With Summer Heating Up, Wouldn’t It Be Nice to Walk Outside and Take a Dip?
Splish splash, I was taking a ….. Wait! That doesn't just have to be the song that gets stuck in your head anymore! No, you can actually take a splish splash by building that swimming pool you have always wanted. Well, before you dip into the equity in your home to fulfill your dream, make sure you understand the fees associated with a home equity loan.
Home equity loans and lines of credit are saddled with a variety of fees. You should shop online to compare before diving into one of these loans. For example, if you apply for a home equity loan, you will most likely be charged fees for closing costs, points, as well as some third party fees. These third party fees that get passed on to you may include appraisal fees, title insurance, escrow fees, homeowners insurance, flood certification fees, and recording fees. Some banks will also charge customers a prepayment penalty fee if they close out the account before a certain timeframe - typically within the first three years. Home equity lines of credit carry most of these fees as well, and they also tend to have annual fees attached to them.
Closing costs typically range from $300 to $500, and banks will oftentimes offer to absorb these fees. However, there can be a slight catch with this kind of offer, so you need to beware! Some banks will offer to pay the closing costs on a home equity loan or line of credit, but in turn, will offer customers a higher interest rate on the loan than if they had paid for the closing costs themselves. Some banks offer options in which if the customer pays the closing costs, they will receive a better interest rate.
So before jumping on an offer that claims to have lower fees, or none at all, make sure you do your research. Find out if the bank has a lower interest rate option for a fee-based loan so that you can make an informed decision and not end up with a higher interest rate, which can actually cost you much more in the long run
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