Taking out a mortgage loan is not as simple as a monthly or biweekly payment.
There are a number of additional costs that the borrower will incur in the home buying process. Your MFAA member mortgage provider will walk you through the rates, but if you’re not sure, ask them what they are so there are no surprises after you’ve signed on the dotted line.
The following is a list of additional costs associated with obtaining a mortgage. Don’t panic, you most likely won’t have to pay them all, what and how much you pay depends on your individual circumstances.
Application/Establishment Fee: Usually a one-time fee paid to the lender upon obtaining unconditional loan approval to cover the cost of establishing the mortgage loan.
Itemization Fees: Lenders may charge a fee if you itemize a Fixed Rate Loan before the end of the fixed period. The amount charged generally depends on the amount of money still owed on the loan.
Deferred Establishment Fees or Exit Fees – These fees typically occur if you decide to refinance a loan or switch to another loan product. The fee will depend on whether you are transferring your loan from one lender to another, or to a new product from the same lender.
Legal fees and disbursements: The borrower’s attorney collects these fees from the borrower to finalize the mortgage contract. They must verify that the seller has the right to sell the property and, if so, change ownership of the property to the name of the borrower.
Lender’s Mortgage Insurance (LMI): If a borrower does not have a 20% deposit on the property, the lender will generally require LMI. This is a one-time premium paid at loan settlement to protect the lender (not the borrower) in the event of a loan default.
Monthly Account Management/Service Fees: These are charged monthly and are usually included with your payment, to cover mortgage servicing and administration costs.
Mortgage Registration Fee – This is a flat fee paid to the state government title office when the property is sold and is paid by the party who purchased the property.
Property Appraisal: Lending institutions will have their accredited property appraisers perform an appraisal of the property they are lending money for; this cost is usually passed on to the borrower.
Stamp Duty: Every homebuyer must pay their state government stamp duty on the purchase value of the property. This is charged on a sliding scale based on the value of the property. Stamp duty amounts and calculators can be found on the State Government Revenue Office websites.
Transaction Fees – Usually associated with mortgage accounts, examples are lines of credit and clearing accounts. A fee is charged when you withdraw money from the account; however, most lenders offer several free transactions per month.
