A guide to home equity loan closing costs

Do home equity loans have closing costs?

Yes. You can expect to pay 3% – 6% of your loan amount in closing costs for a home equity loan.¹

For example, if you take out a $100,000 home equity loan, you can expect to pay $3,000 – $6,000 in closing costs.

Closing costs may vary based on loan amount, property location, and lender requirements, and they are typically due at closing unless rolled into the loan.

Quick guide to home equity loan closing costs

Understanding your expenses is easier when you see them broken down line by line. Some home equity loan fees are flat charges, while others are calculated as a percentage of your loan amount.

Deep dive into home equity loan closing costs

What do home equity loan closing costs pay for? While these fees often vary by lender, property type, and the loan you’re getting, here’s a general idea of what you can expect.

1. Appraisal fees

Before approving the loan, your lender will determine the value of your property by ordering a home appraisal. The results allow your lender to determine how much equity you have, which affects how much you can borrow with a home equity loan. You can generally expect to pay an appraisal fee between $300 and $500. You may pay more if the home is unique or remote. In some cases, lenders may use an automated valuation model (AVM) instead of a traditional in-person appraisal, which could reduce this cost.

2. Credit report fees

Before approving the home equity loan, your lender will pull your credit report and check your credit score. Credit service fees vary, but most cost around $30 - $50, depending on what credit score your lender uses.

3. Origination fees

Your lender will charge a mortgage origination fee to cover the costs of processing and underwriting your loan. You also may see the origination fee broken out into a document processing fee and an underwriting fee. Expect to pay 0.5% – 1% of your loan amount.

4. Notary fees

In most states, a real estate notary must conduct your closing. You can expect to pay up to $20 – $200.

5. Attorney or document preparation fees

Some states require an attorney to conduct the closing. Your settlement provider will handle these arrangements. There also may be special document preparation required. The fees can range from $100 to $500.

6. Title search fees

Your lender will order a title search before approving you for a home equity loan. This is a search of public records for outstanding liens or ownership claims against your home. This process protects both you and the lender from future ownership disputes. The title search fee typically costs $75 – $250.

7. Title insurance

Title insurance protects the lender’s financial interest in the property if a previously unknown ownership claim or lien surfaces later. It is important to distinguish between the two types of policies:

• Lender’s title insurance is typically required by the lender. It protects the lender's investment if a previously unknown ownership claim or lien surfaces. You can expect to pay 0.1% – 1% of the loan amount for this policy.
• Owner’s title insurance protects you, the homeowner. Since a home equity loan is a second lien, you likely won't need to purchase a new owner's policy if you already bought one when you originally purchased the home.

In some cases, title providers, including Rocket Close, offer an insurance wrapper rather than a new policy. This can apply when there's an existing primary mortgage on the home with a lender’s title policy already in place. A title search is still conducted to confirm there are no new claims or liens.

8. Closing or settlement fee

A fee is charged to facilitate your settlement, which involves the coordination of final documents, the recording fees, and the disbursement of funds. This is often $200 – $1,000.

What are closing costs and fees for a HELOC?

You'll also pay closing costs on home equity lines of credit (HELOCs). A HELOC functions like a home equity loan, but instead of borrowing a lump sum, your equity backs a line of credit you can draw on as needed.

Rocket Mortgage does not currently offer HELOCs, but knowing how they work can help you understand all your borrowing options.

HELOC closing costs are like home equity loan closing costs, but there are ongoing fees that may be more commonly associated with credit cards:

• Annual fees. There may be an annual fee for maintaining the account.
• Termination fees. This could be charged when you close the account early. For example, these are often expressed as a percentage of the loan amount, up to a maximum.
• Transaction fees. You could pay a small fee each time you withdraw money from the HELOC.
• Inactivity fee. There may be fees if you don’t use the account at least to the minimum set by your lender.

How can you reduce your home equity loan costs?

If you’re looking to reduce the costs associated with your home equity loan, there are several ways to do that.

1. Find lenders with no-closing-cost home equity loans

Some lenders offer home equity loans with no closing costs. In exchange for not paying closing costs, you'll typically pay a higher interest rate, which may cost you more in the long run. Buyers should compare total costs, not just up-front fees, when deciding on a lender.

2. Improve your credit score

Borrowers who improve their credit scores may qualify for lower interest rates on home equity loans. You can improve your credit score by paying your bills on time and reducing your debts.

3. Shop around and compare lenders

Closing costs for home equity loans vary depending on which mortgage lender you choose. Before deciding, compare a Loan Estimate from multiple lenders. Request fee breakdowns from the lenders and review the detailed charges to ensure everything is clear.

4. Negotiate your closing costs

Negotiating closing costs with lenders is another way to reduce the cost of your home equity loan. Lenders may waive specific fees if you ask. If they aren’t waived, you may be able to receive a credit toward them.

5. Reduce your debt

You can boost your odds of getting a lower interest rate on your loan by reducing your monthly debt before applying. Lenders look at your debt-to-income ratio (DTI) to help determine what interest rate you qualify for.

The ratio measures how much of your gross monthly income goes toward your monthly debts and your estimated new loan payment. You can reduce your DTI by paying off as much debt as possible.

The bottom line: Home equity closing fees may be negotiable

Home equity loans have closing costs for everything from appraisals and title searches to notary services. You can generally keep your costs down by improving your credit score and DTI to secure a better interest rate. You can consider no-closing-cost options in exchange for a higher rate, or negotiate costs with your lender.

If you’re ready to get started or look at other options, you can apply online with Rocket Mortgage today.

¹Home Equity Loan Product is a second standalone lien and may not be used for piggyback transactions. Valid for loan amounts between $45,000.00 and $500,000.00 (minimum loan amount for properties located in Michigan is $10,000.00). Not available on Ameriprise products. Additional restrictions, terms, and conditions apply. Must meet qualification requirements. This is not a commitment to lend

Rocket Mortgage, LLC, RockLoans Marketplace LLC (d/b/a Rocket Loans), Rocket Close, LLC, and Rocket Money, Inc. are separate operating subsidiaries of Rocket Limited Partnership. Redfin Corporation is an affiliated business. Each company is a separate legal entity operated and managed through its own management and governance structure. Rocket Limited Partnership and Redfin Corporation are wholly owned subsidiaries of Rocket Companies, Inc. (NYSE: RKT).