Home Equity Loan Fees and Fun
Written by Daphne Tai, Fiona Gu   


The largest cost associated with most home-equity loans is interest. Annual Percentage Rates (APR) are the rates quoted to you (as a borrower). APR is equal to the interest rate per period multiplied by the number of periods in a year. APR is also the rate that determines monthly payments.

Besides the monthly payments, taking out a home equity loan imposes the same fees as a mortgage. These fees include closing costs, such as attorney fees, title search, document preparation and insurance.
  • Attorney Fee: Cost of having an attorney to represent you at closing.
     
  • Title Search: An investigation into all public records and recorded documents connected to a piece of property to confirm property ownership and the condition of the title.
     
  • Document Preparation Fee: This fee is charged to cover the cost for the preparation of all required closing documentations. This would perfect the lien so that the collateral for the loan can be ensured.
     
  • Title Insurance: Insurance that protects the lender (lender's policy) or you (as the buyer and your policy) against any loss from disputes over property ownership.

Aside from the closing costs, there are also other fees. The list below highlights the additional costs.
  • Appraisal: A written justification of the purchase price for the property. This is primarily based on the analysis of comparable sales of nearby similar homes (usually the cost will run from $250 to $350).
     
  • Application Fee: The processing fee when you apply for the loan. The total cost could include the cost of appraisal and credit report.
     
  • Origination Fee: The cost to close the loan and is paid to the loan officer. This is usually 1% of the whole mortgage and is often negotiable.
     
  • Stamp Duty: A payable state government tax for property transfers. It is paid by the buyers of the property. The fee is calculated based on the property’s purchase price and it varies between different states. Note: A mortgage stamp duty is calculated on the amount of your loan.
     
  • Arrangement Fee: A fee imposed by the commercial bank for arranging complicated financing forms.
     
  • Early Pay-Off Fee: Cost incurred when you pay off a loan early.
     
  • Annual Maintenance Fee: Annual cost to access your loan account.
Please keep in mind that the fees you pay for opening an equity account are quite similar to the ones you pay when you buy a home. These fees can cost you about 2% to 5% of the loan. 

 

 
Last Updated on Wednesday, 22 December 2010 05:51