How you can avoid costly Home mortgage penalties and fees

Two things to check for when evaluating your loan offer are hidden closing costs and prepayment penalties. These are often overlooked because people just don’t think about them.

In fact, after the rate and down payment, many people gloss over most of the other details. Doing this can cost you money and restrict your future options. We’ll show you how to leave your options open and spot unnecessary costs.

Closing costs

What will my closing costs be?

Don’t be surprised by your closing costs.

Closing costs are part of every loan. Some of them you simply have to pay and are standard in loan offers. Others can be added to increase your lender's profits. Your lender is required to provide you with a Good Faith Estimate (GFE) which lists all of the closing costs associated with your loan. When reviewing your GFE, look for origination fees and points.

Origination fees: These are points added to your closing costs that go directly to your lender’s profits. You can usually negotiate to have these removed.
Points: These should only be paid if you asked for them and plan to stay in your home for a while. If you plan to move or refinance soon, this is money lost so get them removed.

Closing costs can add a significant amount to your purchase price. It’s a good idea to get an estimate of what this number will look like. Plug in your loan numbers now to get an accurate account of your closing costs.

Prepayment penalties

How advantageous are extra payments?

See how much you can save by paying off your mortgage quicker.

Prepayment penalties can stop you from paying off your loan on your terms. If you get a promotion that puts more money at your disposal each month, it can be a good idea to pay down your mortgage. This builds equity quicker and lowers your total payment amount. Some lenders add prepayment penalties into your loan offer. Make sure you ask your lender about these and have them removed if possible. Extra mortgage payments can significantly reduce the amount of interest paid on your loan. See how much you can save by adding a few dollars to your monthly mortgage payments.