A Short List of Different Mortgage Expenses
If you want to buy a house, then you will probably need a mortgage loan
. But before you apply, make sure to understand mortgage expenses. Knowing the cost of the loan can be very helpful also if you are applying for mortgage refinancing.
There are two major types of mortgage expenses: recurring and non-recurring. Recurring expenses are the fees you have to pay each month for the entire lifetime of your home loan. On the other hand, non-recurring mortgage expenses are the one-time costs that you have to pay when you secured the home loan.
Non-Recurring Mortgage Expenses
The origination point is one of the most common non-recurring mortgage expenses. A point represents one percent of the home loan. This point is also known as the broker fee. Another non-recurring cost is the loan discount fee. This fee would be similar to origination point. This is the premium that you have to pay if you want to lower interest rate.
You must also pay a one time fee for pulling your credit report. Almost all lenders require a tri-merge credit report from borrowers obtained from three major credit bureaus. The property appraisal must be paid also. Your lender will hire an appraiser to determine the value of the property and you have to shoulder the professional fees.
Processing fees are also included in the non-recurring mortgage expenses category. These fees will pay for the processing and documentation of the home loan. A loan processor will take care of these things and will serve as the go between with all parties concerned.
Other non-recurring expenses include the title insurance fees, document fees, underwriting fees, and escrow or attorney's fees. Title insurance technically protects the lender and ensures that you will get clean title for the property. Document fees cover the costs for printing and handling your loan documents. Underwriting and escrow charges are professional fees for those who will render services for handling your home loan.
Recurring Mortgage Expenses
Recurring mortgage expenses are costs you have to pay monthly. The property tax for example is a recurring expense. If the lender pays the property tax through an escrow, you will be required to fund the initial balance. You may also pay the property tax directly to the office of the local tax collection agency.
Hazard insurance may also be required by the lender. Again, the lender can set up an escrow to pay the insurance and you have to fund this account. An upfront payment worth a few months of premium may be collected by the lender for fire and hazard insurance. If there is no escrow account, you will be required to maintain regular premium payments for hazard insurance to cover your home.
Lastly, there is the monthly mortgage payment. Usually, you have to pay the monthly interest charges and the principal of the loan unless you have an interest only mortgage. The mortgage should be paid monthly or bi-monthly.
You have to shoulder the costs of the home loan. That is why you need to know the different mortgage expenses. Look for different loan offers and choose a package that is less expensive.
A Short List of Different Mortgage Expenses
By: Rob Blake
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