. In this blog, we will go over some of the costs that often get overlooked when borrowers refinance, renew, or opt into a second mortgage.\u00a0\u00a0\u00a0<\/span><\/p>\n <\/p>\n
Penalty fees\u00a0<\/b><\/p>\n
When a borrower breaks their mortgage term, lenders will charge a series of penalty fees. These fees <\/span>vary depending on the lender, mortgage terms, and whether you are switching lenders, but they can run into the thousands of dollars. These fees can include processing fees, administration fees, or anything associated with discharging the mortgage.\u00a0<\/span><\/p>\nThe prepayment penalty is generally either three months\u2019 interest or the interest rate differential. If your client is looking to refinance for rate-based savings, make sure to highlight what the interest penalty would be when breaking the mortgage.\u00a0<\/span><\/p>\nWhen switching lenders, remind clients that there is another fee to discharge the mortgage as well. While these fees also vary between province and lender, they can typically range between $200 to $350.\u00a0<\/span><\/p>\n <\/p>\n
Legal and appraisal fees\u00a0<\/b><\/p>\n
When it comes to second mortgages or refinancing, there are certain payouts that generally get forgotten. It\u2019s important to communicate these to your clients early on to avoid a shortfall at closing, which is a pain for everyone and can lead to unsuccessful transactions. For example, borrowers are required to have a lawyer review and register a new mortgage, as well as facilitate the transaction. These services can usually add about $1000 worth of legal fees to your client\u2019s final bill. The cost of property appraisal (which some lenders require to determine the LTV) is also important to factor in. These appraisals can run up to $500.\u00a0\u00a0<\/span><\/p>\n![\"Don\u2019t](\"https:\/\/canadianlending.ca\/brokers\/wp-content\/uploads\/sites\/3\/2021\/06\/2Dont-let-additional-fees-be-your-clients-downfall.jpg\")
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Lender fees\u00a0<\/b><\/p>\n
If your client\u2019s mortgage term is up for renewal, there won\u2019t be a prepayment penalty. However, some lenders charge their full lender fee again at renewal, which can be 1% to 2% of the remaining loan amount. In addition to the renewal fee, lenders may tack on other hidden fees under the guise of administration fees.\u00a0<\/span><\/p>\nThis is one reason it\u2019s important for brokers to partner with trusted, transparent lending partners. Additional costs to refinancing, second mortgages, or renewals could add up, and may even be the difference between getting a deal closed.<\/span><\/p>\nAt CMI, we do not charge the full lender fee at renewal, and pride ourselves on being upfront and transparent about all our fees. Take this opportunity to help homeowners work out how much time is left on their existing term, what they expect to pay over that time, and subtract any rate-based savings. As a mortgage broker, your clients are turning to you for advice on dealing with a tumultuous market. Helping them to understand the true cost of these mortgage solutions, and partnering with a transparent private lending partner, will not only improve your credibility as a broker, it will also keep clients loyal.<\/span><\/p>\n
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