J is for Junk Fees.
If you’ve ever bought or sold a home, you’ve probably seen a laundry list of fees on your sale or mortgage papers. These fees, usually found at the bottom, are in addition to notary fees and appraisal fees, and are sometimes called “junk fees.” While a specific fee may be necessary depending on your circumstances, most often they are included to boost the profitability of the lender and are almost always redundant and disproportionately inflated.
Junk fees can include:
- Administration fee
- Application fee
- Commitment fee
- Credit report
- Document preparation fee
- Document review fee
- Mail fee
- Postage fee
- Reconveyance verification fee
- Tax service
- Underwriting fee
- Warehousing fee
- Wire transfer fee
These fees can add up pretty quickly. In some instances, you can negotiate them away – or at least reduce the total fees payable – but chances are, you’ll have to pay something.
Sadly, you get bitten twice on these fees. Once when you pay them and again when you realize that you can’t deduct them. While you can generally deduct interest payments and discount points (pre-paid interest) on a qualifying home mortgage if you itemize, you may not deduct processing fees as deductible expenses. And no cheating: you cannot simply recharacterize amounts that are ordinarily stated separately on the settlement statement, such as administrative fees and application fees, as points and take the deduction. Points or fees charged for specific services are not interest and cannot be deducted.
