How Much Are Home Equity Loan Closing Costs and Fees?

Home equity loans and lines of credit (HELOCs) let you turn your home equity into cash. Accessing this type of financing can cost anywhere between 2% and 5% of your loan amount, in addition to ongoing interest charges.

A home equity loan gives you a lump sum at closing, and a HELOC gives you access to credit to use at your discretion. These financing options can be smart ways to fund home renovations, cover bills, or even pay off debts, but it’s important to consider the total cost of financing. If you’re considering borrowing a home equity loan or HELOC, here are the potential expenses.

What are typical home equity loan closing costs?

Home equity loan closing costs vary depending on the size of your loan amount. Some, such as origination fees, are charged as a percentage of your loan, and others are a flat fee. Closing costs may come out of your loan amount, lowering the equity you can access. 

Here are the most common fees related to home equity loans, most of which are assessed at closing. 

Fee	Cost
Origination fee	Up to $125 or a small percentage of the loan amount
Appraisal fee	$300 – $400
Credit check	$25 – $50
Title search	$75 – $200
Documentation preparation fee	$100 – $400
Recording fee	$15 – $50
Notary fee	$50 – $200
Mortgage points	1% of the loan amount per point

Origination fee

The origination fee, sometimes called an application fee, is the fee lenders charge to issue your loan. It generally covers the cost of loan processing and underwriting. 

Appraisal fee

Many lenders require appraisals to determine the market value of your property. Your home’s appraised value will help determine how much you can borrow with a home equity loan. Depending on your lender, you might pay the appraiser or have the fee rolled into your closing costs.

Credit check

When you apply for a home equity loan, your lender will pull your credit reports to review your payment history, open accounts, and outstanding balances. This type of credit check will lower your credit score by a few points. Although this is a third party fee, it’s typically included as part of your closing costs. 

Read More

What Credit Score Is Needed for Home Equity Loans? 

Title search

When you apply for a home equity loan, lenders hire a company to conduct a title search to confirm that you legally own your property. The title company’s fee covers the cost of conducting a thorough review of public records to validate ownership. 

Document preparation and notarization

Your lender may charge fees for preparing and notarizing your loan documents and having an attorney review them for accuracy. Documents may include your second mortgage and other legal forms associated with your loan.

Loan recording

Your home equity loan must be recorded with the county where your home is located. The loan recording fee covers the cost of recording your loan. Also called a government recording charge, the cost depends on your state and local agencies. 

Discount points

Some borrowers buy discount points to reduce their home equity loan rate. Buying points is optional; if you do so, you’ll pay a fee at closing. If you don’t, you won’t pay a fee. It could cost 1% of the loan amount to lower the interest rate by 0.25%.

What other home equity loan fees could I be charged?

Beyond closing costs, these are the other fees you might pay for a home equity loan.

Fee	Cost
Prepayment penalty	Up to 2% of outstanding loan balance
Variable rate change	May go up or down based on the index rate if you have a variable-rate loan
Late payment fee	Flat fee

Prepayment penalty

Some lenders may charge a prepayment penalty of up to 2% of your outstanding balance if you repay your home equity loan before the end of its term. 

So, if you have an $8,000 balance remaining and decide to pay it in full, a 2% penalty would be $160. This fee helps the lender recoup the interest it would have made, particularly if it covered any of your closing costs.

Variable rate change

Most home equity loans have a fixed interest rate, but in some cases, you may have an option for a variable rate. This rate is tied to an index and rises and falls based on this benchmark.

Late payment fee

Most lenders have a grace period of up to two weeks past your loan payment’s due date. After that, you may pay a late fee, which could be a percentage of the payment or a flat dollar amount.

What home equity line of credit closing costs will I pay?

A HELOC lets you draw on a credit line over a set period instead of a one-time loan disbursement. Most of the closing costs are the same as those associated with a home equity loan. Common HELOC fees are included in the table below.

Fee	Cost
Origination fee	Up to $125 or a small percentage of the loan amount
Appraisal fee	$300 – $400
Credit check	$25 – $50
Title search	$75 – $200
Documentation preparation fee	$100 – $400
Recording fee	$15 – $50
Notary fee	$50 – $200

Origination fee

The origination or application fee is the cost associated with issuing your HELOC. It could be a flat fee or a percentage of your total credit line, depending on your lender.

Appraisal fee

Before issuing your HELOC, your lender must appraise your home to determine its market value. The appraisal is used to calculate your loan-to-value ratio and total credit line. You may pay the appraisal company, or the fee may be rolled into your lender closing costs. 

Credit check

Your lender will run a hard credit check when you apply for a HELOC. Checking your credit helps determine your ability to repay what you borrow. You will typically pay a small fee for your lender to pull your credit report and review your credit history.

Title search

Your lender will do a title search to confirm you legally own your property before it issues a HELOC attached to it. A title search involves reviewing public records to determine ownership. The fee covers the cost of the title company’s research services.

Document preparation and notarization

You’ll also pay a fee to prepare and notarize your HELOC documents, which could include standard mortgage forms and legal documents. 

Loan recording

Because a HELOC is a second mortgage, you’ll also need to have your credit line recorded with your county of residence. The loan recording fee covers the cost of legally recording the HELOC. 

Other HELOC fees 

In addition to closing costs, HELOCs often have other fees that can increase the overall cost of borrowing against your equity. 

Fee	Cost
Annual fees	$25 – $75
Cancellation fee	$500
Rate conversion fees	$75
Inactivity fee	Up to $50
Transaction fee	Varies by lender

Annual fee

Many HELOCs come with an annual fee, which covers the cost of managing and maintaining your credit line on an ongoing basis. You’ll pay this fee each year.

Cancellation fee

If you close your account earlier than agreed upon with your lender, you might pay an extra fee. Lenders may charge a cancellation fee if you terminate your HELOC within the first three years.

Rate conversion fees

Many HELOCs have variable rates, but your lender might allow you to convert to a fixed-rate option. If you do, your lender might charge a fee for the rate conversion at that time. 

Read More

Fixed-Rate HELOCs: How They Work and Where to Get One 

Inactivity fee

Some lenders charge an inactivity fee if you fail to use your credit line within a specified time frame. If you’re concerned you might not use your HELOC, be sure to read the fine print before applying so you don’t incur any surprise costs. It’s important to understand what time frame triggers the inactivity fee. 

Transaction fee

Some lenders charge transaction fees for HELOCs. So each time you draw down on your HELOC, you’ll pay a small fee.

How do home equity loan fees and closing costs affect your total costs?

Consider the total cost of borrowing when comparing home equity loan or HELOC options. You might find that one with a higher upfront cost will save you in the long run, so be sure to do the math.

Here’s an example.

	Offer A	Offer B
Loan amount	$50,000	$50,000
Closing costs	$1,000	$1,300
Interest rate	7.7%	7.4%
Total cost after 10 years	$22,849	$22,208

In the above scenario, Offer B might look more expensive up front, charging $300 more in closing costs, but it saves you cash in the long run. Always compare fees and interest costs upfront and over the loan term to ensure you get the best deal.

How do HELOC costs and fees affect your total costs?

Here’s an example of how much a HELOC might cost over time, accounting for fees and interest. This example assumes you draw down your full HELOC balance, and your interest rate remains fixed for 10 years.

	Offer A	Offer B
Credit line	$50,000	$50,000
Closing costs	$1,000	$1,300
Interest rate	7.7%	7.4%
Annual fee	$75	$25
Total cost after 10 years	$23,599	$22,458

How to reduce or avoid home equity loan and HELOC fees

Fees can add up and eat into how much value a home equity loan or HELOC can offer you. Here are the best ways to avoid or reduce your costs.

1. Compare options. Every lender charges different fees, so comparing a few offers can ensure you get the best deal. 
2. Negotiate. Lenders may waive fees to get your business.
3. Improve your application. Working on your credit, reducing your debt-to-income ratio, and focusing on on-time payments may not affect your loan fees but could result in a lower interest rate. 
4. Don’t overborrow. Be sure to only borrow what you need. This reduces your interest and the cost of any percentage-based fees your lender may charge.

Our expert’s take on negotiating with lenders

Erin Kinkade

CFP®

Home equity loan costs can be negotiated between the borrower and the lender. Some financial institutions may be more lenient, and others charge a flat fee they must stick with. Lenders could reduce or even eliminate the closing costs. However, they may compensate for this “lost” revenue by charging a higher interest rate. It’s always worth a try to lower any expense.

How to reduce or avoid home equity loan and HELOC closing costs

HELOC and home equity closing costs can add up to 5% more in charges, so avoiding or reducing these could save you money. 

1. Compare options. Be sure to compare offers from different lenders. Closing costs vary by lender, so this step could help you keep more money in your pocket or negotiate lower costs.
2. Opt for a no-closing-cost lender. Some lenders charge no closing costs at all. Just be sure to read the fine print to ensure the lender isn’t rolling the costs into your loan rather than charging you at closing—meaning more long-term interest charges.
3. Don’t overborrow. Only borrow what you need. Borrowing more money than you’ll use will result in higher closing costs and longer-term interest charges.

Where to find no-closing-cost HELOCs and loans

Fees, penalties, and interest rates can vary based on your credit score and the lender, so it pays to do research and compare several options. Some fees may be negotiable, so ask your lender before closing on the loan. Your loan agreement is a contract; you don’t need to agree to every term. Also, use quotes from other lenders as a negotiating tool.

These lenders offer HELOCs with no closing costs:

Read more about the best no-fee and no-closing-cost HELOCs. Avoiding closing costs makes your HELOC or home equity loan more affordable, especially if you’re borrowing a large sum. Some fees, such as origination fees, could be a percentage of your financed amount, which could amount to thousands of dollars.

FAQ

Are closing costs on a HELOC tax-deductible?

HELOC closing costs aren’t tax-deductible, but your interest on a HELOC may give you a tax break. You could deduct HELOC interest on your taxes if you use the funds to buy, build, or substantially improve your home and itemize your deductions (rather than taking the standard deduction). 

Are closing costs on a home equity loan tax-deductible?

Like a HELOC, closing costs on a home equity loan are not tax-deductible, but the interest may be deductible if the loan is used to purchase, build, or substantially improve your home.

Do most lenders charge a home equity loan or HELOC prepayment fee?

Prepayment fees on home equity loans or HELOCs vary by lender. Some lenders might charge a prepayment fee if you pay off the loan early, but many don’t. Review loan terms carefully, or ask your lender about any potential prepayment penalties before proceeding with the loan.

Are home equity loan closing costs cheaper than mortgage closing costs?

Closing costs for home equity loans tend to be lower than those for traditional mortgages because they are smaller and may require less extensive underwriting.