A cost-benefit analysis that subtracts homeownership benefits from homeownership costs. Closing costs Costs associated with the underwriting and funding of a loan that are paid when the loan is about to be disbursed and the borrower about to take possession of the asset. Mortgage closing costs include title search, appraisal fee, legal and escrow service fees, and mortgage points. A borrower can draw on a line of credit up to a pre-authorized amount. The borrower doesn't have to borrow the whole amount, as with an installment loan.
Interest is charged only on the amount withdrawn, and is calculated on daily balances.
To draw on a line of credit, a borrower writes a check against the account or uses an ATM, just as with a regular checking account. The interest rate charged on a home equity line of credit is usually based on the U.S. commercial prime rate, which is the rate that major U.S. banks charge their best customers. For instance, if a credit line rate is the prime rate plus two percentage points, and the prime rate is 8.5 percent, the credit line annual interest rate is 10.5 percent. When considering a home equity loan, the lender will consider the combined LTV, assuming full disbursement of the equity loan. Mortgage points are also called discount points.