Understand and Lower Home Equity Loan Closing Costs

Home equity loan closing costs typically range from 2% to 6% of your total loan amount, adding thousands to your borrowing expenses. 

These costs include appraisal fees, origination fees, and other closing expenses that can significantly impact your bottom line. Understanding these charges helps you make smarter decisions about your borrowing options. Some lenders offer ways to reduce or eliminate certain closing costs, making it worth your time to know exactly what to look for when shopping for a home equity loan.

This guide breaks down the different types of home equity loan fees, explains what they cover, and shows you practical ways to lower your closing costs. You'll learn which fees are negotiable, which lenders might waive certain costs, and how to secure the most cost-effective home equity financing for your needs.

What are the home equity loan closing costs?

Most borrowers feel surprised by the variety and extent of home equity loan closing costs. These fees typically amount to 2% to 5% of your total loan amount, though they can reach up to 6%. If you're borrowing $50,000, you could pay between $1,000 and $2,500 in closing costs.

Knowing these costs helps you budget accurately and compare lender offers effectively. Here are the specific fees you'll likely face when taking out a home equity loan:

Appraisal Fees ($300-$800)

Lenders need to verify your home's current market value through an appraisal before approving your loan. This essential step determines how much equity you actually have available. Appraisal costs typically range from $300 to $450, though they can reach $800 in some cases. Prices vary based on your property's location and complexity.

Some lenders, like Better, might be able to waive the appraisal requirement

Many lenders now use automated valuation models (AVMs) instead of traditional in-person appraisals, potentially lowering this cost.

Credit Report Fees ($10-$100)

Lenders check your credit report to assess your creditworthiness and determine loan eligibility. These fees generally range from $10 to $100 per report, with most falling between $20 and $50. If you apply with a co-borrower, the lender will check both credit histories and charge accordingly. 

Origination Fees (0.5%-1% of loan amount)

Origination fees cover processing and underwriting your loan application. These typically range from 0.5% to 1% of your total loan amount. Some lenders charge a flat fee upfront while others take a percentage of your loan, potentially affecting your APR.

Document Preparation and Attorney Fees (0.5%-1% of loan amount)

These fees cover preparing legal documents related to your loan. In some states, an attorney must review these documents, adding to the cost. Document preparation and attorney fees generally range from 0.5% to 1% of your loan amount, though they can reach $2,000 in some cases.

Title Search and Insurance ($100-$450 for search; 0.5%-1% for insurance)

A title search examines your property's title history to ensure there are no outstanding liens or ownership claims. This typically costs between $100 and $450. Additionally, many lenders require title insurance to protect their investment against unexpected claims. 

Title insurance generally costs between 0.5% and 1% of your loan amount, though it can range from 0.1% to 2%.

Notary and Filing Fees ($20-$100)

Since a home equity loan creates a lien on your property, it must be filed with your local county clerk's office and properly notarized. These administrative fees typically range from $20 to $100, with notary services averaging around $20.

Beyond these standard fees, you might face other potential costs:

• Mortgage points - prepaid interest to lower your rate
• Mortgage recording fee - county fee for recording the lien
• Early payoff penalties - charged by some lenders if you pay off the loan early

The exact fees and amounts vary significantly based on:

• Your loan amount (larger loans generally have higher fees)
• Your property's value and location
• Local regulations and requirements
• Your lender's policies and fee structure

To fully understand what you'll pay, always ask for a detailed breakdown of closing costs from potential lenders. This transparency helps you decide which home equity loan offers the best overall value, considering both interest rates and closing costs.

How to lower your home equity loan closing costs

Closing costs can significantly increase the total expense of your home equity loan, but you can reduce these fees with the right approach. Implementing strategic actions could save you thousands of dollars on your home equity financing.

Find the right lender

Your choice of lender plays a crucial role in determining your closing costs. Some financial institutions offer special benefits that reduce your overall expenses.

Start with your current lender or credit union. Lenders often waive or discount fees for existing clients, especially those with established relationships.

For example, if you get a home equity loan with Better, you're automatically enrolled in the Better Forever program, a loyalty program that waives origination fees on any future purchase or refinance loans.

Consider a lender with no-closing-cost options. Several financial institutions offer home equity loans with no closing costs, though they typically offset this by charging a slightly higher interest rate.

You could consider a lender like Better, which allows you to roll your closing costs into the loan, making it so that there are zero upfront costs, while still offering you a competitive interest rate.

Consider specialized lenders. Some lenders cater to specific needs, such as fast closings or large loan amounts.

For example, with Better, you could get your cash in as little as 7 days¹.

Shop around

Comparing multiple lenders is perhaps the most effective strategy for reducing home equity loan closing costs.

Contact at least three different types of lenders and request detailed cost breakdowns, looking beyond just the interest rate.

Negotiate

Many borrowers don't realize that closing costs are often negotiable, particularly lender-controlled fees.

✅ Target origination fees. Lenders might pad their origination fee, which typically runs between 0.5% to 1% of the loan amount. For a $100,000 loan, you'd typically pay between $500 to $1,000. Don't hesitate to ask your lender to reduce or waive it, especially if you're a strong borrower or repeat client.

✅ Request fee waivers. Lenders that charge certain fees – such as credit pull fees – may waive them if you ask. Even if they aren't waived, you may be able to receive a credit toward them.

✅ Negotiate title and escrow fees. Ask your loan officer to price out options with two or three service providers. Many title companies offer a discounted re-issue rate, which is lower than the initial policy rate.

✅ Leverage competing offers. If another lender offers better terms, show the written offer to your preferred lender and ask them to match or beat it. This approach often yields positive results, particularly in competitive markets.

Consider a HELOC

A home equity line of credit (HELOC) might offer cost advantages over traditional home equity loans.

Lower upfront costs.

Many lenders offer HELOCs with no closing costs, no application fees, and no annual fees. Better, for example, offers HELOCs with no application fees, no annual fees, and no fees to use the funds. Plus, you can roll closing costs into the loan creating zero upfront costs.

Feature	Home Equity Loan	HELOC
Upfront costs	2-6% of loan amount	Often lower
Flexibility	One-time lump sum	Draw what you need, when needed
Interest charges	On full loan amount	Only on amount used
Rate type	Typically fixed	Usually variable with fixed options

Flexibility benefits.

Unlike home equity loans that provide a lump sum, HELOCs allow you to borrow only what you need, when you need it. This means you'll only pay interest on the portion of the line you actually use.

By using these strategies – finding the right lender, shopping around thoroughly, negotiating fees, and considering a HELOC – you'll minimize the closing costs on your home equity financing while still getting the funds you need for your financial goals.

To see how much equity you can borrow from your home and what your monthly payments might be, use Better's HELOC Calculator.

Conclusion

Understanding home equity loan closing costs helps you make smarter borrowing decisions that can save thousands of dollars. While these costs typically range between 2% and 6% of your loan amount, you now have several effective strategies to minimize them.

Comparing lenders remains essential since fees and policies differ significantly. Many financial institutions offer special programs or discounts, especially for their existing customers. Most closing costs are negotiable, making it worthwhile to discuss fee reductions with potential lenders.

Though traditional home equity loans work well for many borrowers, HELOCs offer another path with potentially lower upfront costs and more flexibility. The right choice depends on your specific financial needs and goals.

Ready to access cash from your home? Start by requesting detailed cost breakdowns from multiple lenders, focusing on both interest rates and closing fees. Ask specific questions about which fees can be reduced or eliminated, and don't hesitate to show competing offers to your preferred lender.

Finding the right combination of low closing costs and favorable loan terms requires research and negotiation. Taking time to understand these costs and explore different options helps secure the most cost-effective way to tap into your home's equity.

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¹ Disclaimer: Assumes borrowers are eligible for the Automated Valuation Model (AVM) to calculate their home value, their loan amount is less than $400,000, all required documents are uploaded to their Better Mortgage online account within 24 hours of application, closing is scheduled for the earliest available date and time, and a notary is readily available. Funding timelines may vary and may be longer if an appraisal is required to calculate a borrower’s home value.