What Is a Servicing Fee?

A servicing fee is the percentage of each mortgage payment made by a borrower to a 澳洲幸运5官方开奖结果体彩网:mortgage servicer as compensation for keeping a record of ♉payments, collecting, and making escrow payments, passing principal and interest payments along to the note holder. Servicing fees generally range from an💯d annual rate of 0.25% to 0.50% of the outstanding mortgage balance that is paid monthly.

How a Servicing Fee Works

Loan servicing is the administration aspect of a loan from the time the proceeds are dispersed by the mortgage lender until the loan is paid off. In addition to collecting the monthly payments from the borrower, the 澳洲幸运5官方开奖结果体彩网:mortgage loan servicer performs the following duties:

• Administration of a loan includes verification of the mortgage
• Sending monthly payment statements
• Maintaining records of payments and balances
• Collecting and paying taxes and insurance (and managing escrow and impound funds)
• Remitting funds to the note holder, overnight shipping
• Following up on delinquencies

Loan servicers are compensated by collecting a small percentage of each periodic loan payment, known as a servicing fee.

In addition to earning the actual servicing fee, in most cases, mortgage servicers also benefit from being able to invest and earn interest on a borrower's escrow payments as they are collected until they are paid out to taxing authorities, insurance companies, etc. 澳洲幸运5官方开奖结果体彩网:Mortgage servicing rights (MSR) trade in the secondary market much like 澳洲幸运5官方开奖结果体彩网:mortgage-backed securities (MBS).

Example of a Servicing Fee

Let's say that the outstanding balance on a mortgage is $100,000, and the servicing fee is 0.25%. The loan servicer is entitled to retain (0.25%/12) x 100,000 = $20.83 of the next period payment before passing the remaining amount to the note holder.

Other Mortgage Loan Costs

Servicing fees are generally deducted from a mortgage automatically. However, borrowers should be aware that there are several costs to a mortgage loan besides the principal and interest payments due each ꦏmon🌌th. The servicing fee is only one of those fees.

澳洲幸运5官方开奖结果体彩网:Closing costs are due at the loan's closing, which is when the paperwork is signed and the funds are dispersed. Closing costs often cost 3%-4% of the home's price and can include a payment for property taxes and 澳洲幸运5官方开奖结果体彩网:homeowners' insurance. Other fees are charged for a title search, pulling your 澳洲幸运5官方开奖结果体彩网:credit report, and appraisal.

However, some lenders may pay these fees but embed them within the loan's interest rate or add them to the loan's principal balance, often called a 澳洲幸运5官方开奖结果体彩网:no-cost mortgage. All these factors should be taken into consideration when shopping for a mortgage or loan.

The Bottom Line

The mortgage service provider collects and processes the borrower's monthly mortgage payments. In return, the servicer charges a loan servicing fee, which can be calculated as a percentage of the monthly payment. The fee can range from 0.25% to 0.50% of the outstanding mortgage balance. However, there are several other fees charged to borrowers for a mortgage loan, including application, underwriting, title search, and appraisal fees.