In today's economic environment where millions of Americans find themselves dealing withand , it can be difficult to find valuable credit sources. Credit cards and personal loans are two traditional options, but both come with prohibitive interest rates that could offset any help they provide. Fortunately, homeowners have a low-interest alternative at their fingertips: their .
By using aor a , homeowners can finance and renovations, pay for major expenses and help — all at a much lower interest rate than some other popular credit types. To access the equity in the home, however, owners will need to complete a similar experience to their initial home purchase. This includes paying for home equity loan closing costs.
If you think you could benefit from taking out a home equity loan then start exploring local offers here now.
How much are home equity loan closing costs?
Closing costs for a home equity loan are about 2% to 5% of the total loan amount. So if you're taking a loan on your home equity for $50,000, you can expect to pay between $1,000 to $2,500. This is an approximate figure, however, and it will rise based on how much equity you ultimately withdraw as well as other factors. In general, borrowers can expect to pay for all of the following items when they close on their home equity loan:
- Origination fee: This is what you pay the lender to help cover the processing and funding portion of your home equity loan. This could be a set figure or it could be a percentage of your total home equity loan (it depends on the lender being used).
- Appraisal: Your lender will want to verify that your home is worth what they think it is, as this can affect the amount of equity you actually have to borrow. Appraisal costs vary but you can expect it to be at least a few hundred dollars (think $300 to $500).
- Credit report: Your lender will also want to make sure that you're not a credit risk, so expect to pay for a credit report for them to review before agreeing to disburse the funds (each credit report cost is different but can range from $10 to $100 each, approximately).
- Document fees: This will range based on how many documents you need and how many copies of those are required, but it can range from less than $100 to slightly more depending on what the lender wants.
- Title check: Before giving the homeowner access to the home equity the lender will want to do a title check to make sure there are no liens or issues with the title to the home as it currently exists (this can be a few hundred dollars, too, depending on who does the checking).
Closing costs on a home equity loan could conceivably include other items not on the above list. Some borrowers may pay "points" to secure a lower interest rate. There are also may be items that some lenders want to see that other lenders are comfortable skipping. That's why it pays to do your research to find the best and most cost-effective home equity loan lender for you.
To minimize the out-of-pocket expenses you'll have to pay to secure a home equity loan it makes sense to make sure you've shopped around first so you know what else is out there. It's possible that you can negotiate better loan terms with your current lender by pointing out the other options on the market.before applying. This will help improve your chances of getting a low interest rate. You shouldn't automatically proceed with your current lender, either, as other banks and institutions may offer you better rates and terms. Even if you do stay with your current bank,
The bottom line
Home equity loan costs will generally fall in the 2% to 5% range, depending on the above factors. But those costs could be a small price to pay to get low interest credit otherwise unavailable for most borrowers. Because of the interest rates available onand , many homeowners may want to pursue them now to help make ends meet and get their credit back on track.
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