A Guide To Home Equity Loan Closing Costs

Need to pay for a major kitchen remodel? Want to add a primary bedroom suite? A home equity loan or a home equity line of credit (HELOC) can be a savvy way to pay for these and other home improvements.

Home equity loans and HELOCs are beneficial, especially when you understand the costs behind them. Let’s explore some closing costs you can expect to pay when closing on a home equity loan or HELOC. Rocket Mortgage^® doesn’t offer HELOCs at this time, but we do offer a Home Equity Loan.¹

Do Home Equity Loans Have Closing Costs?

Yes, home equity loans have closing costs. As with any mortgage loan, you’ll pay several closing costs when taking out a home equity loan or home equity line of credit (HELOC). You can expect to pay 3% – 6% of your total loan amount in closing costs for a home equity loan.

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

But what fees and services contribute to your closing costs?

What Are The Different Kinds Of Home Equity Loan Closing Costs?

A home equity loan allows you to borrow against the equity you’ve built in your home— a figure that rises as you pay down your mortgage loan and/or the value of your home increases. Home equity loan closing costs include various fees.

Quick Guide To Home Equity Loan Closing Costs:

1. Appraisal Fees

A home appraisal is a key step in your application for a home equity loan. Before approving the loan, your lender must determine how much your property is worth. To do this, your lender will order a home appraisal. A state-licensed third-party appraiser will visit your home and compare it to similar properties in the area that have recently sold. This also includes a standard health and safety assessment.

The appraiser will then determine the market value of your property, a figure your lender will need to calculate how much equity you’ve built. The appraisal fee will vary by location, but you can generally expect to pay in the range of $600 – $2,000.

2. Credit Report Fees

Before approving the home equity loan, your lender will pull your credit report and check your three-digit credit score. Credit service fees vary, but most will cost anywhere from $20 – $50.

If you’re applying for a home equity loan with someone else, such as a spouse or partner, lenders will check the credit of everyone listed on the mortgage and charge for every credit report they pull.

3. Attorney Fee Or Document Preparation Fees

Your lender will prepare numerous documents you must review and sign for a home equity loan. In some states,’ attorney review of these documents is required to ensure they accurately reflect your closing costs.

The fees will vary, but you can expect to pay 0.5% – 1% of your loan amount on document preparation or attorney fees.

4. Origination Fees

Your lender will charge a mortgage origination fee to cover the costs of processing your loan, such as collecting your financial information and underwriting your loan. Underwriters are responsible for verifying your income and confirming that you can afford your new monthly mortgage payment.

This fee will also vary, but you can expect to pay 0.5% – 1% of your loan amount.

5. Notary Fees

You must hire a real estate notary if you have paperwork you need notarized during closing. Notary fees will vary, but you can expect to pay about $20 for notary services.

6. Title Search Fees

Your lender will order a title search before approving you for a home equity loan. It’s a search of the public record for liens or ownership claims other entities – including government bodies or individuals – have against your home. For example, if you're behind on your property taxes, your county may have a lien against your home, which would show up during a title search.

The title search fee often depends on a property’s location and generally costs $75 – $200.

7. Title Insurance Costs

Your lender will probably require a lender’s title insurance policy when you take out a home equity loan. The insurance protects your lender if an individual, government body, or other entity makes an undiscovered ownership claim against your home that didn’t come up during the title search. You can expect to pay 0.1% – 2% of the loan amount for a lender’s title policy.

You probably don’t need to buy an owner’s title insurance policy – which also protects a homeowner against unexpected ownership claims – when taking out a home equity loan if you already purchased one when you purchased the home.

A home equity loan is one way to borrow against your home’s equity and meet your financial needs, and a home equity line of credit is another.