Search thousands of topics on CostHelper

BROWSE ALL TOPICS >> babies & children  cars  consumer electronics health & personal care home & garden personal finance  pets  schools small business sports weddings
CostHelper > Personal Finance  > Real Estate > Home Equity Loan

Home Equity Loan Cost


How Much Does a Home Equity Loan Cost?

 
average costLine of Credit: 3.25%-6.99%high costHome Equity Loan: 5%-8.59%
post Post    

Home equity loans allow borrowers to use the equity in their home -- the home's appraised value minus the mortgage amount -- as collateral on loans using their equity.

Typical costs:

  • The interest rate on a home equity loan ranges from 5%-8.59%, or $500-$859 annually per $10,000 borrowed, depending on geographic location and the borrower's credit. For example, according to BankRate.com[1] , interest rates range from 5%-8.49% in Nevada, while they range from 6.99%-7.29% in New York.
  • The interest rate on a home equity line of credit ranges from 3.25%-6.99%, or $325-$699 annually per $10,000 borrowed, depending on the region and the borrower's creditworthiness.
  • Borrowers typically pay closing costs on home equity loans. These can amount to as much as 3% of the loan amount, or $300 per $10,000 borrowed.
Related articles: Property Appraisal, Refinancing a Mortgage, Real Estate Contract Review

What should be included:
  • Traditionally known as a second mortgage, a home equity loan is a one-time, lump-sum loan that is amortized, which means it is paid off over a defined amount of time (between five and 10 years, depending mainly on the size of the loan) with a fixed payment. Home equity loans typically have a fixed interest rate.
  • A home equity line of credit, or HELOC, is an open-ended line of credit with the home serving as collateral, making the loan less risky for the banks. This means banks can offer lower interest rates for HELOCs, but because these interest rates are variable they can go up or down.
  • Financial advisors suggest home equity loans for large, one-time bills, while HELOCs are useful for longer-term debts, such as education expenses or home renovations.
  • Home equity loans or lines of credit are not available on investment properties.
Additional costs:
  • Because the loans are based on equity, borrowers typically pay for a property appraisal to determine the home's value. Appraisals average $300-$500.
  • Borrowers who choose a home equity line of credit are often charged an annual fee of about $50, and may be charged transaction fees each time they borrow money from the credit line.
  • Many banks charge an early payoff penalty that typically amounts to 2%-3% of the loan. BankRate.com offers tips on how to avoid this penalty[2] .
Discounts:
  • As with a mortgage, the amount paid in interest to home equity loans is tax deductible[3] .
  • Some banks offer interest-rate discounts when the borrower maintains another account with that institution or when automatic payment is set up. For example, Bank of America offers a 0.25% discount for each scenario. On a HELOC, Bank of America offers another 0.25% discount for loans of $25,000 or more.
Shopping for a home equity loan:
  • The Federal Trade Commission offers a list of common pitfalls[4] of home equity loans and how to avoid them. The commission offers another list of considerations for a home equity line of credit[5] , including advice on what to do if the bank reduces the credit line.
post Post    
CostHelper News


10 Reasons to Shop Small Business Saturday on Nov. 28
After the retail insanity of Black Friday, consider checking out locally-owned companies on Saturday, Nov. 28. || Posted October 25 2020


10 Key Ways to Prepare for Extreme Snow
Forecasters are predicting a true nor'easter will hit the eastern and central states with rain, thunderstorms, ice, snow and high winds over the Thanksgiving weekend. It's crucial to plan ahead, before bad weather hits. || Posted November 26 2013

‣ All CostHelper Blog Posts


What People Are Paying - Recent Comments


 

Comment On Your Experience With a Home Equity Loan
 
Subject:  *
Amount Spent:  *
Amount Borrowed: Interest Rate: 
Lender:   
Comments: 
Purchased:  Year: 
City:  * State:  *
 
Information about you:
Email:  * Email addresses are not displayed.
Name:  This is the name we'll display with your post.
me on this computer
*=required field.
 



External Resources:
  1.  www.bankrate.com/home-equity.aspx
  2.  www.bankrate.com/finance/mortgages/6-steps-to-a-lower-prepayment-penalty-1.aspx
  3.  www.irs.gov/publications/p936/ar02.html#en_US_2011_publink1000229890
  4.  www.consumer.ftc.gov/articles/0227-home-equity-loans-and-credit-lines
  5.  www.consumer.ftc.gov/articles/0227-home-equity-loans-and-credit-lines
More Personal Finance Topics
Check Out All Costs for Personal Finance How Much Do Tax Returns Cost? How Much Does Closing a Home Cost? How Much Does a Traffic Ticket Attorney Cost?

Search Thousands of Topics on CostHelper.com

 
Today's Featured Cost Articles

About CostHelper
CostHelper is based in Silicon Valley and provides consumers with unbiased price information about thousands of goods and services. Our writers are experienced journalists who adhere to our strict editorial ethics policy.

CostHelper Community
Toilet Flange Replacement/ Toilet Reset
Paid: 5294.00
(Break down of pricing was not initially provided and I had to call to speak with a manager to get exact pricing)... [more]
-Gray
Replacing a Toilet Cost
ER visit for ear achech
Paid: 2250.00
I was there in hospital only for 15 minutes. due to Covid Urgent care was closed near my house. Doctor came and prescribe me anti biotic ear drops and pills. Got a rude shock when they charge me with huge bill... [more]
-Deepa
Emergency Room Visit Cost
Overspent?
Paid: 312.00
$312 per pet.Exam39.25Waste disposal 2.99Heart worm 48.30Fecal 25.29DA2P 101.99Lepto 21.50Sentinel 69.34I always feels overcharged when I go here... [more]
-Rebekah
Dog Vaccination Cost
Root tips
Paid: 845.00
Speechless, total ripoff, I have been going to Dr. L. Tabor for many years, I assisted him a few years... [more]
-Terri P
Tooth Extraction Cost
Ignition coils, spark plugs & valve cover gasket
Paid: 107.00
Check engine light came on, code was P0303, third cylinder. Googled causes of code found ignition coil and spark plugs most likely. Ordered parts from Amazon and my husband and I changed them after watching some YouTube videos... [more]
-JLC
Ignition Coil Replacement Cost
A/C repair
Paid: 670.00
Decided to to replace the 35 year old aging AC system. New compressor, accumulator, orifice tube, refrigerant hoses, condenser. Flushed the evaporator. Charged with ozone friendly 12a refrigerant... [more]
-citydragon
Car Air Conditioning Cost