Mortgage discharge costs, also called exit fees, deed fees, early-repayment fees or vacating fees, are fees associated with a mortgage loan payoff or transfer. They are costs to a borrower and occur typically at the end of a mortgage term or if a loan is transferred or re-mortgaged.
Discharge fees are charged by financial institutions to discourage borrowers from paying off their loan early from refinancing. Many times customers are surprised finding this cost on their closing documents, not understanding what it is.
Not all loans have discharge costs. Some loans have clauses stating that discharge fees are waived if less than 10 years remain on the loan's term. Mortgage loan documents state the exact clauses of a borrower's loan.
Discharge costs are normally calculated one of two ways. The percentage method calculates this fee by charging a flat percentage rate multiplied by the original loan amount. The other method bases the costs by charging one to two months of interest charges to the borrower.