Mortgage Recurring vs. Non- Recurring Costs
Mortgage Recurring vs. Non-Recurring Costs
Avoid Surprises at Closing with These Key Insights
Closing costs can sometimes feel overwhelming, with numerous terms, numbers, and documents to navigate. To simplify things, it’s helpful to categorize these costs into recurring and non-recurring expenses. Understanding the difference will empower your preparation and help you avoid financial surprises.
Non-Recurring Costs
Non-recurring costs are one-time fees associated with initiating a new home loan or refinancing. These costs come from third-party services such as lenders, brokers, and insurance companies.
Common Non-Recurring Costs Include:
Underwriting Fees: Charged by the lender.
Appraisal Fees: Paid to appraisers for assessing your property’s value.
Credit Report Fees: Charged by third-party vendors to pull your credit.
Condo Certification Fees: If applicable for condo owners.
Title Insurance:
Lender’s Title Insurance: Protects the lender in case of a title claim.
Owner’s Title Insurance (Optional): Protects you, the owner, from title disputes.
Note: If you refinance, you only pay for the lender’s title insurance again.
Outside of your down payment, title insurance and escrow fees are typically the largest non-recurring costs. At ProMortgage, we pride ourselves on transparency and do not charge unnecessary “junk fees.”
Recurring Costs
Recurring costs are ongoing expenses that you’ll pay throughout the life of your loan. These include:
Insurance
Collected for one year upfront during a refinance or home purchase.
Prepaid Interest
Covers the interest from your loan’s closing date to the end of the month.
Mortgages are paid in arrears, meaning your payment at the start of a month covers the previous month’s interest.
Impound Accounts (Optional):
If you choose to roll property taxes and insurance into your monthly payment, additional charges will appear as impounds.
How Closing Dates Impact Costs
The date you close on your loan affects the amount of prepaid interest you’ll pay. For example:
If you close on June 15, you’ll pay:
15 days of interest on your old loan.
15 days of interest on your new loan.
Your first mortgage payment will be due on August 1 (covering interest for July).
If your closing occurs at the end of the month, known as the “hump,” prepaid interest calculations may shift due to the required three-day waiting period after your closing disclosure (CD). This is normal, and I’ll ensure any changes are clearly explained.
Final Thoughts
Your closing disclosure will outline all costs, including points for your chosen rate or any lender credits. My team and I are here to help you understand these fees and feel confident throughout the process.
If you have any questions about recurring or non-recurring costs, don’t hesitate to reach out. We’re committed to making your experience clear, comfortable, and stress-free!
