No Closing Cost Purchase Money HELOC

Posted By: terpsfan

No Closing Cost Purchase Money HELOC - 09/24/21 07:21 PM

If we have a no closing cost HELOC and we allow it to be used for a purchase money would the costs required for the transfer be considered closing costs even though they would be paid on a cash transaction. We advertise no closing costs but it is not our intent to pay warranty deed prep and transfer taxes.
Posted By: rlcarey

Re: No Closing Cost Purchase Money HELOC - 09/24/21 08:07 PM

Well, the warranty deed does not concern me, but transfer taxes are definitely closing costs.

4. Misleading terms prohibited. Under §1026.16(d)(5), advertisements may not refer to home-equity plans as free money or use other misleading terms. For example, an advertisement could not state “no closing costs” or “we waive closing costs” if consumers may be required to pay any closing costs, such as recordation fees. In the case of property insurance, however, a creditor may state, for example, “no closing costs” even if property insurance may be required, as long as the creditor also provides a statement that such insurance may be required. ( See the commentary to this section regarding fees to open a plan.)
Posted By: Dan Persfull

Re: No Closing Cost Purchase Money HELOC - 09/24/21 08:09 PM

If you advertise no closing costs then I'm not sure how you would exempt the transfer taxes from being part of the closing costs.


4. Misleading terms prohibited. Under §1026.16(d)(5), advertisements may not refer to home-equity plans as free money or use other misleading terms. For example, an advertisement could not state “no closing costs” or “we waive closing costs” if consumers may be required to pay any closing costs, such as recordation fees. In the case of property insurance, however, a creditor may state, for example, “no closing costs” even if property insurance may be required, as long as the creditor also provides a statement that such insurance may be required. ( See the commentary to this section regarding fees to open a plan.)
Posted By: terpsfan

Re: No Closing Cost Purchase Money HELOC - 09/24/21 08:51 PM

We would pay the taxes on the DOT recording but the transfer taxes I was referring to would be the taxes on the warranty deed recording. These would need to be paid in a cash transaction. Would you still consider these closing costs?
Posted By: rlcarey

Re: No Closing Cost Purchase Money HELOC - 09/24/21 09:01 PM

I would not consider those loan closing costs - but making a HELOC for a purchase transaction is also highly unusual unless there is a substantial down payment also required.