What Are Mortgage Servicing Fees And How Can You Avoid Them?

Feb 29, 2024

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It would be nice to think that after closing day and finalizing your mortgage terms, you won’t ever pay more than the regular monthly loan amount. But unfortunately, that’s not always the case. Loan servicers, or the entities who issue mortgage coupons and process your payments, can charge fees that go beyond your standard mortgage payment. If you understand these charges, you’re halfway to avoiding them.

In this informational guide, let’s take a look at the different mortgage servicing fees you could be charged – and how to avoid having to pay them.

What Are Mortgage Loan Servicing Fees?

Loan servicers charge mortgage servicing fees to process your loan or mortgage paperwork. In addition, they’ll charge you for any services not considered routine, or as a penalty for late payments.

After your loan is closed, mortgage loans move into the servicing phase during which your monthly payment is collected until the loan is paid off. It’s the responsibility of the servicer to forward principal and interest payments to the investor in the loan, usually someone in the bond market.

A portion of your mortgage payment, generally around 0.25%, is withheld from your monthly mortgage payment by the mortgage servicing company that processes your payments and statements. Because it’s just a portion of the payment held back from the mortgage investor, you don’t pay any additional fees.

However, beyond the basic services covered by the servicer’s contract with the mortgage owner, servicers can charge some fees directly to borrowers.

Being aware of the different home loan servicing fees and knowing how to avoid them can help you choose the right mortgage for your needs.

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