The home equity line of credit also called the HELOC loan. When shopping for a HELOC loans, borrowers should be aware of the fees that are associated with these types of loans. Borrowers should also keep in mind that home equity loans are different from the standard mortgage home loans. Simply put, the borrower is applying for a line of credit instead of a mortgage loan. The interest rates on HELOC loans are almost always variable. Here is a closer look at some of the home equity fees that lenders charge borrowers.
First, lenders charge borrowers annual maintenance fees. The lenders have to find a way to make money. It might cost $15.00 to process all the paperwork for a loan. However, the lenders will pass those fees over to the borrowers and charge around $25.00 $75.00 per year. The annual maintenance fees can also be a one time application fee. If an attorney is needed, borrowers may have to pay attorneys fees and closing costs. Mortgage companies and banks have applied to credit insurance when it is not required in the contract.
Next, banks charge borrowers appraisal fees. In most cases, borrowers have to get a home appraisal so that the lender will know the market value of the home. For example, if a borrower’s home is valued at $100,000, the bank may only approve a home equity line of credit for $70,000. Banks may also charge the borrower at credit report fee. It is not uncommon for financial institutions to charge fees for inspecting the property and for checking the home’s title. Loan flipping is very common. Once the homeowner obtains the home equity loan, the financial institution forces the borrower to “repeatedly refinance the loan.” This type of loan forces the borrower to pay additional fees every time the loan is refinanced.
Then, financial institutions charge borrowers non-usage fees or cancellation fees. If the homeowner decides not to use all the funds, then the bank may be able to charge fees for not using the funds. On the other hand, mortgage companies and banks have cancellation clauses in their contracts that allow them to charge cancellation fees. Homeowners have to be careful because their home is being used as collateral and the lender can force the borrower to sell the home if a default occurs. Please keep in mind that in most cases the lender will lend the borrower the difference between the fair market value and what is owed on the property. Fnancial institutions have different loan guidelines and the borrower have to do research to get the best results.
Finally, there are so many fees associated with the home equity line of credit that the most experienced mortgage professionals do not always understand how they work. Borrowers should shop around before obtaining a HELOC loan. Always remember that most of the fees will be based on the market value of the home, the person’s credit history and the applicant’s income. The borrower should do everything possible to avoid becoming a slave to the lender.