2nd Mortgage Fees?

[Russ Filtz]

Anyone know what a respectable fee would be for a 2nd mortgage? Got a quote from one broker and if I read the numbers right they are asking for around 5.5% of the loan! Good, bad, ugly?

[David G Baker]

Anyone know what a respectable fee would be for a 2nd mortgage? Got a quote from one broker and if I read the numbers right they are asking for around 5.5% of the loan! Good, bad, ugly?
Russ,
I do not know what is normal but I know that I would not pay 5.5% as a fee for a 2nd mortgage. That would be $550 on a $10,000 loan. If the 2nd mortgage had a reasonable interest rate in the neighborhood of 6% it may not be bad but 2nd mortgages are generally much higher, probably in the range of 9 to 12%. Check with your local bank or credit union they can give you a better rate in some cases depending on your credit rating.

[Jim Becker]

Many 2nds or equity loans/lines are obtainable with little or no closing fees. Shop around. And don't forget your current lender as they often have programs for existing customers.

[glenn bradley]

At this point in time you should be able to find quite a few offerings with no fees. The HELOC Jim mentions is good for many folks especially if you take it from your current lender. My general rule is to take nothing with a variable rate but that's because I know I won't pay attention. A friend of mine made out quite well with a variable he later refinanced to a fixed at the appropriate time (whatever that is).

Even BofA has some decent offerings right now but Wells Fargo is still expensive. Don't forget your local credit union and check out ditec. From my limited experience I find that you have to look . . . a lot . . . before you get a feel for what a good deal is. The variations in rates and costs are pretty broad.

[John Shuk]

This is the place Dave Ramsey of radio fame recommends. Given the type of show he does (Financial responsibilty) I'd like to think they are honest. Quicken tried to sneak me into a type of loan that I specifically told them I did not want. 5.5% seems like alot to me but I just don't know.
http://www.churchillmortgage.com/

[Ron Jones near Indy]

FYI--local bank has HE line of credit at prime + 0% with no closing fees

[Tim Morton]

I would not pay more than $500 on a $50k loan. And depending on the urgency and your credit rating, you should be able to find one for much less.

[Pat Germain]

Definately check with the company currently holding your mortgage. I did this and was able to skip the cost of an appraisal, a credit check, and many other fees. The rate was also good.

However, CU always recommends, "Shop for a rate, not for a company." bankrate.com lists numerous lenders and their rates and it's updated daily.

[John Shuk]

Often those are interest only loans and they will only bill you for the interest in hopes that you will not peck away at the principle.
It seems people would be better off using a Mobbed up loan shark these days than dealing with some of the lenders out there.

[Russ Filtz]

Thanks all. I felt it was excessive, but it's even worse when you start looking at total refinancing, not just a second. One thing I'm not sure of is this guy was warning me away from a HELOC (at least in my case where I pretty much have a fixed amount I want out). He said HELOCs are treated almost like a credit card and can directly affect your credit rating (e.g. how much credit you have outstanding, etc), but a fixed second mortgage doesn't.

[Jim Becker]

Any loan can affect your credit rating. A line of credit, however, is just that...a line of available money that you can borrow at any time. (within the rules of the particular contract you have) Therefore, if you apply for another credit instrument, it could be affective to your credit score, especially if you have a lot of other open credit available.

If you have a fixed amount of money you need, a HELOC may not be the best instrument, but it's certainly an option. A home equity loan/second mortgage with a fixed rate is the alternative.

I'm not sure about your "worse when you start looking at total refinancing"...with the right lender, the costs can be very low and the actual monthly payment less than the combination of a first and second with a similar time to payoff. Your current mortgage holder should be your first stop in your search, but the mortgage market is very competitive right now. Chase, Countrywide, etc., usually have very nice offers availabile, both directly and via brokers. Unfortunately, you have to do a bit of homework to find the right deal. Also check if your employer has any kind of "benefits" with any lenders. They are not always the best deal, but sometimes "timing" makes them a good opportunity.

[Hal Flynt]

Let me give my 2 cents, Sr. Loan Officer for a Mortgage COmpany

First semantics;

2nd loan means any loan subordinate to a 1st mortgage or primary mortgage.

There are generally 2 types of subordinate financing available:

1. Open ended or HELOC (Home Equity Line of Credit) where you can draw down as much as you want to up to a preset limit and again pay it down and have available the difference between the current balance and the credit limit. It’s very similar to a credit card in application but uses your home as collateral. HELOCS are for the most part adjustable rates and tied to the prime rate generally.

Lenders will generally make these with “no closing costs” IF you keep them open for 2-3 years as an average. If you pay off early, then you may be asked to pay the closing costs, which are generally minimal. Most banks will make these without a new appraisal ($350+/-). Title search, document prep, recording fees, taxes to the state and or county etc. will be in the $300-500 range without an appraisal.

2. Next there is a closed in loan. It’s like the traditional mortgage. You borrow a certain amount, it’s disbursed and you make payment over an agreed upon schedule. It can be a fixed rate or adjustable.

These loans are generally sold into the secondary market (Fannie Mae, Freddie Mac etc.) Loans sold in the secondary market have higher closing cost because each loan regardless of size has to have certain things included to make it marketable to Freddie or Fannie. Here is a list of what call “conforming closing costs”:


Lender Fees
1. Appraisal $350-450
2. Credit report $12-50
3. Flood Cert (required by FEMA) $13.50-25
4. Underwriter Fee $400-600
5. Tax Service Fee $80-95
6. Application Fee $$50-500
7. Lender Doc Prep $50-250
8. Any discount points and origination fees, which are a function of the bond market as the prices of bonds go up, rates go down and visa versa.


Now Legal and Title Fees:
1. Closing Fees ( usually split between buyer and seller) $100-195 each side
2. Title Search, title insurance etal $650+/- on the first $100,000, then $2.00-2.50 per $1000 up to $3000000 Then $1 (Varies from place to place)
3. Closing Document prep. $$75-150
4. Handling fees (to express payoffs, delivery etc) $25-50

Enter the Government:
1. Recording Fees $4 per page (County sets this)
2. Conveyance Tax (Sales tax on the sale, none on a refinance or 2nd unless part of the purchase money) Varies
3. Probate Tax ( Tax on the Mortgage amount, yes on a 2nd) Varies
4. School tax Varies
5. Other taxes as the locality dictates.

So is 5.5% too much, probably of it’s in addition to the above, pretty good if it includes the above. Our average overhead to produce a loan to sell to Fannie or Freddie is between $700-1200 regardless of size. Our fees are built into the quote on rates with points. If you want a no closing cost loan, the I offer you a "premium priced loan" (higher rate with points to cover the costs).

Remember most of these costs are mandated to protect the public from less than ethical practitioners and of course to protect the lender and the attorneys.:D

More than you wanted to know, I'm sure

[Glenn Clabo]

More than you wanted to know, I'm sure

No Sir...this is exactly what we need. Thank you VERY much Hal!

[Hal Flynt]

You're welcome.