The mortgage application fee is an amount paid by a borrower in connection with a mortgage loan .
The processing fees , whether they relate to a mortgage or other loan, to an individual or a company, are usually deducted initially from the amount of the loan granted.
Role of these costs
These fees are presented as remunerating the work, the time, the formalities, and the competence of the advisor or financial intermediary . They are intended to cover part of the structural costs but have only an indirect link with the cost accounting data of the banks. They are one of the billing elements of customer service as part of the overall cost of credit and are based on market opportunities, including the effects of competition.
They generate an operating income insensitive to the cost of the financial resource. Banks can thus make up for a margin deficiency on the interest rate in certain cases. The work of instruction of a file is relatively independent of the amount and especially of the duration of the loan, thus of the interests which will be cashed, which justifies a separate billing with a system of minimum and maximum.
In cooperative and mutual banks, for some loans or loans, the fees are partially replaced by the subscription of shares of the bank, which allows the immediate strengthening of its capital without passing through its operating account.
In the United States
Fees are generally 1% of the amount borrowed with a minimum and a maximum depending on the institutions. Pay attention to institutions that advertise costs excluding taxes ( VAT ) in their contract.
Exceptions exist: The Zero Rate Loan is mostly exempt from filing fees as well as housing savings loans.