It is noteworthy that a high percentage of home equity lines closed do so at no cost. However some equity lines do have associated closing fees and most traditional second mortgages have closing costs. The closing fees for most second mortgages are dramatically smaller than that of first mortgages. The costs of closing home equity second mortgages could include the following: Title and escrow fees, lender fees, appraisal and credit fees.
Title & Escrow Fees
Title insurance protects both the buyer and lender by insuring a clear chain of title; that the persons with the legal right to convey title to the property are the ones who have actually done so. The escrow fee is a service fee charged by the Title Company for acting as an independent third party in facilitating the transaction and insuring that all parties have performed as agreed.
For loans of $200,000 and below, title companies offer what is referred to as a "flag" policy of title insurance which generally costs about $125. This type of policy guarantees the last recorded document conveying title to a property. The policy guarantee applies to documents appearing in the official public record of the County Recorder's Office. The escrow fee for all types of second mortgages is referred to as a "mini or sub" escrow fee and ranges between $225-$250.
Additional charges could include notary and recording fees along with the payoff fees on any existing second mortgages being paid at closing. These fees can range in total between $60-$150.
Lender Fees
The flat fee that a lender charges to process and fund your loan fall under a variety of names and can generally be lumped into one category the industry refers to as "garbage fees". They include underwriting, processing, administrative, document preparation and funding fees. The standard lender fee for second mortgages approximates $250.
Appraisal Fees
If a fee appraisal of your property is requested by the lender, the cost to inspect the property will depend on the type of property involved (i.e. single family vs. duplex to fourplex) and whether the property is owner occupied or an investment property. The typical fee for a standard owner occupied single family tract home, condominium or townhome appraisal is $300-$400.
Credit Fees
The fees to check your credit (using three credit bureaus) ranges from $25-$65 per person or per married couple. If your credit report has many inaccuracies on it, the costs to correct the errors could generate higher fees from the credit reporting company.
Taxes
The lender will request that all delinquent or outstanding property taxes be paid at loan closing. Most counties require the payment of property taxes on a semi-annual basis. But if you happen to be closing a loan during the window of time where your property taxes are due but not yet delinquent, you may be required to pay the installment in escrow, prior to closing, because your property taxes are now a valid lien on the property.
It is important to note that if you do fall within the aforementioned window, you should not attempt to pay your property taxes outside of escrow because it could take the county weeks to post your property tax payment as received. Then you may be left in the position of having to pay your taxes a second time, in escrow, because the title company was unable to verify that the county received your first payment prior to closing (of course one of these payments would be refunded to you after closing once your property tax payments were both posted - but what a hassle). It is best to always consult with your loan coordinator or escrow officer before making a property tax payment during the escrow process.
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