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.