Transactional Funding Costs: Flat Fees vs. Percentages

Transactional funding costs depend on the written quote for the deal. A proposal may use a fixed dollar charge, a percentage, a minimum fee or more than one component. Convert each proposal to dollars using the same funding amount and expected repayment time before deciding which costs less.

Ask what the percentage applies to

A percentage of the purchase advance is different from a percentage of the resale spread. Ask for the base amount, fee calculation and any minimum. Also confirm whether other charges are included, added separately, paid before closing or deducted from proceeds.

Illustrative comparison: on a $180,000 advance, a hypothetical 1% charge is $1,800. A hypothetical $2,000 flat charge is $200 higher. If the percentage quote also has a $500 administrative charge, its total becomes $2,300. These figures explain the comparison; they are not Axelrad rates or a market-rate claim.

Financing cost is only one line in the deal

The gross spread is the difference between the purchase and resale prices. It is not the amount you necessarily receive. Include settlement charges on both transactions, the funding charge, credits and any other obligations shown in the settlement figures. Ask the settlement team which items have already been included so you do not deduct them twice.

Suppose the purchase is $180,000 and the resale is $205,000. The gross spread is $25,000. If illustrative combined settlement costs are $5,500 and the funding charge is $2,300, the remainder is $17,200 before any other applicable costs or taxes. That arithmetic is a planning example, not a profit forecast.

Price the timing you actually need

A same-day repayment quote does not establish the price or availability of a longer hold. Ask what happens if the resale date changes before funding and what the agreement provides if repayment is late after the purchase closes. An extension is not something to assume because the end buyer expects to close soon.

A useful comparison has a base case and an unresolved-change column. Put the quoted amount in the base case. Put questions in the change column until the funder answers them; do not invent an extension price to make the deal pencil out.

Request a quote you can reconcile

• Proposed advance and exactly which costs it covers.
• Funding charge in dollars, calculation and minimum.
• Other charges and when each is payable.
• Repayment date and required settlement process.
• Treatment of a canceled funding request or changed resale date.

Use the net-spread calculator with your actual written figures. Then request an in-house transactional funding review with both contracts and the settlement timeline.