This article covers the cost of a true home equity loan. Not something from a bank where they are verifying your income and scrutinizing over your credit score. Because the cost is not insignificant, you really need to weigh the costs against the benefits if you are borrowing less than $40,000. Also it is wise make sure you are borrowing the right amount. You do not want to borrow more later and pay another set of fees.
Note all the fees can be added to the loan so that you are not paying out of pocket any money except for the appraisal and occasionally the good faith deposit, which usually can be paid by credit card.
There are numerous lenders and they have different rate and fee structures. They may charge the same fees but call them by different names. What follows has been simplified to give you a general idea of the cost. This pricing is for general cases, not extreme cases like remote locations, unusual buildings or current mortgage arrears. We will always give you a detailed account of all the fees and costs for your case before you commit.
In general the lenders we deal with at Alternative Lending.ca, have the following fee structure.
For a first mortgage generally the total fee is 2% of the loan amount.
For a second mortgage generally the total fee is 3% of the loan amount.
Because there is a minimum cost of doing business, there is a minimum total fee that is charged if the loan amount is less than $100,000. The minimum fee is $2000 for a first mortgage and $3000 for a second mortgage.
The legal costs are around $1200 – $1700. The borrower is responsible for the legal costs on both sides.
The appraisal is approximately $300 for a single family dwelling in a city setting.
So the minimum cost of getting a home equity loan is about $3500 to $5000.
Of course there are exceptions. For instance a few lenders charge 1% less in fees and some have a lower minimum fee, but often they increase the rate or have a higher renewal charge to compensate for it. Some lenders will allow you to use their lawyer to save cost. These are the details we will look into for you to see if they will benefit you.
If you have any questions or if you want to get started, please call 604-831-4437 and ask for John.
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