Closing costs not only apply to mortgage loans, but they are also quite common when it comes to borrowing against the equity in your home in the form of a home equity loan. Home equity loan closing costs can range from 2% to 5% of your loan amount, depending on your lender. Some may offer low or no closing costs. That’s why it’s so important to compare closing costs when you are shopping lenders and comparing home equity loan rates. Fees should always be disclosed by the lender upfront, so be sure to ask for a full listing of all fees. Here are examples of some of the closing costs you can expect when closing on a home equity loan.
- Application/origination fee – Some lenders may charge a standard application fee when applying for a home equity loan.
- Appraisal fee – An appraisal is an important step in the home equity loan process. It will help your lender determine the amount of equity in your home. Most lenders let you borrow about 85% of your available equity. This is another amount that may vary among lenders, with some allowing a little more.
- Credit Report fee – Lenders will always run a credit check to see your credit score and determine your creditworthiness. Many lenders charge a fee for this service. It’s always important to build and maintain an excellent credit history to receive the lowest loan rates and lower fees. Pay your bills on time and keep your credit utilization low to secure a higher credit rating.
- Title search fee – A title search is another necessary part of the home equity loan process. It proves to the lender that you are the rightful owner of the home. It also alerts a lender to any outstanding taxes or liens against or debt on the property.
- Attorney fee – If an attorney was involved in the preparation of any of the loan documents, an attorney fee will also be charged. Any professional fees, such as attorney fees will be included in closing costs.
- Notary fee – Paperwork will need to be notarized and a fee will be charged.
Reducing home equity loan closing costs
If you have a stellar credit rating, which makes you a good risk for lenders, as well as adequate equity built in your home, you may be able to negotiate your closing costs. Be proactive and ask your lender to waive or reduce your closing costs. This may save you hundreds, possibly thousands of dollars. When you’re shopping home equity lenders, we know that interest rate is an important factor. Closing costs and fees are important as well. Be sure to compare both when comparing credit unions and other lenders. Don’t assume fees are the same for every lender. A slightly lower interest rate might be offset by very high closing costs. Costs and fees may also depend on the type of home equity loan you are applying for, such as a fixed rate home equity loan or a HELOC.
Credit Unions offer competitive home equity loan rates
As we mentioned above, closing costs, fees, and interest rates can vary from lender to lender, so be sure to shop around. Guthrie Community Credit Union offers home equity loans for every need. Qualified borrowers can borrow up to 100% of your home’s value less any existing mortgage balances, based on creditworthiness. It pays to do your research and look at all your options when borrowing against the equity in your home. It’s important to note that many lenders will allow you roll your closing costs into the total balance of your home equity loan, so there is no need to pay cash out of pocket. Have questions about home equity loan closing costs? Feel free to contact a representative of Guthrie Community Credit Union. Guthrie can help you turn the equity in your home into cash for any need.