Home Equity Fees to Avoid

Home equity fees will be assessed when you sign your home equity loan and may be assessed down the line as you maintain the loan. Some of these fees are necessary as you are paying a lender for the services rendered. However, some of the fees are avoidable if you are willing to carry out certain tasks personally. Depending on how much time and knowledge you have at your fingertips, you may be able to reduce the cost of your loan substantially.

Necessary Fees on Signing

There are sum fees you simply cannot avoid. One of those is the cost of origination of the loan. This fee is what you are paying to the agent or broker for the time they spent with you during the application process. Origination fees tend to be very low, a few hundred dollars on average sized loans. You will also have to pay any required fees to insure the loan, which will vary according to the size of the loan and the requirements of your lender. Your primary mortgage lender may also have a requirement for home equity loan insurance if you do decide to take out an additional lien on the property. Application and processing fees for the loan are minimal but unavoidable.

Avoidable Fees on Signing

There are some steps you can take on yourself to save on fees. If you are able to provide your own credit report, background check and income verification, you will save a few hundred dollars. Borrowers who are already members of credit monitoring services may be able to have a sealed report delivered directly to the lender. You will still have to pay for the reports, but you will not be assessed for the lender's standard mark up. In order to record the debt with the registrar, you can save money if you do this step yourself. There is a standard registration fee, and the lender also assesses a fee for the time he or she spends recording the new lien. You can go to the registrar's office  yourself with the appropriate information to save money. You should note,, however, the process can be time consuming and confusing.

Avoidable Fees after Signing

Once you have signed your new loan contract, the only fee you cannot avoid is interest. If you are smart with your funds, you will not be assessed additional fees. First, making all payments on time is essential to avoiding late payment penalties. If you are going to be late on a payment, contact your lender immediately to confirm the situation and ask for an extension. You should also avoid modifying the loan in the future in order to avoid prepayment or modification fees. Of course, there are items outside of your control that may require a modification of the loan. Foreseeing these items up front is essential to avoiding fees. You can build in options in your contract for future modifications, such as credit line increases or monthly payment adjustments, if you agree to pay a higher interest rate in the beginning.

 

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