Okay, my neighbor Sarah started looking into home equity loans last spring. She'd built up about $150,000 in equity, needed funds for a major kitchen renovation, and figured she'd just borrow what she needed. Simple, right? Then she got the loan estimate and called me, completely thrown off by the fees. "Casey, there are like fifteen different charges here. I thought this was just going to be straightforward."
That conversation happens more than you'd think. According to the Consumer Financial Protection Bureau's home equity lending guidance, home equity loans and HELOCs are the second most common mortgage products in America after primary mortgages. With American homeowners holding an average of more than $300,000 in equity as reported by CBS News in April 2025, understanding these costs matters more than ever.
Closing costs are basically the admission fee for accessing your home's equity. You've built that equity through years of payments and property appreciation but borrowing against it involves real expenses. The good news? Many of these costs are negotiable and understanding what you're paying for puts you in control.
Home equity loan closing costs typically fall between 2% and 5% of your total loan amount, according to Bankrate's 2025 analysis. For that $100,000 loan, you're looking at $2,000 to $5,000 in upfront fees. Sometimes more, occasionally less, but that range covers most scenarios. The key is knowing which fees are standard, which are negotiable, and where lenders try to pad their profits.
Here's the straight answer: yes, home equity loans have closing costs. Just like your original mortgage, these loans involve paperwork, verification, legal processes, and risk assessment. All of that costs money.
The CFPB explicitly states that home equity loans "may have upfront fees and costs" and recommends comparing more than just monthly payments when shopping around. They're being diplomatic there. What they mean is these costs are real, they're substantial, and you need to factor them into your decision.
That said, the amount varies wildly. According to data compiled by Experian in May 2025, closing costs on home equity loans generally range from 2% to 5%, but some lenders charge as little as 1% while others approach 6%.
Let me work through a real calculation here. Say you're borrowing $80,000 against your home equity.
Closing Cost Calculation:
That $2,400 gap represents where shopping around and negotiating really matter. It's not pocket change. It's a vacation fund or several mortgage payments.
Here's every fee you might see, what it covers, and typical cost ranges. In my Master’s of Social Work (MSW) program, we learned about how financial stress affects families emotionally, especially when people feel blindsided by costs they didn't expect. That's exactly what happens with closing costs when you don't understand them upfront.
This table represents actual market rates as reported by multiple financial institutions in 2025. Your specific costs will vary based on location, lender, and loan amount.
Your lender needs to know what your home is actually worth right now, not what you paid for it or what you hope it's worth. That means hiring a professional appraiser.
Cost Range: $300 to $700, according to industry data compiled by LendingTree. Yahoo Finance reports typical appraisal fees between $300 to $450 as of February 2025.
A state-licensed appraiser visits your property, measures it, photographs it, and compares it to similar homes that recently sold in your area. These are called "comps." They're looking at your property's condition, location, size, features, and any improvements you've made.
The appraisal determines your loan-to-value ratio, which directly affects how much you can borrow. Here's how it works:
LTV Calculation Example:
Some lenders now use automated valuation models instead of full appraisals, which can reduce this cost significantly. According to The Mortgage Reports, some institutions waive appraisal requirements entirely for certain borrowers with strong equity positions. Worth asking about.
Every applicant's credit gets pulled. If you're applying with a spouse or partner, both credit reports get pulled.
Cost Range: $20 to $50 per credit report, according to LendingTree's analysis.
The lender checks your three-digit credit score from FICO or VantageScore and reviews your full credit history. They're looking for payment patterns, outstanding debts, credit utilization, and any red flags like recent late payments or collections.
This might sound minor at $20-$50, but remember if you're co-borrowing with someone, that doubles. Two applicants mean two credit reports, so you're looking at $40-$100 just for credit checks.
This is where lenders make a chunk of their money. The origination fee covers the cost of processing your application, verifying your financial information, and underwriting your loan.
Cost Range: 0.5% to 1% of your loan amount, according to data from LendingTree. Some lenders charge up to 1% or more, while others advertise no origination fees.
Origination Fee Comparison: On a $120,000 home equity loan:
That $600 difference is meaningful. At AmeriSave, explore home equity loan options with transparent origination fees so borrowers know exactly what they're paying and why.
The origination process involves underwriters who verify your income through pay stubs, tax returns, and bank statements, confirm your employment, calculate your debt-to-income ratio, and ultimately decide whether you qualify for the loan. This takes time and expertise, which is what you're paying for.
Before approving your loan, your lender orders a title search to examine the public record for any liens, ownership disputes, or legal claims against your property.
Title Search Fee: $75 to $200, depending on property location and complexity, as reported by Bankrate.
Title Insurance Cost: 0.1% to 2% of your loan amount, according to Experian's research.
The title search uncovers issues like unpaid property taxes which create a lien against your home, mechanic's liens from unpaid contractor work, judgment liens from unpaid debts, boundary disputes with neighbors, and previous owners' unresolved claims.
Once the search is complete, you'll purchase a lender's title insurance policy. This protects your lender if an ownership claim surfaces that wasn't discovered during the title search. If you already bought an owner's title policy when you purchased your home, you probably don't need to buy another one for a home equity loan. That's something to clarify with your lender upfront.
Title Cost Example: On a $150,000 home equity loan:
Someone has to prepare all the legal paperwork, and in some states, attorney review is legally required.
Cost Range: $100 to $400, or 0.5% to 1% of your loan amount, according to Yahoo Finance's February 2025 report.
These fees cover preparing your loan agreement, creating the promissory note, drafting the deed of trust or mortgage, and ensuring all documents comply with state and federal regulations.
In states that require attorney involvement like New York and Massachusetts, you're paying for a licensed attorney to review everything and ensure your interests are protected. It's an extra cost, but it's also an extra layer of protection.
Most of your loan documents need to be notarized, meaning a licensed notary public witnesses your signature.
Cost Range: $20 to $50 per signature or document, according to The Mortgage Reports.
This varies by state. Some charge per signature, others per document. It sounds minor, but when you're signing 15-20 documents, it adds up.
Your county clerk's office charges a fee to officially record your home equity loan in the public records.
Cost Range: $15 to $50, according to The Mortgage Reports.
This creates the legal record that your lender has a lien on your property. Without this recording, the loan wouldn't be legally enforceable. Some lenders also tack on administrative fees for things like document courier services, overnight shipping, or wire transfer fees.
HELOCs and home equity loans share some costs, but HELOCs come with their own unique fee structure.
The initial closing costs for a HELOC are often lower than home equity loans. According to Bankrate's September 2025 analysis, HELOC closing costs typically range from 1% to 5% of the credit limit.
Many lenders advertise "no closing cost" HELOCs, but read the fine print. They're usually rolling those costs into your interest rate or charging them in other ways.
Unlike home equity loans, HELOCs charge fees throughout the life of the line of credit:
Think of this as a membership fee for keeping your credit line available. Even if you never tap into it, you're paying for the privilege of having access.
Every time you draw funds from your HELOC, some lenders charge a transaction fee. If you're making frequent small withdrawals, these add up fast. Strategy here: make fewer, larger withdrawals to minimize these fees.
Close your HELOC before a specified period, usually 2-3 years, and you'll face penalties. Major financial institutions commonly charge $200 to $500 if you close within the first two to three years, according to Bankrate's research on early termination policies.
Early Termination Example: You have a $50,000 HELOC with $20,000 outstanding and decide to close it after 18 months.
This is why I tell people: don't open a HELOC unless you're genuinely planning to use it and keep it open for at least the minimum required term.
Negotiating Home Equity Loan Closing Costs: What Actually Works
Can you negotiate these costs? Absolutely. According to CBS News interviews with lending experts in April 2025, most closing costs are negotiable to some degree.
Nathan Young, founder of North Star Mortgage Network, told CBS News: "Reducing upfront expenses makes the loan more affordable, especially for those tapping into equity for renovations, debt consolidation, or major purchases. Paying less in fees means more of your home equity is actually going toward your goals, not into unnecessary costs.”
Nicollette Chapman, senior vice president at a housing data firm, recommends getting quotes from three different types of lenders: "Price loans out with three different types of lenders: a federally insured bank, an independent mortgage bank and a broker. Make sure to reach out to your personal bank. Many institutions will give preferred pricing to their depository banking customers" (CBS News, April 2025).
Three-Lender Comparison: You get these three offers for a $100,000 home equity loan:
Now you have leverage. Go back to Lender A and say, "Lender C offered me no origination fee. Can you match that?" Sometimes they will, sometimes they won't, but you won't know unless you ask.
A higher credit score signals lower risk to lenders. Yahoo Finance reports in their February 2025 analysis that borrowers with excellent credit scores of 740 or higher may qualify for fee waivers or reductions.
Lenders calculate your DTI by dividing your total monthly debt payments by your gross monthly income. Lower DTI equals better rates and potentially lower fees.
DTI Calculation: Your monthly debts:
Your gross monthly income: $7,500
DTI = $2,550 / $7,500 = 34%
Most lenders prefer DTI below 43%. If you're above that, pay down some debt before applying. Even getting from 45% to 40% can make a meaningful difference in your loan terms.
Some lenders offer home equity loans with no upfront closing costs. Before you celebrate, understand the trade-off. According to Bankrate, these loans typically come with higher interest rates.
10-Year Cost Comparison:
Option A: Pay $3,000 closing costs upfront, get 6.5% rate on $100,000
Option B: No closing costs, but 7.0% rate on $100,000
In this example, you pay the same total amount either way. The question is whether you prefer to pay upfront or over time. If you plan to pay off the loan early, paying closing costs upfront usually makes more sense.
Interest rates fluctuate. If rates are trending downward, waiting a few months could save thousands. Monitor the Federal Reserve's rate decisions and their forward guidance about future rate changes.
Some lenders offer package discounts if you already bank with them. CBS News reports that existing customers of major banks often receive preferred pricing. Your existing relationship gives you negotiating power.
Mark Worthington, branch manager at Churchill Mortgage, told CBS News: "The best way to be successful in negotiating closing costs is to speak to more than one source. This allows you to compare the service and cost levels to find what best serves your needs.”
Simply asking "Can you waive the application fee?" or "Is there any flexibility on the origination fee?" works more often than you'd think. Lenders want your business. The worst they can say is no.
For services like title insurance and appraisals, you sometimes have the option to choose your own provider. The Mortgage Reports notes you can "shop around with different suppliers for third-party services, like the appraisal and title search, to see if you can find one that charges less than you've been quoted.”
Don't fixate only on closing costs. Your interest rate has a much bigger impact on total costs over time. According to the CFPB's guidance, borrowers should "compare more than just your monthly payment when shopping around.”
Total Cost Comparison:
Scenario 1: $2,000 closing costs plus 6.0% rate
Scenario 2: $500 closing costs plus 7.0% rate
You saved $1,500 on closing costs but paid $4,800 more in interest. Sometimes paying more upfront for a better rate is the smarter move.
Closing costs feel like a barrier, and sometimes that frustration is valid. But home equity loans remain one of the most affordable ways to borrow large amounts of money when you need it.
The CFPB explicitly warns that "if you cannot pay back the HEL, the lender could foreclose on your home.” That's serious. You're putting your home at risk. So when does it make sense?
In my MSW coursework, we discuss how financial decisions create stress in families. Taking on more debt when you're already stretched thin doesn't solve problems. It amplifies them. Be honest about whether you need the money or just want it.
Home equity loans and HELOCs are great ways to get to the value you've built up in your home, but the closing costs are high and real. This is what this means for you.
You should expect to pay 2% to 5% of the amount of your loan in fees up front. That's how it is. If you take out a $100,000 loan, you'll have to pay back $2,000 to $5,000 before you get any money. From the start, take these costs into account when making your choice.
Pay attention to what you can control. You can't change fees that other people charge, like appraisals or recording fees. But you can definitely negotiate fees that lenders set, like origination fees. Shop around, compare at least three offers, and use competing quotes as leverage.
Think about the total cost of the loan over its lifetime, not just the initial payment. A loan with higher closing costs but a much lower interest rate is often cheaper overall. Do the numbers. Find out how much you'll pay in total over the life of the loan, whether it's 10, 15, or more years.
We think that being open about costs helps homeowners make better choices at AmeriSave. Knowing exactly what you're paying and why gives you control, whether you're paying off debt, making home improvements, or covering big costs.
It's important to remember that your home is your most valuable asset. Using its equity wisely can help you get ahead financially. If you don't use it carefully, you could lose everything. The closing costs are just the cost of getting in. The real question is whether the loan will help you reach your financial goals or make them harder to reach.
Not completely, but you can lower or put them off. Some lenders do offer home equity loans with no closing costs, which means they pay the fees. However, Bankrate's research shows that this usually means you'll have to pay a higher interest rate to make up for the lender's upfront costs. Some lenders include closing costs in the loan amount, so you don't have to pay them up front, but you do have to pay interest on them over the life of the loan. Neither choice actually gets rid of the costs. They only change when and how you pay them. To find out which option saves you more money in the long run, the CFPB suggests comparing the total cost of borrowing, which includes both upfront fees and interest charges. Paying closing costs up front usually costs less overall if you plan to keep the loan for a long time.
According to research from Experian, you should set aside 2% to 5% of your loan amount for closing costs. Some loans can have closing costs as high as 6%. If you want a $75,000 home equity loan, plan to spend between $1,500 and $3,750. The exact amount will depend on a number of things, such as your lender, where you live, how much you borrow, and how well you negotiate. Title and appraisal fees are usually higher in markets with higher prices. Since origination fees are usually based on a percentage, larger loans often have higher fees. Your credit score and financial profile are also important because people with good credit and strong finances may be able to get lower fees. Within three business days of applying, your lender should give you a loan estimate that lists all of the estimated costs. This document, which is required by the federal government, gives you a clear idea of what to expect and makes it easier to compare offers from different lenders.
Both products have a lot of the same upfront costs, such as appraisal fees, credit report fees, and title fees. The main difference is in the ongoing fees. Experian's analysis shows that home equity loans usually have higher closing costs up front, usually 2–5% of the loan amount, but no ongoing fees after closing. You get your money all at once, and then you pay it back in fixed monthly payments. That's all there is to it. HELOCs often advertise lower upfront costs, and some lenders even say there are no closing costs. However, they charge fees throughout the draw period, such as annual maintenance fees that can range from $50 to $250 per year, transaction fees every time you draw funds, inactivity fees if you don't use the line enough, and early termination fees if you close the account before a certain period of time, usually 2–3 years. LendingTree says that these ongoing HELOC fees can add up over time and sometimes even be more than the savings from lower upfront costs. You need to think about your needs and how you plan to use the money before making a choice.
In general, you can't deduct closing costs from your taxes, but you might be able to deduct the interest you pay on your home equity loan in some cases. The IRS says that you can only deduct the interest on a home equity loan if you use the money to buy, build, or make major improvements to the home that secures the loan. If you use a home equity loan to remodel your kitchen, bathroom, or add on to your home in a way that makes it worth more, the interest is usually tax-deductible. If you use the money to pay off credit card debt, buy a car, or pay for a wedding, you can't deduct the interest. The difference is important because it changes the real cost of borrowing. You may be able to deduct some closing costs, like mortgage interest points that you pay to lower your rate, over the life of the loan. Talk to a tax professional about your own situation because tax laws change and everyone's situation is different. The CFPB says that how you use borrowed money affects how taxes are handled.
The time it takes to go from applying for a loan to closing on it can be anywhere from two to six weeks. This depends on how quickly your lender processes your application, how quickly you send in the required paperwork, and how complicated your financial situation is. The day you sign the last loan papers, which is also the day you pay the closing costs, is called the "closing table." At least three business days before closing, your lender will give you a closing disclosure that lists all the fees you'll have to pay. You will need to bring a cashier's check or set up a wire transfer for the exact amount of the closing costs. Some people who take out loans choose to include the closing costs in the loan principal. This means that you are borrowing more than you need to pay for those costs. You don't have to bring cash to closing, but this makes your loan bigger and your monthly payments higher. Most lenders want to see that you have homeowners insurance and that your property taxes are up to date before you close. The appraisal usually takes place within the first week or two after you apply. Underwriting looks at your finances in detail in the middle of the timeline. AmeriSave's streamlined digital process can speed up many of these steps, cutting down on the time it takes to go from application to closing and making the process clearer for borrowers.
Yes, you can definitely negotiate, and doing so could save you hundreds or even thousands of dollars. CBS News talked to lending experts in April 2025 who said that lender-controlled fees give you the most room to negotiate. These fees include origination fees, application fees, document preparation fees, and rate lock fees. The lender sets these fees, but they can choose to lower or waive them to get your business. It's much harder to negotiate third-party fees like appraisals, credit reports, title searches, and government recording fees because they come from companies or government agencies that are not part of the deal. But you can sometimes choose your own title company or appraiser, which could save you money. Getting loan estimates from at least three different lenders and using their competing offers as leverage is the best way to negotiate. If one lender gives you better terms, show that offer to other lenders and ask them to match or beat it. A lot of them will, especially if you have good credit, a steady job, and are a good borrower. Nathan Young of North Star Mortgage Network told CBS News that it's very important to negotiate closing costs because paying less in fees means that more of your home equity goes toward your goals instead of the lender's profits.
If you don't have enough money at closing, you have a few choices. First, ask your lender if you can add closing costs to the loan amount. This means you'll borrow a little more to pay for those costs. This raises the amount of money you owe and the amount you pay each month, but you don't have to pay thousands of dollars in cash right away. Second, think about a home equity loan with no closing costs, where the lender pays the fees but charges a higher interest rate. Bankrate says that this usually raises your rate by 0.25% to 0.50%. Third, talk to your lender about lowering or getting rid of some fees, especially the ones for starting and applying for a loan. Fourth, wait and save money before applying. This is because paying closing costs up front with a lower interest rate usually costs less over the life of the loan. Fifth, look into whether a HELOC might be a better fit for your needs. Some have lower upfront costs, but keep in mind that they also have ongoing fees. Before making a choice, figure out how much it will cost you to borrow the money, including all fees and interest charges over the life of the loan. Sometimes delaying your home equity loan by a few months to save money for closing costs saves you thousands of dollars in the long run. The CFPB says that if you take out a home equity loan when you can't afford it, your home could be at risk of being foreclosed on.
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