Understanding the Costs of a Home Equity Loan

Are you considering obtaining a home equity loan? While home equity loans can present you with a great way to consolidate bills or to make large purchases, it is important for you to understand that there are many fees that are typically associated with obtaining a home equity loan. Therefore, it is important for you to understand the expenses associated with home equity loans so you can take out the type of loan that is best for you and your personal situation.

Typical Closing Costs

Just as is the case when taking out a mortgage loan, there are typically many closing costs associated with taking out a home equity loan as well. In fact, the closing costs of home equity loans are generally equal to 2 to 5 percent of the total amount of the loan. This is because there are several fees associated with the closing of a home equity loan. These include:

Application fees
Attorney or title agent fees
Document preparation fees
Property appraisal fees
Title search fees

If you take out a home equity line of credit rather than a traditional home equity loan, you may not have to pay all of these closing fees in order to seal the deal. Still, you will likely have to pay for the property to be appraised and there may be an annual fee for keeping the line of credit open.

Interest Fees

Any time you take out any type of loan, you will have to pay interest on the funds you have borrowed. The same is true when it comes to equity loans, whether they are the traditional home equity loan or a line of credit equity loan. If you take out a traditional home equity loan, you will likely be charged a fixed interest rate. If you take out a line of credit home equity loan, on the other hand, you will likely receive a variable interest rate instead. Either way, the interest rate will likely be lower than what you would find on a credit card. Nonetheless, you should compare offers and be aware of the costs that interest fees will add to your overall expense.

Keeping the Costs Down

While it is impossible to completely avoid paying fees when taking out a home equity loan, there a few steps you can take in order to keep your expenses minimal. One of the most important steps you can take is to shop around, as different lenders will have different terms available with their loans. You may also be able to save money by selecting a lender that will take a computerized estimate of your home's value rather than paying an actual appraiser to go to your home. While there still may be costs associated with these types of fees, they are generally far less than what you would pay for a full appraisal.

About the Author: Shannon Kietzman is a well known author and trusted resource. Shannon regularly writes for http://www.electronicappraiser.com/, which is a leading provider of home appraisals that offers a nationwide personalized instant informational report about house values. For more information, please visit www.electronicappraiser.com .

Saving for your First Home

If you have done any research on home buying at all, you have probably learned that there are many costs associated with home buying in addition to the mortgage itself. Legal fees, property taxes, insurance, home appraisal fees, and closing costs can easily add up to thousands. The best scenario for financing a home is having a considerable down payment on hand. A down payment will reduce your monthly payment as well as the interest you will pay over the course of the loan, and a down payment of at least 20% will eliminate the need for private mortgage insurance.

There is no concrete rule dictating how much you should save for your down payment, though a good rule of thumb is to save as much as possible! Here we offer some suggestions to help you save up a sizeable down payment for your home purchase:

-Plan ahead. Once you decide you want to purchase a home, do not expect anything to happen overnight. It may take a year or two, or longer, to save up the funds you need to get started. Do not let a long timeframe discourage you. Everyone has to start somewhere.

-Downsize. If you are currently renting your home, you may consider downsizing to a less expensive home or even moving in with a willing family member while you save up. This arrangement will likely force you to give up some of the amenities and convenience to which you are accustomed, but it is a short term sacrifice to reach your longer term goal. Reduce your standard of living temporarily and sock away your savings into the home fund.

-Boost your income. Some people choose to take on a second job or do contract work on the side to increase their income while saving for a home. If you have the option, consider seeking out a means of bringing in additional income, then save every extra cent. Working extra may not be the most appealing idea, but it is important to maintain focus on your goal and remind yourself that every penny is propelling you closer to it.

-Lose some amenities. Reduce your cable package or get rid of it altogether. Analyze your cellular phone plan and look for any opportunities to cut it back. Wash your car yourself instead of taking it to a car wash. Rent movies instead of going to the theater. Purchase items in bulk at discount outlets. When you eliminate a cost, deposit that amount into your home savings account.

-Stick with it. Scrutinizing every expenditure for an extended period of time can feel exhausting. To save up a down payment for a home, you may need to accustom yourself to a lower standard of living temporarily. That is not to say that you have to deprive yourself of pleasure completely, but rather seek out cost cutbacks that still allow you to enjoy life. For example, if you love going out to dinner, give yourself limits for frequency and cost.

Saving up for your first home is about consistency and self control. When you feel your inspiration to save money is waning, check out homes in your area on the internet or in person to serve as a goal reminder to help keep you on track. Home sweet home will feel even sweeter when you know you truly earned it.

About the Author: Greg Sullivan is the President of www.electronicappraiser.com, a leading provider of home appraisals offering a nationwide personalized instant home appraisal service. For more information, please visit www.electronicappraiser.com.