A number of different fees apply to obtaining and paying off a home or business mortgage. Understanding these fees helps you avoid excessive or unjustified expenses. The majority of these costs occur when a mortgage is originated, but others may have to be paid later on.

A wide variety of fees are required at mortgage closings or settlements. According to federalreserve.gov, these may include expenses for private mortgage insurance (PMI), origination/processing, appraisal of the property, applying for the loan, determining if the home or business is in a flood zone, conducting a land survey, and/or transferring a mortgage from one owner to another. These costs are referred to using various other names at times. Understanding the lender’sdirect expense associated with them is possible in some cases, but not most. Many of these fees range from $50 to $1000, but can be higher depending upon the loan principal. Some lending institutions merge most of their fees into one. The Housing and Urban Development (HUD) website indicates that lenders must supply a detailed fee estimate prior to the closing, but the real expense may vary.

Additional fees can apply while mortgages are being repaid, but it is often possible to avoid them. A late fee will be charged if a monthly payment is not made on time. According to helpwithmybank.gov, lenders can still demand a late fee if the payment was postmarked before the due date but arrived too late. However, some more understanding banks provide a “grace period” before charging this kind of fee. Prepayment penalties are a type of large fee required when some kinds of mortgages are paid off earlier than expected, either because the home was resold or the owner made extra payments. If there is any likelihood that the home will be sold or funds will become available to repay the mortgage early, it is best to avoid mortgages with such penalties in their terms. Some borrowers also have to pay for private mortgage insurance on a monthly basis, in addition to the interest and principal.

Understanding the normal range for each type of fee before reviewing the closing costs estimate is useful in identifying unreasonably high fees. These fees usually cannot be evaded, but vary depending upon the mortgage principal and lender. Becoming aware of any prepayment penalty in the terms and avoiding late mortgage payments will usually prevent the two above mentioned post-closing fees from being charged.