Home equity loans allow you to borrow money using the equity in your home as collateral. A home equity loan can have similar closing costs and fees as a mortgage. Closing costs include fees and other money due on the day you sign the paperwork and close the loan. It’s important to be prepared for closing costs, as they can typically total about 2% to 6% of the loan amount. Closing costs may vary from lender to lender. Certain closing costs can sometimes be added to a borrower’s loan amount, rather than paying it in cash at closing. The lender can roll it into the total amount of the, which may save you initially, but will cost you on interest.
Closing costs may include:
- Application fee – Yes, some lenders charge a fee just to apply for a home equity loan.
- Appraisal fee – A home appraisal fee is a fee charged by a licensed appraiser to review and report on the value of the property used as collateral for the loan. The fee may be in the $300 to $400 range.
- Attorney fees – Charged when an attorney is involved in preparing paperwork.
- Credit report fee – This is a fee charged by a lender to run a credit report on the borrower.
- Document preparation fee – Another fee charged by the lender to prepare documentation.
- Flood certificate – This fee determines whether the property needs flood insurance.
- Notary fee – A notary may be required to verify the identity of signers.
- Origination fee – This fee may be charged by the lender for the administration of the loan. This is a fee you can negotiate with some lenders.
- Title search fee – Most lenders charge a title search fee. This fee will uncover all liens against the property.
Shop around for the best home equity loan lender
Choice One and other local credit unions are always a great place to start when shopping for a home equity loan or any loan for that matter. Because a credit union is not for profit, they often offer more competitive rates, lower fees, and better terms than big banks. Choice One Credit Union offers great rates and no or low closing costs* for first-lien home equity loans. When shopping for the best home equity loan deal, be sure to compare several lenders. This includes getting a detailed listing of all fees involved in the closing of the loan and the amount of each fee. This is in addition to shopping rates. While some closing costs may be negotiable, others, such as an appraisal fee are typically non-negotiable. If you don’t understand the terms, fees, or condition of the loan, ask questions. Don’t be afraid to ask a lender to lower the fees or meet the terms of another lender.
Compare all the loan estimates you receive. Pay close attention to all the fees, including the application or loan processing fee, origination or underwriting fee, document preparation and recording fees, and broker fees; these may be quoted as points, origination fees, or interest rate add-on. If points and other fees are added to your loan amount, you’ll pay more to finance them. Look at the rates and all costs for an apples-to-apples comparison between lenders.
Learn more about which home equity loan is best for you, by reading our Choice Words blog.
*No Closing Cost Promotion applies to first lien only. Third-party fees will be reimbursed for the cost of originating your loan excluding any property tax or transfer fees. Fee Reimbursement–The lender may have paid some third-party fees associated with this loan. Please refer to the Closing Disclosure provided prior to loan closing for an itemization of third-party fees paid by the Borrower (if applicable), and those paid by the Lender on the Borrower’s behalf. The Borrower agrees to reimburse the Lender the actual amount of bona fide third-party fees paid on the Borrower’s behalf, as permitted by applicable law if the loan is paid off within twenty-four (24) months after consummation.