Budget when Taking a Loan?

You will need to budget various mortgage fees when applying for a loan because these can be substantial. You can find the details of these fees in lender's brochures or on their websites.

Some of the specific fees that you will need to check are:

Loan Application Fee

This mortgage fees is normally a percentage of the loan value or a flat amount. The application fee charges range between $250 and $500. Some lenders will waive off this fee as an incentive for you to apply for a loan It is a negotiable fees. You must as a habit request for waiver of this fee and most lenders will normally oblige.

Some lenders will charge a higher loan application fees if you're taking the mortgage for an investment property or buying the property through a family trust or company. In such cases a fee of up to one percent of the loan value is typical.

Low Equity Premium

Most banks will charge a 'mortgage indemnity insurance' or a 'low equity premium' if your loan to equity ratio is over 80%. The lenders charge this mortgage fees because their risk on such loans is much higher and they insure their risk by charging you an additional amount. This insurance protects them against any loss they may face if you are unable to repay the loan because of any unforeseeable problem.

The Low Equity Premium fee is calculated on a sliding scale. If your loan to equity ratio is 82 percent the fee may be around 0.2 percent of the loan value or $200 on a loan of $100,000. This can go up to go up on a sliding scale to 1.5 or even 2.0 percent if the borrowing goes up to 95 percent of the property value. This will be around $2000 on a loan of $100,000. This amount can be paid by cash or you can have it added to the loan amount.

Valuation Charges

Many banks and lenders will ask for a registered valuation if the property values are declining or if your loan to equity ratio exceeds 80% of the property's value. When the property values are on the increase the banks will accept a government valuation or waive of the requirement of registered valuation.

A valuation of a residential property will typically cost $300 to $500. In case of commercial properties the costs can run into couple of thousands of dollars. You must get a rough estimate of the cost by speaking with couple of property valuers in your area.

Pre-payment of Fixed Loan Fees

Lenders will normally not charge you a fee if you will make a small increase in fixed loan repayments. But if you will apply to make payments in excess of 5% or higher amounts the banks will charge a penalty interest fee or an administration fee .

This penalty interest fee is normally based on the amount of money you wish to repay and for the time duration the loan has still to run. The lender will normally waive off the fee if the interest rates have increased since the time you fixed the loan. Fixed administration charges may still apply. If the interest rates have fallen the lender will cover their loss by charging you a fee in case they are unable to re-lend the money or give the money to a new borrower at a lower rate than what you were paying.

Switching Fees

A switching fee is charged if you stay with the same lender but change some aspect of your loan. For example you change from a fixed rate to a floating rate or vice versa. This fee can be a considerable amount if the interest rates have changed substantially. You must try to negotiate this with your lender.

Loan Top Up Fees

This mortgage fees is charged by the lenders for the additional work involved when you borrow an extra amount of money on the increased equity of your property. This fee is negotiable and you must talk to your lender before applying for the 'Top Up Loan'.

Banking Fees

Bank service charges apply to loans such as 'Credit Revolving Facility'. These can be a flat monthly fee of $10 or $15 or a small transaction fees is charged in addition to the interest rate when you draw money against this facility. This mortgage fees like others is negotiable.

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