This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

When a HELOC Fee Makes Sense

Fees can make an otherwise affordable loan expensive. But some fees, such as the annual maintenance fee charged on a home equity line of credit (HELOC), can actually lower the costs of your loan, depending on how you intend to use your HELOC.

Many of the fees associated with a HELOC should be avoided, such as an application fee, an appraisal fee, and a "non-usage" fee charged for leaving the money in your line of credit untouched. (The non-usage fee is particularly disagreeable, since one of the main benefits of a HELOC is its usefulness as a safety net in case of emergencies.) But the decision to choose a HELOC with an annual fee depends on whether it offers a better interest rate than non-fee loans and how frequently you plan on withdrawing money.

To help you decide, head to's home equity section and enter your ZIP code for a list of rate offers in your area. Residents of North Carolina, for instance, can apply for a $50,000 HELOC from Fifth Third Bank (FITB - Get Report) with an interest rate of 3.75%, as long as they are willing to pay a $65 annual fee. Alternatively, they could apply for the same-sized line of credit from Southern Community Bank and Trust (SCMF) or Citizens South Bank (CSBC) at interest rates of 5.0% and 6.0%, respectively, and not have to pay any annual rate.

The next step is to figure out whether the lower interest rate is worth the extra fee you're paying. There's only a 1.25 percentage point difference in rates between the HELOCs offered by the Fifth Third Bank ($65 fee) and the Southern Community Bank and Trust (no fee). If you withdrew $25,000 on the first day of your line of credit and didn't repay it for a full year, the $65 fee would save you $312.50 in extra interest ($25,000 x 1.25% = $312.50). However, if you choose instead to use your HELOC only for emergencies and make repaying the balance a priority, you may not incur enough interest charges to warrant the $65 annual fee.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
FITB $17.54 0.00%
AAPL $94.19 0.00%
FB $118.06 0.00%
GOOG $695.70 0.00%
TSLA $222.56 0.00%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs