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Broker fees do not make home equity loan lines of credit more expensive than credit cards

06/09/2007

It's a common illusion that it's "more expensive to get a home equity line of credit" than it is to get a credit card, because of prospective 'broker fees' that may be charged by the mortgage company that you're getting a home equity loan from.

But in fact, there are brokers and brokerages like The Mortgage Store Online, who do not charge broker fees or service fees, as long as you qualify with one of their Grade A lenders: because the broker is paid a service fee by the lender they connected you with, and so you don't have to pay the broker at all.

Say if you do need to pay a broker a broker fee: usually at most, it would equal 4% of the amount you borrowed: so if your home equity line of credit was $10,000 - you would pay a broker a fee of $400. But if you used a credit card, at a rate of 18% (like one of MasterCard's current rates) - you would lose $25,092 (yes, twenty-five THOUSAND dollars) over 25 years compared to a home equity line of credit for the same amount, at a rate of 6%. Which means, you'd end up spending far more on credit card interest charges over time than that initial $400 broker fee.

However small broker fees might be for home equity loans, The Mortgage Store Online advises potential home equity loan borrowers to ask the broker they are dealing with upfront whether a broker fee will be charged or not, and how much that fee will actually be.

Learn more about home equity loan lines of credit

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