We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What Is a Finance Fee?

Malcolm Tatum
By
Updated: May 17, 2024
Views: 4,569
Share

A finance fee is a type of charge that is often associated with the process of brokering a mortgage deal between a debtor and a lender. Sometimes known as a mortgage broker fee or a financing fee, the purpose of this type of charge is to allow the broker to adequately cover the expenses that are connected with the process of brokering the loan arrangement. The exact amount of the finance fee will vary, and is usually calculated as a fixed percentage of the total face value of the loan. There is usually some leeway in determining the percentage used, with some lenders placing a maximum limit on the percentage while allowing brokers to extend fees that are under that amount in order to compete in the local market.

The calculation of a finance fee depends on a number of factors. One has to do with the limits placed by lenders on the percentage used to determine the total amount of the fee. Home loans that are underwritten by governmental agencies may place lower limits on the percentage, especially with programs that are designed to aid consumers in specific economic classes with purchasing a home. Non-governmental lenders may allow a higher percentage to be used for the calculation of the finance fee.

Along with maximum percentage limits put in place by lenders, the broker may also consider several factors when determining the percentage used for the finance fee. One key factor is the current state of the marketplace. Should the broker determine that a lower fee could help make the difference between brokering a deal and losing the opportunity to a competitor, he or she may be willing to calculate the finance fee at a lower rate. Other factors, including the level of risk associated with brokering the loan, may also play a role in determining the finance fee.

Consumers who are working with mortgage brokers can and often do attempt to negotiate the amount of the finance fee. This strategy can usually work if there is evidence that the consumer could go elsewhere and obtain a mortgage that involves tendering less in the way of origination fees and other types of costs. In order to entice the buyer to go with the loan offered through the broker, a reduction in the fee may be enough to secure the business and allow the broker to realize at least some compensation for his or her efforts.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Editors' Picks

Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
Share
https://www.wisegeek.net/what-is-a-finance-fee.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.