Search thousands of topics on CostHelper.com

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


7 Fireplace and Wood Stove Safety Steps To Do This Week
Gathering around a wood stove or fireplace on a cold winter night can be wonderful experience, but it's crucial to not take basic safety for granted. || Posted November 12 2013


10 Quick and Inexpensive Home Makeover Projects To Do Before Holiday Guests Arrive
Having friends and family gather for the holidays is traditionally considered a heartwarming idea -- but the mere thought of it can also be heart-stopping if they're planning on staying at your place, and you realize your home is looking less than it. || Posted November 18 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
Locksmith
Paid: 95.00
I left my keys inside... [more]
-Pepi44
Locksmith Cost
Commercial and residential power washing and window cleaning
Paid: 350.00
This company is truly amazing, I've never felt so satisfied after seeing the transformation of my home. I had green grime and algae growing rampid in the front my home. Within a few hours my home along with my deck was spotless... [more]
-Emanuel 1
Window Cleaning Cost
ER visit.
Paid: 9040.00
Thought I was having a heart attack, went to ER... [more]
-Omie
EKG Cost
Tune up
Paid: 384.00
Feel ripped off.Nearly $400 for a tune up. All that was done was a spark plug replacement and fuel induction service... [more]
-Sam Wise
Tune-up Cost
dented our friendhip
Paid: 300.00
I was asked to be MOH and other bridesmaid was out of town. She agreed to be financial co-host. Offered bride shower for 12-15 people. She said she would invite 40. My small house could barely accommodate... [more]
-70s gal
Bridal Shower Cost
Pet sat 2 dogs small poodle and medium Maltese
Paid: 140.00
Friday night to Monday AM, fed both dogs a total of 6 times, administered allergy eye drops to 1 of dogs, total of 6 times and spent the night with them 2 nights... [more]
-Pet Content While You're Away
Pet Sitting Cost