Ask any major bank or lender about a home equity line of credit in Canada, and be prepared to spend the next few minutes listening to how wonderful they are, how you only have to pay the interest every month, and how they’re ready for any financial emergency you come across. And the truth is, all of those things are absolutely true. But what they won’t tell you (at least not right off the bat,) is about the fees that are involved with these kinds of loans. These fees can be somewhat mysterious and hard to find, as lenders aren’t prone to advertising them. But it’s important to know what the fees are for, how much you’ll be charged, and what can be waived (because some of them can!)
- Administration costs – There is a cost just for setting up your line of credit, and this is what the administration fee is. It can cost anywhere from $150 – $200, but you can ask your bank to waive this fee.
- Legal costs – A lawyer will need to register the loan documents showing that it is secured by your home equity. This will be cheaper if you use the in-house lawyer at the bank, but you can hire your own to do it as well. Either way it will cost you anywhere from $500 to $1,500.
- Appraisal fees – The bank will need a professional appraiser to determine the value of the property, and that will probably cost anywhere from $150 – $250. It is the only way for the lender to know the maximum amount they can lend you.
- Title search – This is a search completed on the property to make sure that there are no liens on the property. A title search can cost anywhere from $250 – $500.
- Inactivity fees – These are fees that are pretty much decided by the lender, so it’s hard to say just what any one person will be charged. These fees are there to cover the costs of maintaining the loan, different transactions, and any inactivity that’s seen on the account.
- Discharge fees – Yes, it doesn’t only cost you money to open that home equity line of credit, but it also costs you money to close it too. The discharge fee can be anywhere from $200 – $350.
Yes, the fees that are associated with HELOCs can be many, so it’s especially important that you know about them before you take on a loan. If you know you’re going to want a HELOC at the same time you take out the first mortgage, you could save thousands of dollars by getting it at the same time. That strategy might not work for everyone though, and you always need to seriously consider the pros and cons of taking out two loans at the same time.
