A home equity line of credit (HELOC) can be a flexible tool for accessing the equity you’ve built in your home. With a HELOC, you can tap into your line of credit whenever you need over an extended, multi-year period.
However, as with other home loans, taking out a HELOC comes with an assortment of closing costs. Additionally, many home equity lines of credit have other fees you may incur on an ongoing or situational basis. We’ll discuss the most common costs and expenses you’ll encounter, along with average cost ranges for each.
Key Takeaways
- HELOC closing costs can vary by lender, but typically range from 2% to 5% of your total line of credit.
- Some lenders may charge ongoing or situational fees, such as an annual fee, an inactivity fee, or an early termination fee.
- Shopping around, negotiating fees with your lender, and reassessing your borrowing needs can often lead to lower HELOC closing costs.
What Exactly Goes Into HELOC Closing Costs?
Closing costs are the fees associated with obtaining a loan, such as a home equity line of credit. This can include expenses incurred by your lender and third-party service providers.
While the actual breakdown of costs depends on the company you choose and what’s customary in your area, some of the most common HELOC closing costs include:
- Origination/application fees
- Appraisal fee
- Credit report fee
- Title search fee
- Filing fee
- Notary fee
- Document prep fees
In addition to these closing costs, many HELOCs have other fees that you may be responsible for, such as:
- Annual fee
- Inactivity fee
- Early termination/prepayment penalty
No-Closing-Cost HELOCs
You may have noticed some companies advertising no-closing-cost HELOCs. In most cases, however, this name can be a little misleading.
While it’s likely true you could open a line of credit with no out-of-pocket expense, lenders offering these types of HELOCs generally recoup their costs by either rolling the fees into your loan or charging you a higher interest rate than you’d otherwise qualify for.
In one way or another, you’re still likely to pay for the closing costs. However, these loans may be a practical option for homeowners who want to open a HELOC but need to keep upfront expenses to a minimum.
Typical Cost Ranges
In most cases, HELOC closing costs range from 2% to 5% of your total available line of credit. However, these costs can vary significantly based on the lender you choose.
Let’s take a closer look at some of the most common expenses and how much you can expect them to cost.
| Fee Type | Typical Cost |
| Origination/Application Fees | $15 to $500 or around 0.5% to 1% of the credit line |
| Appraisal Fee | $300 to $700 |
| Credit Report Fee | $10 to $100 |
| Title Search, Filing, & Notary Fees | $20 to $500 |
| Document Prep Fees | 0.5% to 1% of the credit line |
Origination/Application Fees
Typical Cost: $15 to $500, or up to around 0.5% to 1% of the credit line
An origination fee is a fee paid to the lender to cover the administrative costs associated with processing your loan. You may also see this referred to as an underwriting fee. In some cases, lenders may charge a separate application fee, though many roll it into origination costs.
Appraisal Fee
Typical Cost: $300 to $700
Lenders require a current home appraisal to accurately determine the amount of equity you have and the size of the line of credit they will offer. With most types of mortgages, this involves a professional appraiser conducting a site visit and doing a full traditional appraisal of your property.
Many HELOC providers, however, are turning to automated valuation models (AVMs) to generate a computer-driven estimate of your home’s worth. AVM appraisals tend to be far cheaper and faster than traditional appraisals, so be sure to ask prospective lenders about their appraisal requirements while shopping for your loan.
Credit Report Fee
Typical Cost: $10 to $100
Credit report fees cover the costs associated with pulling your credit report and credit scores from the major credit bureaus. This report – including your three-digit FICO score or VantageScore – is crucial in determining whether you meet the lender’s borrowing requirements, as well as for establishing your quoted interest rate.
Keep in mind that credit report fees are typically charged per loan application; if you’re applying jointly with someone else, you’ll likely need to pay twice.
Title Search, Filing, and Notary Fees
Typical Cost: $20 to $500, depending on location
Title search, filing, and notary fees are third-party administrative costs passed on to other service providers and your local government.
A title search is an examination of public records to ensure that you’re the legal owner of your home and that no other unknown outstanding claims exist against it. Notary fees are paid to the notary who notarizes all of the loan paperwork. Filing fees are the costs owed to your local government to file the HELOC documents into the public record.
Document Prep Fees
Typical Cost: 0.5% to 1% of the credit line
Document prep fees cover the costs of preparing all the paperwork associated with the loan. In some cases, these may be referred to as attorney fees, particularly if a third-party attorney is completing the documents. While you may see some lenders charging document prep fees separately, others may roll them into their overall origination costs.
Other Fees to Keep In Mind
In addition to closing costs, you may also be responsible for paying other fees on an ongoing or situational basis. Not all companies charge these fees, so be sure to ask lenders about their fee policies when shopping for a HELOC.
| Fee Type | Typical Cost |
| Annual Fee | $5 to $250 per year |
| Inactivity Fee | $5 to $50 per year |
| Early Termination/Prepayment Penalty | Up to $500 or 2% to 5% of your balance |
Annual Fee
Typical Cost: $5 to $250 per year
Many lenders charge an annual fee to cover the ongoing costs of maintaining your HELOC. While this fee varies by lender, and some may not even charge it at all, you will likely be responsible for paying it every year, whether you’ve used your line of credit or not.
Inactivity Fee
Typical Cost: $5 to $50 per year
Lenders earn money from the monthly interest you pay on your loan balance. As such, your company may charge a modest inactivity fee each year you don’t carry a balance or use your line of credit.
Early Termination/Prepayment Penalty
Typical Cost: Up to $500 or 2% to 5% of the remaining balance
Early termination/prepayment rules and penalties can vary by lender. Oftentimes, you can expect to pay an early termination fee if you close your line of credit within the first two or three years after opening it.
Why Costs Vary – Factors That Influence HELOC Fees
HELOC closing costs and fees can differ significantly depending on:
Lender Policies
Lenders are free to establish their own specific closing cost structure, meaning that you may be quoted vastly different amounts from one company to another.
Location & Regulations
Costs can vary by location due to various factors. This can include customary appraisal costs in your area, government filing fees, and local regulations, such as requiring an attorney to oversee all real estate loans.
Lender Type & Loan Amount
Since some closing costs are calculated based on the size of your loan, opening a larger line of credit often results in higher closing costs. Additionally, the type of lender you choose may impact your actual closing costs. For example, local credit unions tend to charge lower fees than national banks or mortgage companies.
How to Reduce HELOC Closing Costs
Here are five practical strategies to help reduce the required HELOC closing costs.
1. Shop Around With Multiple Lenders
Closing costs can vary depending on the lender and the details of your loan. Taking time to understand how fees and rates are structured can help you feel confident in your decision. Comparing offers may give you a clearer picture of what’s available and help you find a home equity line of credit that aligns with your financial goals.
2. Negotiate the Fees
Many HELOC closing costs, particularly those paid to the lender, such as origination and underwriting fees, can be negotiated. After shopping for quotes with at least three companies, use the most favorable loan estimate to force the other lenders to compete for your business.
As we touched on earlier, you may also be able to obtain a low or no-closing-cost HELOC with little to no out-of-pocket expense in exchange for agreeing to a slightly higher interest rate on your loan.
3. Reassess Your Borrowing Needs
Since some closing costs are charged as a percentage of your total available line of credit, reassessing your borrowing needs and opening a smaller HELOC may help you save on upfront fees.
Many homeowners end up paying more in closing costs than necessary because they simply accept the maximum offered line of credit without evaluating the equity they actually need to tap.
4. Set Up Autopay
While not all lenders offer this option, many will give you a small discount on your closing costs or ongoing interest rate if you set up autopay for your monthly payments when opening up your home equity line of credit.
5. Improve Your Eligibility
Improving your eligibility for the line of credit – such as raising your credit score or reducing your debt-to-income ratio – may not directly impact closing costs. Still, it can lower the quoted interest rate.
As such, it may make it more practical to opt for a no-closing-cost HELOC and still wind up with a lower interest rate than you would have previously qualified for due to your improved financial profile.
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The Closing Process
Closing typically occurs between two and six weeks after you formally apply for your HELOC. This period allows the lender sufficient time to process and fully underwrite your loan. Companies that use an automated valuation model instead of a full traditional appraisal tend to close sooner.
Once your loan officer is given the clear to close by the underwriting team, they work with you to schedule a date for the actual closing. This may take place in-person or online, depending on the lender you work with.
During the closing, you need to provide proper identification, review and sign the paperwork, and pay your closing costs. Since federal law provides homeowners with a three-day right of rescission on HELOCs, you generally have access to your line of credit approximately three days after closing.
Ready to Get Started?
Although HELOC closing costs will vary based on a variety of factors – including the lender you choose – you can typically expect to pay between 2% and 5% of your total available line of credit. However, shopping around, negotiating fees, and reassessing your borrowing needs can help lower the costs in many cases.
Ready to see what size home equity line of credit you qualify for? Start your application with Refi.com today!
