I recently opened a construction loan for a house with a local bank. The loan value was $185,000 and the orgin fee was 1%. I am very unhappy with the bank and want to pay off the balance. I have borrowed to date ($9,000). Can I expect any refund of the fee since I did not borrow the full amount?
Well, it won't cost you more than time to ask, so ask. There are a couple of reasons behind the origin fee. One of them is to cover the upfront costs of underwriting your loan and putting it on the bank's books. From some perspectives, that's a cost of doing business, and points, as they are called, should be dropped in favor of building costs into the rate charged. There are arguments pro and con on that issue. Most agree with those who try to match the timing on costs and revenue, which would mean that points and other front-end fees are here to stay.
Another reason for the fee is that the bank has to commit the loan funds to your construction loan. Whether the funds are actually advanced or not, they are earmarked for you, and aren't available for other borrowers, so the points in a sense are designed to compensate the bank for the costs of holding the funds for you. Those are a couple of the reasons your bank might use to resist refunding most of the $1,850 of front-end finance charge for your loan.
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Well, it won't cost you more than time to ask, so ask. There are a couple of reasons behind the origin fee. One of them is to cover the upfront costs of underwriting your loan and putting it on the bank's books. From some perspectives, that's a cost of doing business, and points, as they are called, should be dropped in favor of building costs into the rate charged. There are arguments pro and con on that issue. Most agree with those who try to match the timing on costs and revenue, which would mean that points and other front-end fees are here to stay.