The mortgage opening commission is an added amount on the principal of a mortgage loan and that must be assumed by the receiving client.
Within the group of expenses related to the assumption of a credit or loan when purchasing a home, one of the main ones is the mortgage opening commission.
Although each entity works in a specific way and adapts to the conditions of the requesting client, these commissions are often in ranges between 0.5% and 1.5% on the principal of the loan.
In most economic systems, these commissions are established by the entities and their payment corresponds to the client requesting the credit or loan.
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Function of the mortgage opening commission
In the context of the banking and mortgage market, it is common for clients to have to face the payment of this commission at the beginning of the relationship with the entity.
Generally, banks that offer mortgages charge their clients these amounts with the idea of covering a series of concepts:
- Study of the client’s proposal: Conditions of the subject of the credit in terms of economic solvency and of the good to be acquired.
- Assessment of risks incurred: The mortgage market and the characteristics of the real estate market in the area are examined.
- Preparation of proposal: Each bank establishes a personalized offer to its client, taking into account the previous points. A contained element will be this opening commission.
- Other concepts: Banks often require specialized professionals and the formation of work teams for this type of work. It is also usual, in this sense, to outsource these processes.
Main features of the mortgage opening commission
Beyond the explained concept, it is necessary to highlight some characteristics related to this type of bank commission:
- Mandatory: Generally, the mortgage laws of most territories establish the opening commission as mandatory payment. Each entity will have the possibility of including this amount in the principal of the loan.
- Legality: These parameters are regulated through the mortgage laws of each country.
- Claim: Sometimes this amount can be claimed by the client in cases of abusive amounts or non-inclusion detailed in the loan offer before signing, for example.
- Proportionality: The commission is defined and agreed as a minimum percentage calculated on the principal of the loan.
- Non-periodicity: These types of commissions are only paid on a single occasion, generally, with the signing of the mortgage agreement.