Servicing Fee

DEFINITION of 'Servicing Fee'

A percentage of each mortgage payment made by a borrower to a mortgage servicer as compensation for keeping a record of payments, collecting and making escrow payments, passing principal and interest payments along to the note holder, etc. Servicing fees generally range from 0.25-0.5% of the remaining principal balance of the mortgage each month.

BREAKING DOWN 'Servicing Fee'

In addition to earning the actual servicing fee, in most cases, mortgage servicers also benefit from being able to invest and earn interest on a borrower's escrow payments as they are collected until they are paid out to taxing authorities, insurance companies, etc. Mortgage servicing rights (MSR) trade in the secondary market much like mortgage-backed securities.

RELATED TERMS
  1. Mortgage Servicing Rights - MSR

    A contractual agreement where the right, or rights, to service ...
  2. Bi-weekly Mortgage

    A mortgage payment plan where payments are made every two weeks, ...
  3. Level Payment Mortgage

    A type of mortgage that requires the same dollar payment each ...
  4. Interest Due

    The portion of a current mortgage payment that is comprised of ...
  5. Accelerated Amortization

    Extra payments made towards paying down a mortgage principal. ...
  6. Mortgage

    A debt instrument, secured by the collateral of specified real ...
Related Articles
  1. Investing

    Understanding the Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  2. Personal Finance

    Understanding The Mortgage Payment Structure

    While a mortgage’s size and term set the baseline, the interest, taxes and insurance all influence the amount of the monthly payment.
  3. Personal Finance

    Mortgage Basics: Costs

    By Lisa SmithPeople generally think about a mortgage in terms of the monthly payment. While that payment represents the amount of money needed each month to cover the debt on the property, the ...
  4. Investing

    Be Mortgage-Free Faster

    Getting rid of this debt faster has bigger benefits than you might think.
  5. Investing

    Make A Risk-Based Mortgage Decision

    Find out how to choose which mortgage style is right for you.
  6. Personal Finance

    Mortgage Basics: The Amortization Schedule

    By Lisa SmithThe amortization schedule for a residential mortgage is a table that provides a breakdown of the schedule of payments from the loan's first required payment to the loan's final payment. ...
  7. Personal Finance

    Choose Your Monthly Mortgage Payments

    Exotic mortgages allow you to decide how much to pay. Find out how much they really cost.
  8. Markets

    How Interest Rates Work On A Mortgage

    A step-by-step explanation of the interest calculations, mortgage types, and how the loan is eventually "retired" – which means paid off.
  9. Investing

    Score a Cheap Mortgage

    Hidden costs can create what looks like a good deal. Find out how to find the best mortgage possible.
  10. Personal Finance

    Top 6 Mortgage Mistakes

    These common errors could end in foreclosure.
RELATED FAQS
  1. Is there any limit on how much I can pay toward my mortgage principal every month?

    I understand that I'll be paying more interest and less principal for almost the first half of my mortgage term. I'm planning ... Read Answer >>
  2. Why does the majority of my mortgage payment start out as interest and gradually ...

    When you make a mortgage payment, the amount paid is a combination of an interest charge and principal repayment. Over the ... Read Answer >>
  3. What are the pros and cons of a simple-interest mortgage?

    Learn the difference between a simple interest mortgage and a standard mortgage, along with their relative advantages and ... Read Answer >>
  4. What are the different types of subprime mortgages?

    Clarify your understanding of subprime mortgages. Learn about the different types, how they work and when they might be beneficial. Read Answer >>
  5. I've come into a large amount of money. Should I invest it or pay off my mortgage?

    There is no simple answer to this question as it depends on a number of key factors, namely the aspects or criteria of your ... Read Answer >>
  6. Do mortgage escrow accounts earn interest?

    Paying down monthly mortgage escrow accounts? Will you receive any interest on this payment? If you are, should you put more ... Read Answer >>
Hot Definitions
  1. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  2. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  3. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  4. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  5. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  6. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
Trading Center