Home Equity Loan Rates - The Hidden Costs!
Home equity loan rates are 'hidden' costs accrued when taking out this kind of loan. Most costs are similar to the ones you had when you bought your home. What are these costs and what are they for? We examine these rates below.
Home equity loan rates may include closing costs. These are usually fees for your attorney, title searches to verify your ownership of the home, mortgage preparation, filing, and insurance fees. How much can you expect to pay? Bank on about 2 to 5 percent of the total loan amount.
Property appraisal fees are usually included in home equity loan rates. A property appraisal will tell you roughly how much your house is worth on the property markets. Property appraisal fees may be lumped in with your closing costs so be sure to ask! Also if your home has had an appraisal within the last six months you may be exempt from this evaluation so ask your loan advisor!
Application fees will be charged to cover the cost of processing the loan. In the case where you apply for a home loan but are denied you may not get this money back. Make sure to ask whether you are due a refund if your home equity loan application is not successful. This may be one of the less 'fair' home equity loan rates.
What are 'points'? These are home equity loan rates charged as service fees. They are calculated based in the total loan amount or credit granted. They are generally expected to be paid on closing. A single 'point' is equal to 1 percent of the loan. If you took out a home equity loan of $ 50 000 a single point is equal to
$ 500.
Other home equity loan rates you may have to pay are annual maintenance fees which could amount to $ 100 and transaction fees charged when you withdraw money from your home equity loan or credit account.
Add to this a cancellation fee that may be charged if you pay off your loan early - (go figure!). Home equity loan rates can also accrue if you don't use your loan in a certain amount of time. This is called an inactivity fee.
If all this is starting to sound a little scary remember that your bank may waive home equity loan rates including closing fees - so a little enquiring may help in the long run. On the other hand avoiding closing costs isn't a reason to sign with a particular lender. The main issue is the full cost of the loan. The most important indicator of actual cost is the annual percentage rate. Make enquiries to get the most competitive rate.
