Beware of Home Equity Loan Fees

Are you in the process of searching for a home equity loan? Do you have big plans for the money?

While a home equity loan is useful for many reasons, ranging from debt consolidation to a home improvement project, you don’t want to go down this path until you know exactly what you’re getting into. And that means answering this question: what are the fees associated with a home equity loan?

This varies from lender to lender, but you can generally expect to pay all of the following:

1. Appraisal Fee

Since a home equity loan depends on the amount of equity that you have in your home, your lender will order a home appraisal early in the process. This is the first step in determining your loan to value (LTV) ratio.

Most lenders will only let you borrow up to 85 percent of your home’s value.

Average fee: $300 to $500

2. Credit Report Fee

It goes without saying that most lenders want to take a close look at your credit report and score before approving you for a home equity loan.

The higher your credit score, the less of a risk you are. Conversely, if you’ve had credit struggles in the past, it’s more difficult to secure a loan.

Average fee: $30 to $50

3. Loan Origination Fee

Some lenders waive this fee, while others always charge it. During your search, keep an eye out for any lenders that are willing to waive this fee, as it can save you a few dollars.

Average fee: Varies by location and lender

4. Document Preparation Fee

As you can imagine, there is quite a bit of document preparation associated with a home equity loan. Your lender is likely to pass this expense onto you.

Average fee: Varies by location and lender

5. Title Search Fee

A title search tells a lender if you’re the homeowner, if there are any liens, if there are any easements, and if you have outstanding taxes.

Average fee: $50 to $100

6. Notary Fee

A notary public may be used to verify the paperwork associated with your home equity loan.

Average fee: Up to $200 per signature

Final Thoughts

With so many benefits of a home equity loan, it’s easy to get ahead of yourself. But if you do this, you could overlook some or all of these fees.

Before you get started, request a list of fees from your lender. If there’s something that doesn’t make sense, ask for clarification before moving on.

Do you have any experience applying for a home equity loan? Did you pay some or all of these fees?

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