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How much are closing costs on a HELOC or home equity loan?

Unlike traditional mortgages, many lenders don’t charge closing costs on HELOCs and home equity loans for primary homes — but there are other fees to watch out for.

Contrary to popular belief, many lenders don’t charge closing costs on home equity loans or home equity lines of credit (HELOCs) on primary residences — or only charge them under specific conditions. But you may still be on the hook for annual fees or early prepayment penalties. Here’s a closer look at closing costs and other fees you’re likely to run into on home equity loans and HELOCs.

Understanding HELOC and home equity loan closing costs

While many online sources state that you’re likely to pay between 2% and 5% in fees on home equity loans and HELOCs, it’s not entirely accurate. The fact is, only some lenders charge closing costs on home equity products — and you can probably avoid paying them if you shop around.

For example, lenders like U.S. Bank, Citizens Bank, Flagstar Bank, Bethpage Credit Union and Bank of America don’t charge closing costs on their home equity loans or HELOCs. But you still need to look at their interest rates and compare lenders to make sure you’re getting a good deal.

But other lenders do charge closing costs: Regions Bank charges them on loans over $250,000, while Navy Federal charges them on loans under $250,000. TD Bank only charges closing costs if a HELOC is over $500,000 and AppleTree Credit Union charges $296 for loans under $99,999. And it appears most lenders charge closing costs on home equity products for investment and second homes.

Because closing costs requirements vary so much by lender, ask your specific lender if closing costs apply to your loan. Watch out for these other fees, too:

HELOC and home equity loan fees

CostHELOCHome equity loan
Closing costsThese are often not charged, but some lenders will charge them depending on the loan amount.

Closing costs, if charged, typically range from $250 to $1,000.

These are often not charged, but some lenders will charge them depending on the loan amount.

Closing costs, if charged, typically range from $0 to $1,000.

Annual feeFrom $0 to $75 per year, depending on the lender and/or the state.None.
Prepayment penaltyTypically yes, if you close the line within 24 to 36 months.Typically no fee.
Third-party fees (credit check, appraisal, etc)Usually no charge, but some lenders may charge these fees.Usually no charge, but some lenders may charge these fees.
Application feeUsually no fee.Usually no fee.

HELOC and home equity loan closing costs

Check with your lender if these closing costs apply to your loan. Many lenders don’t charge them, but some do — and you may be required to pay these fees if you close your HELOC within 24 to 36 months of opening it.

  • Appraisal fee
  • Credit report fee
  • Document preparation fee
  • Title insurance
  • Survey costs
  • Recording fee
  • Notary fee

If your lender charges closing costs on their home equity loans and HELOCs, make sure the trade-off in the form or lower interest rates or other benefits is worth it to you.

How to get a no-closing-cost HELOC or home equity loan

Getting a no-closing-cost HELOC is a matter of shopping around. If a given lender is charging closing costs or origination fees, carefully evaluate whether it’s worth paying them in exchange for a lower interest rate or other benefits. If not, keep shopping around to find a lender that doesn’t charge closing costs.

3 more HELOC fees to expect

While many lenders don’t charge closing costs or origination fees, here are a few types of fees you can expect to pay:

  1. Annual HELOC fee. Many HELOCs come with an annual fee, typically ranging from $15 to $75.
  2. Early closure fee. Most HELOCs have an early closing fee if you close the line within 24 to 36 months. These fees can cost hundreds of dollars, so check how much you might be on the hook for.
  3. Inactivity fee. Some lenders may charge an inactivity fee on your HELOC if you don’t withdraw a set amount annually.

Another thing to be aware of is that the lender may require you to draw a specific amount when you open a HELOC. This amount may be as little as $100 or as much as $5,000 or more. Minimum withdrawal requirements and potentially increasing variable rates can affect the overall cost of your HELOC in the form of higher interest payments.

Which is more expensive?

The costs of establishing a HELOC or home equity loan are similar, but interest rates can vary widely and affect the overall cost or your loan more than any other factor. For instance, many HELOCs offer attractive introductory rates for six months to a year that are at least 1% lower than the fixed rates on home equity loans.

But after the introductory period is up, the rate on your HELOC can jump up to the prime rate plus a margin — which may make your HELOC rate less attractive. For example, if the prime rate is 4% and your margin is 1.25%, your variable rate will be 5.25%. This may be higher than the rate on a fixed-rate home equity loan if you locked in a low rate when rates were favorable.

To make sure you’re getting the lowest-cost loan possible:

  • Compare variable vs. fixed rates. Study where the prime rate is heading and compare the best variable rate on a HELOC to the best fixed rate on a home equity loan. If you think rates are going down, a HELOC could be cheaper than a home equity loan and vice versa.
  • Determine how much you need. Depending on the amount you want to borrow, see if you can get a better rate on a HELOC by doing a large initial draw versus a home equity loan. Many HELOCs offer discounted rates on larger initial draws. However, this strategy may only work in a climate of low interest rates.
  • Don’t take out more than you need. If you only need to borrow small amounts of money at a time and pay it off like a credit card, a HELOC can be a cheaper option than getting a home equity loan which starts charging you interest immediately.

Learn more about home equity loans and HELOCs pros and cons to help you decide which is better for your borrowing needs and budget.

Compare HELOCs and home equity loans

Comparing HELOC and home equity loan lenders can save you a bundle. Compare these lenders and lender marketplaces by the type of home equity product you’re seeking, their state availability and minimum credit score.

1 - 3 of 3
Name Product Loan products offered State availability Min. credit score
LendingTree
(NMLS #1136)
LendingTree
HELOC, Home Equity loans
Available in all states
620
Connect with vetted lenders quickly through this free online marketplace.
SoFi
(NMLS #1121636)
SoFi
Conventional, Jumbo, Home equity, Refinance
Not available in: HI
620
No hidden fees, multiple loan terms, and member discounts available.
Hometap Equity Partners
Hometap Equity Partners
Home equity investment
AZ, CA, FL, MA, MD, MI, MN, NC, NJ, NV, NY, OH, OR, PA, SC, UT, VA, WA
600
Sell a portion of your home's equity for cash without monthly payments or hurting your credit score.
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Compare up to 4 providers

3 tips to lower your closing costs

Here are three ways you can potentially reduce closing costs:

  1. Shop around. Hands down, shopping around and comparing lenders is the best way to save on closing costs. If possible, get a home equity product with a lender that doesn’t charge them, as many don’t.
  2. Borrow within the lender’s limits. Some lenders only charge closing costs if the loan is below or above a particular amount. Find a lender that doesn’t charge closing costs on the amount of money you need to borrow.
  3. Keep your HELOC open for 24 to 36 months. If you get a HELOC, prepare to keep the line open for a minimum of 24 to 36 months. Most lenders will charge you closing costs or prepayment penalties if you close the line too early.

5 alternatives to HELOCs and home equity loans

Home equity loans and HELOCs and cash-out refinance aren’t the only way to access cash. If you don’t have equity or don’t want to use your home as collateral, consider these other financing options.

  1. Cash-out refinance. Like home equity products, cash-out refinances let you access your equity but work differently. With a cash-out refi, you get a new loan to replace your old one for a higher amount. But closing costs on refis can run between 2% to 5%.
  2. Personal loans. An unsecured loan for as little as $500 or as much as $100,000 can be used for any purpose. But interest rates will likely be higher than for a home equity loan or HELOC. Compare the top personal loan lenders.
  3. Crypto-backed loans. If you own cryptocurrency, you may be able to borrow against these assets without having to sell them and pay capital gains tax. Learn more about crypto-backed loans’ upsides and drawbacks.
  4. Credit card advances. These have much higher APRs than home equity products, but the convenience can be worth it in some cases. To avoid paying interest for 12 to 18 months, consider an introductory 0% APR credit card.
  5. Peer-to-peer (P2P) loans. This is like a personal loan, but your loan is funded by another individual instead of a bank. Requirements for P2P loans may be looser than a bank loan, but there’s no guarantee of funding. Compare popular P2P lending platforms.

Bottom line

Getting a home equity loan or HELOC can be a smart financial move, but because you’re taking on more debt with these products, make sure the pros of borrowing outweigh the cons.

The good news is, you don’t have to pay closing costs in many cases if you shop around. To find the right fit for your needs, compare HELOC lenders.

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