How can I avoid closing costs on a refinance?

closing cost

Although obtaining a good rate for your credit is the most important criterion, this should not make you forget that these are not the only costs to be expected, such as borrower insurance, but also the application fees. What do they correspond to? Can they be negotiated? All our answers!

What are the application fees for a loan?

The vast majority of banks charge for the constitution of the loan application file. Between the meeting of the various documents and their verification, this step takes time. Depending on the banks, these fees can reach between 0.4 and 1% of the total amount of the loan, representing on average a sum ranging from 500 to 1,000 €.

Facility NameApplication fees

LCL Around 700 €

Bred Around 500 €

BNP Paribas Between €400 and €1,000

Agricultural credit Around 400 €

Axa Around 800 €

Know that if your file was not difficult to set up, that it required few appointments and that you are one of your bank’s good customers, you can try to negotiate these fees. In the best case, you can see them reduced to 50%.

If you go through an online broker, he is the one who compiles the file and the closing costs must be paid to him. You will then owe nothing to the bank. In general, brokers cap the application fee at €500 because they receive a commission. Thanks to our real estate loan rate simulator, find the best rate for 2022 and benefit from our negotiated rates on application fees!

Home loan: when do you have to pay the application fees?

Most lending institutions are attached to these fees because they are a source of immediate profit on your file. They are supposed to cover the expenses relating to the time spent on the constitution and processing of the loan file. Indeed, several speakers will spend time studying your project, giving you information, and putting all their tools in place to offer you a credit offer. This will inevitably cost the lender time and money, which will remunerate these people through the application fees.

Their amount depends on the commercial policy of the lending bank. These are also variable costs. They can be billed as a flat rate, or be in the form of a percentage depending on the amount of capital remaining due. Generally, they amount to between 0.4 and 1% of the capital borrowed, representing on average a sum of between 500 and 1,200 euros.

It is during your first credit repayment withdrawal that you will often find the application fees added.

Can we negotiate the mortgage application fees?

You can find the amount of the application fees in the banks’ tariff guides. Know that you can negotiate them quite easily because they do not represent a lot of money compared to the rate of the credit, the guarantees at the cost of the insurances. You will have to make the banker understand that a greater or lesser drop in their application fees will encourage you to choose their bank.

  • The fact of dealing directly with the bank (therefore without intermediary = broker), and if your file does not offer any particular complexity, will work in your favor to claim a reduction of at least 50% or even the cancellation of these files fees.
  • Be aware that if you have had a mortgage file set up by your bank but in the end, you prefer to take out your loan with another financial institution, or an online loan, you will have to insist beforehand not to pay the application fee. Indeed, the bank would be entitled to apply these fees to you because they will reimburse the work carried out by their advisers.
  • Finally, most of the time, and thanks to strong competition from credit institutions, banks do not charge administration fees in the event of a refusal of the offer by the borrower.

Six tips to reduce the application fees of your loan offer

To lower the application fees for your home loan:

  1. Pay attention to the quality of your profile: to attract certain customers, banks are ready to do many things: If you are borrowing as a couple, you are under 45, you have a stable profession allowing you to earn more than €45,000 per year, that you have a contribution and that you have a low debt ratio, you have every chance of achieving your goals!
  2. Nothing beats a significant contribution: a substantial contribution is at least 20% of the amount of the purchase. With this, you will be able to negotiate much more easily. Why is this so important? Because the amount of the contribution shows the customer’s savings capacity. This will reassure the bank and above all limit their risks in the event of a collapse of the real estate market.
  3. Play the competition: meet several banks, and compare how much they would charge you for their application fees. Ask for written proof. If you have a good relationship with your banker, ask him to make you a proposal that is better than those obtained by his competitors. If you want to quickly get an idea of ​​the application fees charged on the market, consult our home loan rate comparator, it is an excellent basis for starting loan negotiations with your banker.
  4. Loyalty or novelty? If you are a former customer of the financial institution, ask for a gesture on behalf of your loyalty. If you are a good customer, he should reduce the application fee or possibly eliminate it. If you are a new customer, you should not hesitate to project yourself into the future with the bank by giving strong arguments such as, for example, offering to domicile your income or to take other products in exchange for a discount on application fees.
  5. HT or TTC: this is the trap for beginners: some establishments take the liberty of announcing to you administration fees excluding tax, and not including tax.
  6. Borrower insurance:  finally, even if it relieves the cost of credit a little, remember that negotiating the fees does not necessarily provide big savings. You must not forget that it is the interest rate and the amount of the borrower’s insurance which will represent a much larger sum in total.
By Master James

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