How Much Are Home Equity Loan Closing Costs?

How Much are Home Equity Loan and HELOC Closing Costs?

In general, home equity loan and HELOC closing costs add up to roughly 2% to 5% of your total loan amount. These costs can vary from lender to lender, and may be higher or lower depending on where you live.

Here's a breakdown of common closing costs and what you can typically expect to pay for each, followed by explanations of what each of these fees covers.

Learn more: What Are Closing Costs?

Origination Fee

Potential cost: 0.5% to 1% of loan amount

An origination fee covers the lender's cost of processing and underwriting your loan or line of credit. It can be a flat fee or a percentage of the loan amount or credit line.

Appraisal Fee

Potential cost: $300 to $500

Lenders use professional appraisals to determine the current market value of your home, which they use to help calculate your home equity. Costs can vary depending on where you live.

Credit Report Fee

Potential cost: $30 to $50

Checking your credit is a key part of the loan approval process, and may help determine the interest rate you're offered. This fee covers the costs lenders pay to check your credit.

Learn more: Requirements for a Home Equity Loan or HELOC

Title Search Fee

Potential cost: $75 to $250 or more

Lenders run title searches to look for liens or claims on your property. Typical fees range from $75 to $250, depending on where you live.

Title Insurance Fee

Potential cost: 0.5% to 1% of loan amount

You may be required to pay for title insurance that protects the lender against an unexpected claim on your home. Unlike regular mortgages, home equity loans may not require you to take out title insurance for yourself. HELOCs may not require title insurance at all.

Document Preparation Fee

Potential cost: $100 to $500 as a separate line item, an hourly rate if attorney is consulted or may be included in your origination fee

This fee covers the cost of preparing your loan documents, which might include review by an attorney. Document preparation may be included as part of your origination fees instead of being broken out separately.

Notary Fee

Potential cost: $20 to $100

Some lenders charge an additional fee to have a notary public verify and notarize your loan documents.

Loan Recording Fee

Potential cost: $15 to $50

Your county recorder or other local official will typically charge a $15 to $50 fee to cover the cost of recording the new lien on your home in the public record.

How Much are HELOC Closing Costs?

Closing costs are similar on a HELOC and a home equity loan, still totaling around 2% to 5% of the loan amount. However, some fees may be lower or may not apply to HELOCs, potentially saving you money at closing. As an example, some HELOCs may charge application fees instead of origination fees (though some lenders still charge origination fees, so it's a mixed bag).

Then again, because a HELOC starts out as a revolving line of credit, there are ongoing fees that may crop up after you close. Here are a few to think about:

• Annual fee: Lenders may charge annual fees (or account maintenance fees) of $5 to $250 every year to keep your line of credit open.
• Transaction fees: You may pay a few dollars for every transaction processed from your HELOC. To minimize fees, you may want to make larger but less frequent withdrawals.
• Inactivity fees: Look for minimum requirements on withdrawals from your HELOC. Some lenders charge a small fee when you don't make transactions on your account after a certain period of time.
• Early termination or early cancellation fees: If you pay off your HELOC and/or close your account early, your lender may impose an early termination fee, early cancellation fee or prepayment penalty. In some cases, this might be a flat fee of up to $500 or as much as 2% to 5% of your outstanding balance. Make sure you're aware of any prepayment fees when you sign your loan documents, so you can plan accordingly.

Learn more: What's the Difference Between a Home Equity Loan and a HELOC?

Can You Negotiate Closing Costs?

Yes, you can negotiate closing costs on a home equity loan or HELOC. Although the amount of flexibility varies, some closing costs and fees may be adjusted or waived.

Which closing costs are most likely to be negotiable? In general, lender-based fees like origination fees, application fees and title fees are more likely to be adjustable, since they're set by the lender. Outside expenses like recording fees, credit report costs and appraisals may be more difficult to eliminate, since they represent a hard cost the lender must pay.

Here's a quick comparison of fees that are more (and less) likely to be negotiable when you're closing on a home equity loan or HELOC:

How to Lower Closing Costs on a Home Equity Loan or HELOC

You can lower your closing costs on a home equity loan or HELOC by shopping multiple lenders to find the best deal. In addition to adding up your closing costs, also consider the overall costs for each loan, including interest charges, to figure out which option saves you the most money in total.

Here are a few tips to help you lower your costs—and closing costs—on a home equity loan or HELOC:

• Compare lenders. Closing costs vary between lenders, so it may pay to consider more than one loan. In addition to checking online marketplaces that can connect you with multiple lenders, you may want to reach out to your current mortgage lender to see if they can offer you a good rate with fewer closing costs based on your existing relationship with them.
• Look for a no-closing-cost loan. Some lenders offer home equity loans and HELOCs with no closing costs. However, make sure you look at your total loan costs: Some no-closing-cost loans have higher interest rates that help offset your upfront savings. Also be mindful that these loans may be more likely to have prepayment or early cancellation fees attached.
• Improve your credit. Although your credit score and credit history don't directly affect your closing costs, they can help determine the interest rate a lender will offer. The lowest rates are generally reserved for the best credit scores. Take a moment to check your FICO^® Score^☉ and credit report. If your credit isn't top-tier, you may want to take steps to improve it before applying for new loans.
• Work on your debt-to-income ratio. Carrying a lot of debt can cause lenders to see you as a risk. If your debt-to-income ratio is high, you may want to pay down debt for a few months to help bring your numbers into better alignment.

Learn more: How to Shop for a Mortgage

The Bottom Line

Closing costs definitely affect your total loan costs on a home equity loan or HELOC. If you're trying to minimize those costs—and especially if you're trying to reduce your upfront charges—taking a close look at your closing costs is key. Comparing costs between lenders and negotiating for the best pricing can help you keep your closing costs down and make your loan more affordable.