Usual Bank Fees?
Hello,
I would appreciate other's insights:
I have a mortgage for $440,000 on a property that can appraise for about $1.4MM. I contacted my bank and asked about a line of credit for $500,000.
They said they charge:
Points: 1 ($5,000)
Legal: $5,500
Appraisal: $2,200 (same appraiser, so it was far less than a new appraiser would charge)
Mortgage tax, fees, etc.
I'm thinking that spending $13,000 plus the nasty NYC mortgage tax (2.125%) and fees is absurd.
Any ideas?
Thanks,
Joseph
Man, I don't know anything about the market in NY, but that sounds absurd, just to set up a HELOC. In Atlanta, an appraisal is $350.00, and they don't charge points. I'd say do some shopping around...
Not to defend it (I'm actually quite pissed off about these costs), but it's not a heloc.
It's a commercial piece of property.
Still, it's just for the right to borrow money, secured well, at 1 pt above prime.
Depending on what rate the existing first is at I'd consider refinancing completely. The fees will look smaller as a function of the total loan amount and rates are low enough I'd try to lock in a long-term fixed rate loan.
The NY mortgage tax is new to me. Tell me more.
Indeed the legal fees and appraisal and mortgage tax would be the same for a refi.
NYC makes quite a nice chunk of change on mortgages -- on everything from SFH to large apt complexes to strip malls. Rates go up at $500,000, and, for some types of properties, at $1MM. This, and various other fees, makes closing quite a costly endeavor.
Well Joseph, I guess the Legal seems out of line to me but the appraisal and the one point origination look reasonable. What kind of rate are they quoting you.
Of course the refi tax is outrageous but you can't exactly blame the lender for that.
I should point out, of course that the money you take out this way is tax free and the interest you pay on it is tax deductable so if you look at the "big picture" you will save more with Uncle Sam than you will give to the mayor in the long run.
Rate is prime+1.
You don't think that a 1 pt charge to establish a LOC is high?
While the tax advantages are there, spending over $15,000 to establish the LOC is just too costly.
15K in costs to get you into how many K of new deals? Is it more than just a cost of doing business.
I would shop the rate. That's still a CLTV of <68%.
What about refi'ing the place?
Shop around.
The numbers do not sound that far off the market price. I have no idea what the legal costs should be. We are talking commercial so expect to pay more then residential.
As you are talking about working capital check to see if there are any annual fees. Also look for loan convents that would let the lender pull the loan or otherwise restrict its use. Some lenders might offer better pricing while expecting extra restrictions.
John
[addsig]
Thanks for all the good insights, perspectives and suggestions.
I have not gone forward, and will indeed shop around, possibly for a refi.
Regards,
Joseph
The fees are reasonable for a lender to take 2nd position. The tax benefits and benefits from the use of the money outweigh the initial costs.
But, the "legal" fees are crap. What could they possibly cover? Title insurance, a closing fee, recording fee, and maybe a survey? Possibly, but those costs are nowhere near $5,000