Reducing Home Equity Fees

Home equity fees can certainly add up if you are not careful. You can expect to pay some fees, however there are several charges that you should not have to pay. There are a few home equity fees that you can negotiate to reduce or eliminate. Sometimes you may be able to get a better deal with a different lender. Here are some common fees and tips on eliminating or reducing them.

Fees you might avoid or reduce

Application fee. This is a fee charged for the processing of your application. Most lenders will refund this fee if your loan is approved. Ask about your lender's policy.

Margin. The interest rate on most home equity lines of credit will have points added to it, called the margin. Your rate is likely to be above the prime rate, so compare margins between lenders to find a reasonable margin.

Appraisal costs. Some lenders will absorb the cost of getting your home appraised. Find out if you will be responsible for this expense.

Variable interest.  As mentioned above, your interest rate will equal the prime rate plus a small percentage called the margin. You can pay points upfront to reduce your base interest rate. You can also find out if there are any periodic or lifetime caps on the interest, which are limits on the amount the rate can go up over a specific time.

Unnecessary fees to avoid

Lender fees. This is an extra fee that some lenders charge at closing. Find a lender without such a charge.

Cancellation fee. You may be able to arrange for this fee to be waived so you are not penalized if you cancel your home equity line of credit. Otherwise, you can find a lender who does not levy this fee.

Annual fee. This charge can also be waived upon request, or you can find a different company to borrow from. There is no need to pay an extra fee every year just to access your equity.

Inactivity fee. You should not be forced to constantly carry a balance on your home equity line of credit or to use the line every month just to avoid this fee. Have it removed or take your business elsewhere.

Prepayment penalties. If you decide to repay the debt early, you should benefit from it and not be penalized. Do not borrow from a creditor that won't waive this fee.

Maintenance or check fees. These are charges levied when you use the account or the checks that access your line of credit. You should not have to pay extra money to use your credit.

Keep this list of fees in mind when comparing offers from various creditors. Do not allow the lender to take advantage of you by charging unnecessary fees.

 

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