Are you considering taking out a mortgage? Would you like to anticipate the additional costs associated with your purchase? Then it’s time to take stock of the application fees. How much can you expect? What are they for? Can they be negotiated with the bank? SeLoger aims to answer these questions in this article.
Definition and role of application fees
The application fees for a mortgage loan are charged to the borrower by the bank and are included in the calculation of the APR (annual percentage rate). We explain.
What are the application fees?
The processing fee is a sum that covers the analysis work that the bank must carry out upon receipt of your supporting documents. This therefore involves:
analysis of your borrower profile with regard to specific criteria (your overall financial situation, your income, your debts, your possible personal contribution, etc.);
the estimation of your borrowing capacity based on the data collected;
the preparation of contractual documents for the loan.
The bank’s goal during this file review is to determine your solvency and the risk your situation represents for them. Following this analysis, they will be able to offer you a suitable financing solution, with monthly payments that match your income.
Why are the application fees applied?
The application fees cover the examination we have just mentioned: the feasibility study, the compliance of documents and the drafting of contracts.
These fees are more a contribution to management and processing costs than a real profit for the bank.
Amount and calculation of application fees
Application fees are not mandatory , but in practice, most banks charge them. The amount depends on the interest rate the institution wishes to apply on the borrowed capital.
When should the application fees be paid?
This question calls for several answers. In reality, the application fees can be paid at several times , at the choice of the banking institution.
Generally, banks choose to collect the amount when the loan is set up . In concrete terms, the collection occurs after the credit offer has been accepted and before the funds are released.
However, it also happens that borrowers must pay the application fees at the time of signing the deed of sale .
Another fairly common case: the amount of the fees is deducted from the amount released . In other words, if you borrow €230,000, but the application fee is €900, the amount you will receive in your account will be €229,100.
In all cases, the payment terms must be specified in the contract. Remember to check them!
What happens if the loan is not granted?
The bank has gathered all your documents and, after reviewing them, has decided not to grant you the loan. In this case, you do not have to pay any application fees.
Either you sign the offer but the sale does not go through . In this case, the bank can then charge you the study fees, if and only if this clause is mentioned in the contract . The amount corresponds to a maximum of 0.75% of the borrowed capital (maximum €150).
Negotiation and reduction of application fees
As we have seen, application fees are freely set by banks. It is therefore entirely within their power to reduce this amount , or even exempt borrowers from it. Especially since the application fees offered are a clever way to attract future buyers and gain market share!
Indeed, lending institutions don’t make money from these few hundred euros. They rely more on interest and borrower insurance.
Yes, it is possible to ask your bank to reduce the amount, or even eliminate it. The best renegotiation strategy is to:
With this presentation, you now know what to expect in terms of application fees for your future mortgage. One step closer to your dream home!