What does not qualify as a finance charge?

A finance charge is defined as the cost of borrowing money expressed as a dollar amount. It encompasses a variety of fees and charges that a borrower may incur when obtaining a loan. Options like discount points, appraisal fees, and legal fees categorically fall under the umbrella of finance charges because they are costs directly related to the extension of credit.

In contrast, insurance premiums are considered a part of the overall costs associated with homeownership but do not qualify as finance charges. They are not fees for borrowing money but rather payments for protecting the property. Insurance protects the borrower’s investment or collateral against certain risks, but it does not directly represent the cost of obtaining the loan itself. Therefore, when determining what constitutes a finance charge, it is crucial to recognize that it pertains specifically to costs associated with the lending process rather than ongoing costs of property ownership.