New-Loan Fee, also referred to as a mortgage discount or point, is a fee imposed by a lender when a borrower obtains a new mortgage. It represents the discrepancy between the mortgage principal and the actual selling price of the mortgage. This fee encompasses the expenses associated with financing and is typically borne by the buyer, although in certain cases, the seller may be obligated to pay it as per legal requirements.
The new-loan fee, also called a mortgage discount, is the amount that the mortgage principal exceeds the actual selling price of the mortgage. It is a fee charged by the lender upfront at the closing of a real estate transaction to cover financing costs. For instance, if a borrower obtains a $200,000 mortgage but only receives $195,000 from the lender, the $5,000 difference represents the new-loan fee or mortgage discount. Typically, the buyer is responsible for paying this fee, although there are cases where the seller may be legally obligated to cover it, such as with a VA mortgage. The new-loan fee is sometimes known as a point, mortgage point, loan-brokerage fee, or discount fee.
A new-loan fee is a charge imposed by a lender when a borrower takes out a new loan. It is typically a percentage of the loan amount and is meant to cover administrative costs associated with processing the loan application.
Yes, new-loan fees are legal as long as they are disclosed to the borrower upfront and are not excessive or unreasonable. Lenders are required to provide clear information about all fees associated with a loan, including the new-loan fee.
The amount a lender can charge as a new-loan fee varies depending on the jurisdiction and the specific loan agreement. It is important to review the loan documents and consult with legal counsel to understand the permissible limits on new-loan fees in your area.
In some cases, borrowers may be able to negotiate or request a waiver of the new-loan fee. This depends on the lender’s policies and the borrower’s negotiating power. It is advisable to discuss this with the lender and explore any potential options.
Generally, lenders cannot increase the new-loan fee after the loan agreement is signed. The fee should be clearly stated in the loan agreement, and any changes to it would require the borrower’s consent. It is important to carefully review the loan agreement before signing to ensure all fees are accurately reflected.
In some cases, the new-loan fee may be tax-deductible. However, this depends on various factors, including the purpose of the loan and the borrower’s individual tax situation. It is recommended to consult with a tax professional to determine if the new-loan fee is eligible for deduction.
If you believe that the new-loan fee charged by the lender is excessive or unreasonable, you may have the option to dispute it. It is advisable to gather evidence, such as comparing the fee to industry standards or seeking legal advice, to support your case. You can then communicate your concerns with the lender and attempt to negotiate a resolution.
Lenders have the right to refuse a loan application if the borrower does not agree to pay the new-loan fee. However, this should be clearly communicated to the borrower upfront, and the lender should not engage in any deceptive or unfair practices.
In some cases, borrowers may have the option to include the new-loan fee in the loan amount. This means that the fee will be added to the total loan balance and repaid over the loan term. However, this may result in additional interest charges, so it is important to carefully consider the implications before making this decision.
If you cancel the loan before it is disbursed, you may be eligible for a refund of the new-loan fee. However, this depends on the lender’s policies and the specific circumstances of the cancellation. It is advisable to review the loan agreement and discuss the refund process with the lender.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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