DEFINITION of 'Garbage Fees'

Unnecessary fees tacked onto mortgage closing costs by lenders to pad the lender's profit. Garbage fees may have names such as "administrative fee", "application fee", appraisal review fee", "courier fee", "document preparation fee", "document review fee","loan origination fee" and "settlement fee". These charges are usually either blatantly illegitimate or are typical costs of business but either way, they are dramatically exaggerated before being passed on to the customer.

BREAKING DOWN 'Garbage Fees'

Although some people see garbage fees as a necessary evil in the financing or refinancing of a home purchase, it is often possible for borrowers to get lenders to reduce or eliminate these bogus fees by speaking up and expressing an unwillingness to pay them. The best time to do this is before signing a good faith estimate.

RELATED TERMS
  1. Junk Fees

    Nebulous charges assessed at the closing of a mortgage that go ...
  2. Brokerage Fee

    A fee charged by an agent, or agent's company to facilitate transactions ...
  3. Origination Fee

    An up-front fee charged by a lender for processing a new loan ...
  4. Fee Income

    Revenue taken in by financial institutions from account-related ...
  5. Service Charge

    A type of fee charged to cover services related to the primary ...
  6. SEC Fee

    A nominal fee that was created by the Securities Exchange Act ...
Related Articles
  1. Investing

    8 Investing Fees That You Should Never Pay

    In investment management and financial planning there are a plethora of fees that are unnecessary.
  2. Personal Finance

    Do You Know How Your Financial Advisor Is Paid?

    It is important to understand how your financial planner is compensated.
  3. Investing

    A Guide To Investor Fees

    Fees are one of the most important determinants of investment performance and something that every investor should know.
  4. Tech

    Are Financial Advisor Fees Too High?

    Fees charged by financial advisors run the gamut. Are you getting a fair deal or paying too much?
  5. Investing

    3 Investment Fees That Are Negotiable

    Investment fees are a necessary evil but that doesn't mean they have to be overly costly. There are ways to negotiate some of the expenses down.
  6. Retirement

    How a 1% Annual Fee Can Ruin Your Nest Egg

    What kind of impact does an annual 1% fee have on your portfolio? The answer may surprise you.
  7. Personal Finance

    Cut Your Bank Fees

    Find out how to get the bank to pay you for using their services, not the other way around.
  8. Personal Finance

    Mortgage Fees That Can Trash Your Refinance Deal

    Before deciding that refinancing your mortgage at a lower interest rate is a good deal, factor all the fees into your calculations.
  9. Financial Advisor

    5 Signs Fund Fees Are Hammering Your Investments

    The worst long-term killer of investment gains isn’t the market; it’s fees, especially for retirement accounts. How do you know if you're paying too much?
  10. Personal Finance

    Bank Fees Be Gone

    Not only are bank account interest rates measly, but fees can take a serious bite out your balance. Here's what to do.
RELATED FAQS
  1. What kinds of fees are involved in futures trading?

    Learn what the various costs are that are charged by brokerage firms and trading exchanges to individual futures trading ... Read Answer >>
  2. When is an underwriting fee too high on a commercial loan?

    Learn about underwriting fees and when they're too high. If the underwriting fee exceeds 2% of the total loan size, the fee ... Read Answer >>
  3. Where do I look for fees that I am charged on investments? What are those fees called?

    The fees and expenses charged for investments vary. The fees usually depend on the type of investment and the investment ... Read Answer >>
Hot Definitions
  1. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  6. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
Trading Center