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    Equity Credit Line Process
     
3   Handling closing costs
Closing cost payment options
Anticipating total costs for a home equity line of credit or loan

Closing cost payment options
Home equity loans and lines of credit often have many of the same closing costs as your original home loan. You can handle these costs three different ways:

   Put Your Equity to Work
   Line of Credit vs. Equity Loan
   Handling Closing Costs
   All About Rates
   The Approval Process
   Closing the Loan
     
  • Cover lender and third-party closing costs through a higher interest rate
  • Bring a check to closing (just like you probably did when you purchased your home)
  • Deduct the closing costs from the cash proceeds of your loan or line of credit

      Which option is best for you? That depends on your goals for your home equity loan or line of credit and the amount of cash you have available for closing costs. For a home equity loan with a fixed rate and term, all three options require you to at least pay interest on your loan from the day you close to the date your first payment is due.

Bringing a check to closing is a good strategy if you're borrowing a large sum, especially with a home equity loan. For a home equity loan with a fixed rate and term, you may even want to pay points to get as low a rate as possible — a rate you'll be happy with for years.

Covering lender and third-party closing costs through a higher interest rate is often called a "no out-of-pocket cost" or a "no-cost" loan. The "no out-of-pocket cost" or "no closing cost" strategy makes the most sense when you're borrowing a small amount and plan to pay it off fairly quickly. You don't commit any cash to getting the loan and since you're paying it back quickly, the slightly higher interest rate isn't as big of a concern as a loan you're going to have for years. And, with a Countrywide home equity line of credit, all we require is that you keep the minimum draw outstanding for six months and we'll waive the closing costs.

Including your closing costs in the loan/line amount makes sense if you'd rather not commit any cash out of pocket to your loan. Amortized over the term of your loan, the closing costs increase your new loan's monthly payment only a small amount.

What's the best way for you to handle closing costs? Ask Countrywide. We can recommend the best option for your situation.

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Anticipating loan costs
Decided a no-cost loan isn't the right option for you? Then let's look at the various fees and charges you'll most likely need to pay before or at closing. (See our Closing Cost Estimator for a quote on your loan's approximate costs.)

Lender-related costs
Third-party fees

Lender-related costs
The cost of a loan is more than your interest rate. Prior to selecting a lender for a specific loan, you should ask about their fees. At application, you'll get what's called a Good Faith Estimate of what the loan will cost. And this is just what the name says. It's an estimate. And, in "good faith," it's as accurate as possible given the information available at the start of the loan process.

 
     
Lender-Related Costs (origination points or fees)
Home Equity Line of Credit
Home Equity Loan
Loan Discount Points
Amounts paid to a lender at closing in exchange for a discount on your loan's interest rate. Each point you pay equals 1% of the loan amount, so for a $50,000 loan, one point equals $500.
N/A
Optional
Processing Fee
Fee charged by the lender to cover the cost of processing the loan.
No
Yes
Pre-Paid Interest
Pre-paid interest on your new loan for the current month. If you close on May 21st , for example, you need to pre-pay the interest from May 22nd ? 31st .
No
Yes
     

See HELOC Terms Summary for important terms on our most popular home equity lines.

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Third-party fees
Third-party fees are collected by your lender for services provided by outside parties, such as an appraiser. All lenders require these fees and many of them are regulated by various governmental organizations.
   
Third Party Fees
Home Equity Line of Credit
Home Equity Loan
Appraisal Fee
Payment for an opinion or estimate of the value of a property. A report is typically prepared by a professional appraiser to explain the determination of the fair market value. Fee is often paid at the time of loan application.
Yes
Yes
Credit Report Fee
Covers the cost of the credit report used to help determine your creditworthiness.
Yes
Yes
Closing/Escrow/Attorney Fee
Pays for the services of the closing or escrow agent, or the attorney who handles the closing of your loan.
Yes
Yes
Abstract or Title Search Fee
Pays for a written history of the title transactions involving the parcel of land where a home is located, including everything in the public record. The search checks for liens, unpaid claims, restrictions or other problems.
Yes
Yes
Title Insurance Premium
Pays for insurance that protects the lender in case of an unresolved claim affecting the marketable title to the property. Special title binders and endorsements may also be included in this charge.
Maybe
(For line amounts greater than $100,000, title insurance is required.)
Maybe
(For loan amounts greater than $100,000, title insurance is required.)
City/County/State Tax/Stamps
Some states have taxes related to the real estate transaction. These taxes range from a few dollars to 1¾ percent of the loan amount depending on the jurisdiction. Current states charging mortgage tax include Alabama, Florida, Georgia, Hawaii, Kansas, Maryland, Minnesota, New York, Oklahoma, Tennessee and Virginia.
Yes
Yes
Recording Fees
Recording fees and transfer taxes are charged by most counties and localities for recording the equity line/loan documents and any liens in the public record.
Yes
Yes

See HELOC Terms Summary for important terms on our most popular home equity lines.


  
   
   
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