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It is normally much less expensive to close a home equity loan than a first mortgage loan. Instead of a complete interior appraisal, a “drive by” or sometimes a real estate tax bill showing the assessed value of your home may suffice. In lieu of a full title examination, only a brief title search that goes back to the recording date of your first mortgage is usually required. Since a title insurance policy was issued at your first mortgage closing, another policy is unnecessary, further saving you money. Instead of costing multiple points (one point equals one per cent of your mortgage amount), a home equity loan should cost between zero and one point at most, saving you hundreds of dollars.
The basic costs will include a title search, the cost for justifying that the fair market value (FMV) of your home supports the amount of money you want (outside appraisal, tax assessment), recording fee (to record the additional mortgage on the property), and origination cost (points), if any. Unlike most first mortgages, there should be no title insurance cost, junk fees (underwriting, processing, warehousing, funding, doc prep, or miscellaneous fees), over night mail costs, or full title examination expense. Your total cost should not exceed about one to one and one-half percent of your new loan amount. In many cases, it might even be zero. Shop around as lenders often offer no cost incentives.