What are costs involved in a Mortgage Loan

The costs of a mortgage loan vary from bank to bank. As such when you are choosing the right bank for you one of the issue you have to keep an eye on are these costs.

  1. Administrative expenses (cost),
    which vary from bank to bank (It can vary from 1% to 1.5% of the loan amount, Min EUR 150). For example: if you have a mortgage loan of 50,000 Eur, it would mean that you might have to pay an administrative fee of EUR 500. The administrative expenses can be paid upfront in the moment of the loan approval or can be paid during the loan disbursement (this varies from bank to bank)
  2. Notary expenses
    for the notarization of the documents, endorsement, pledge agreements. The costs vary from bank to bank, depending on the number of contracts and the agreements of the bank with the private notaries, Min. Lek 5,000.
  3. Life insurance costs:
    Prior to being approved for a mortgage loan, it is mandatory for the applicant to have in place a life insurance policy. The cost of the Life Insurance Police varies based on the loan amount and the borrower's age, meaning the higher the loan value or the older the borrower the higher the premium to be paid. Usually the premium of a life insurance police is paid annually, based on the outstanding loan amount and typically the bank chooses the insurance company. Insurance companies do not issue life insurance police for customers older than to 60-65 years.
  4. Property insurance premium:
    Typically the bank requires that the collateral be insured from earthquakes and fires. The insurance premium might be paid annually or once for all period of the loan and it depends on the value of the loan amount and/or on the value of the property (Some banks request that the entire value of the property be insured, instead of insuring just the value equal to the outstanding loan balance so the premium in this case would be higher than the one insuring only the loan value).
  5. The appraisal fee:
    The cost of the evaluation depends on the collateral to be evaluated (apartment, shop, land, villa etc) and varies from bank to bank as per the agreements between banks and the appraiser.
  6. The expenses for the registration of the property
    in the bank’s favor at the Registration Office of Immovable properties (Minimum 3,000 Lek - Maximum 10,000 Lek depending on the loan amount).
  7. Expenses for the maintenance of the bank account.
    It varies from bank to bank (from 150 Lek , 1.5 USD /EUR -500 Lek , 5 USD/EUR)
  8. The lender may charge a prepayment fee
    In the event that a borrower prepays his/her mortgage before the full term of the loan, the lender may charge a prepayment fee, generally set equal to a modest percent of the unpaid principal balance (varies from fixed penalties up to 5% of the unpaid loan amount). The decision by a lender as to whether to charge a prepayment fee is tied, in part, to the nature of the mortgage whether its interest rate is fixed for any period of time or varies over the life of the loan, and to the source of funds that are used to finance the loan. Where a lender fixes the mortgage interest rate it charges for any extended period of time and finances that loan over that period with a matched-duration fixed-rate debt instrument, an early payoff of the mortgage could leave the institution with a long-term asset (the mortgage) extinguished, while a long-term liability (the funding instrument) remains on its books. In this case, the institution may choose to charge the borrower a prepayment fee, to compensate for the loss of the flow of income.