How Much Are 2025 Home Equity Loan Closing Costs?

Applying for a home equity financing is similar to applying for a mortgage. You may wonder, then, do home equity loans have closing costs? And how about HELOCs?

Yes, they do — and they’re the same sort of expenses. However, while some estimates peg the average home equity loan closing costs comparable to primary mortgages — a range of 2–5 percent of the total loan — they’re often much less, as little as 1 percent. Some are even negotiable.

Still, you’ll need to factor in these fees when determining the total cost of the loan or line of credit. Let’s dive deeper into both home equity loan and HELOC closing costs — and how to reduce them.

What are home equity loan closing costs and fees?

Home equity loan closing costs and fees are upfront expenses: You must pay them before you receive any money. Some costs are flat fees, usually those from outside authorities for services like a home appraisal, title search or notarization. Fees that are charged by the lender often tend to be percentages of your loan principal.

To give you an idea of what you might pay in home equity loan closing costs — helping you figure out the overall cost of your home equity loan — here’s a breakdown of the most common charges.

Origination fees

Potential cost: 0.5-1% of the loan amount

Some lenders charge an origination fee up front — an expense just to get the ball rolling on your application. Amounts vary by lender but may be either a flat fee or a percentage of the amount you borrow. If the latter, it can be as much as 1 percent of your home equity loan. In other cases, this can be a fairly nominal cost: TD Bank, for example, charges an origination fee of $99 for home equity loans.

Appraisal fees

Typical cost: Around $350

​​Lenders typically require that a home appraiser determine the current value of your property, which in turn impacts the worth of your equity stake, and the amount you have available to borrow. Generally, home equity loan appraisals average $358, according to HomeAdvisor. If you have a much larger home and/or you live in a high-priced area, the cost can be more expensive.

This is one area in which costs may actually be decreasing. For home equity financing, lenders are increasingly using an automatic valuation model (AVM) instead of a traditional in-person appraisal. If they do, your appraisal fee would be drastically less, or even zero.

Credit report fee

Potential cost: $10–$100

As a part of any credit-based lending process, lenders check your credit score, doing a hard pull of your credit report. This typically incurs a fee between $10 and $100 per report.

Legal fees

Potential cost: Flat hourly rate (e.g., $100–$300) or percentage of overall loan (e.g., 0.5–1%)

This is one of those home equity loan fees that varies. Some states mandate that an attorney review your loan documents; others make it optional. Even when it’s not a legal requirement, it’s a good idea to have a pro read the contract and make sure that you fully understand the loan terms and that they dovetail with everything the lender originally told you. Many real estate lawyers charge an hourly rate ($100–$300) to review loan papers, though some may have a flat fee. Figure on the legal fees comprising 0.5 to 1 percent of your loan.

Filing/notary fees

Potential cost: $20–$100

Since it’s a lien on your property, a home equity loan has to be filed with your local county clerk’s office. And the agreement has to be properly witnessed and notarized. Again, this varies greatly among states: The cost of home equity loan processing with your local authorities generally runs from $20 to $100.

Title insurance costs

Potential cost: .5-1% of purchase price

Not all lenders will require that you, the homeowner, get title insurance for a home equity loan — especially if you already secured this coverage when you got your original mortgage. If they do, though, the title insurance costs vary depending on the type of coverage your lender mandates: between $1,000 and $4,000 is a common range. Unless you’re dealing with the folks who financed your first mortgage, you probably will have to take out a lender’s title insurance policy (which protects the financial institution against any claims or liens on the home).

Title search fee

Potential cost: $75-200

Since the home is used as collateral for a home equity loan, lenders may arrange a title search to see if there are any liens or claims to the property from another entity. This fee typically ranges from $75-200, depending on your area.

What are HELOC closing costs and fees?

While a home equity loan functions a lot like a mortgage — you get a lump sum you repay over time — a HELOC is a little different. It’s a revolving line of credit, similar to a credit card, that you can access for a fixed number of years (and then repay over another set period). For example, Chase Bank now offers a 30-year HELOC with a 3-year draw period. You can make interest-only payments for the first 10 years, and then repay both interest and principal over the next 20 years.

HELOCs don’t carry all the closing costs that home equity loans do (few require you to take out title insurance, for example). But you can count on similar application-related charges, like credit report fees and home appraisals. In addition, they carry some ongoing expenses, and you’ll need to be prepared to pay fees for certain activities such as closing the line early or freezing the interest rate.  

Application/origination fee

Potential cost: $15–$75

Also known as a processing fee, this is a one-time charge to apply for a HELOC. Some lenders charge per application, some per applicant — so co-borrowers may each have to pay this small flat fee. Some lenders charge a stiffer origination fee, though. Figure, for example, charges an origination fee up to 4.99 percent of the initial draw amount.

Annual fee

Potential cost: $5–$250

This is a recurring fee that applies for each year of an open account, charged whether or not you draw from the line of credit during the year. For example, PenFed Credit Union‘s HELOCs incur a $99 annual fee. Some lenders waive the fee the first year.

Early cancellation fee

Potential cost: A percentage of your loan amount (3-5%) of loan amount or a flat fee ($200-500)

If you pay your HELOC off and close the account while you’re still in the initial draw period, the lender may charge an early cancellation fee. It can be either a set amount or a percentage of outstanding balance. For example, Rockland Trust will charge you $500 if you close your account within two years of opening it.  Bank of America charges $450 if you cancel your home equity line of credit within the first three years. Lenders will also often ask you to repay any closing costs they covered if you cancel the account.

Transaction fee

Potential cost: Nominal (e.g., $5)

This amounts to a surcharge every time you draw from the HELOC. The transaction fee could be a fixed amount (not dissimilar to an ATM fee) or a percentage of the amount you draw. If your lender does impose transaction fees (not all do), you might want to keep your withdrawals few and far between.

Inactivity fee

Potential cost: $5–$50

In contrast to the above, HELOCs might charge you for not using them! These inactivity fees get imposed if a substantial period has gone by without you drawing against the credit line. So if you plan to keep yours just as an emergency fund, make sure your lender doesn’t have them.

Prepayment penalty

Potential cost: 2-5% of outstanding balance or flat fee

Also called an “early termination” or “early closure” fee, the prepayment penalty is an amount imposed if you pay off your full HELOC balance ahead of schedule during the repayment phase. Why? Because eliminating your balance and closing the credit line prevents the lender from earning any more interest (and profits) on it.

Rate lock fee

Potential cost: $50-75

Although they’re variable rate, many HELOCs allow you to freeze the interest rate on all or a portion of your balance. And of course, they often charge you for that privilege – typically, typically, a small flat sum. HELOC borrowers at  BMO Bank have to pay a $75 fee for each lock-in, for example. But it could be worth it, if you think fixing the interest rate will net you savings in the long run.

How to reduce your home equity loan closing costs

Home equity loan or HELOC closing costs can be expensive, but there are steps you can take to lower or eliminate them:

1. Improve your financial profile. You’ll get a better interest rate on your HELOC or home equity loan with a better credit score. And one way to do that is to reduce your debt-to-income (DTI) ratio: By paying off other obligations, you’ll be in a stronger position to receive — or ask for — a break on the closing costs. The lender might waive certain fees or, as with a lower DTI ratio, wrap them into your loan proceeds to minimize your upfront expenses.
2. Try your current financial institution first. Lenders often waive or discount fees for existing clients, especially those with a long relationship or sizable account. Don’t let the fee tail wag the loan dog, though: If your bank’s products aren’t competitive or suit your needs, go elsewhere, despite any little breaks it may offer you.
3. Shop around. Knowledge is power, and even if you like your current lender, comparing closing costs among lenders can help you find the most affordable home equity loan or HELOC option. It can also give you some bargaining power (see below). Start your search with the best low- and no-fee home equity lenders, as you’ll find an appealing absence of some of the common costs.
4. Negotiate with lenders. Don’t be timid about negotiating on home equity loan/HELOC costs and fees. These added charges are often more flexible than the lender might let on. If a lender is unwilling to budge on its closing fees, consider working with a different lender.
5. Explore no-closing-cost HELOCs or home equity loans. Some lenders offer these options, but don’t expect your home equity loan or HELOC to come free. Instead, the lender generally compensates for the lack of closing costs by charging a slightly higher interest rate, which means the overall cost of the home equity loan or HELOC might come out the same in the end.

Bottom line on home equity loan closing costs

So, do home equity loans have closing costs? Yes. So do HELOCs, though to a lesser extent: They tend to charge less upfront, and more to maintain and use the line of credit.

To explore whether borrowing against your home’s equity is right for you, be sure to crunch numbers with a home equity calculator. If you’re ready to move forward with a lender, be sure you understand all the associated expenses, even for loans or lines of credit with “no closing costs.”

Home equity closing costs FAQ

• Are home equity loan closing costs tax-deductible?
  

  Unfortunately, no. While you might be able to deduct some of the cost of a home equity loan or HELOC — namely, the interest you pay on it — the IRS generally doesn’t offer tax perks for closing costs. But as you move forward, the interest you pay on your home equity loan can be tax-deductible, depending on what you use the financing for.

• Do home equity loans have closing costs if you’re using the same lender as your mortgage?
  

  Perhaps. You might be able to score some sort of discount if you do other business with the company, especially if you’re a great customer who pays on time and has a sizable balance in your bank account. However, there is no rule that keeping your primary mortgage and your second mortgage under the same roof will translate to any savings. Regardless, make sure you cast a wide net and compare multiple lenders to make sure you get the best deal.

• Why do closing costs vary among lenders?
  

  Closing costs vary among lenders due to differences in their marketing strategies, pricing structures and profit margins. Some try to keep interest rates low and make up the difference in fees. Others take the opposite approach – they scale back on small fees, but set higher interest rates. Many who claim they have “no closing costs” simply roll the costs into the loan itself. Variations in lender policies can also reflect state laws that disallow or limit fees.

Additional reporting by Maya Dollarhide