Annual Facility Fee
Different loans offer different features. Australians are no longer living in their homes for 30 years even though they borrowed a 30-year mortgage. A new mortgage feature is a portable loan, which allows Australians to move and take their mortgage with them.
Some home loans include a redraw feature. To maintain the feature, the client incurs an annual facility fee. The fee covers the administrative costs involved with client redraws.
The redraw feature allows a client to send repayments larger than the monthly amount. The extra funds rest in a sub-account. If the client decides that they need the funds, they’re allowed to withdraw them. The accounting and administration that goes into redrawing the funds lead to administrative costs. Thus the annual facility fee covers those costs. The lender must ensure that the correct amount available for withdrawal is correct. Then it’s up to the lender to release those funds to the client.
A bridging loan is placed in a facility before the funds are distributed. The bridging loan is a short-term solution, but it also incurs a facility fee.
A loan is a contract between the client and the lender. Before the loan receives approval, it’s considered a facility. The facility promises to transfer the funds to the applicant when the loan receives approval. The fund transfer incurs a fee because it takes several steps to set up. Then the lender ensures that the funds reach their destination.
Annual Facility Fee Conclusion
An annual facility fee covers the cost of redrawing fees for some loans. Loans without a redraw feature incur the fee as an administrative cost. Even though loans are maintained with the help of technology, people still double-check the reports, applications, and hardware. Thus, fees cover those costs. To receive more information about loan fees, contact our Mortgage Street loan specialist team.