HELOC Closing Costs and Hidden Fees: What to Expect Before You Sign
Don’t let hidden costs catch you off guard—understand the closing fees and expenses of a HELOC before you borrow.

When considering a Home Equity Line of Credit (HELOC), it’s crucial to understand not only how it works but also the costs and fees associated with the loan. Many borrowers overlook the closing costs and hidden fees that can add up quickly, making the loan more expensive than initially expected.

In this article, we’ll break down everything you need to know about HELOC closing costs and hidden fees, so you’re fully prepared before signing on the dotted line.

What Is a HELOC?

Before diving into the specifics of costs and fees, it’s important to understand what a HELOC is and how it works.

A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows homeowners to borrow against the equity in their property. It functions similarly to a credit card, in that you have a credit limit, can borrow and repay money as needed, and only pay interest on the amount you borrow.

The amount you can borrow is typically based on the equity in your home, your credit score, and your lender’s specific requirements. Many people use HELOCs for home improvements, debt consolidation, or to cover unexpected expenses.

However, like any financial product, a HELOC comes with costs—some of which are straightforward, and others that are hidden and easy to overlook. Understanding these costs before you sign is essential for making a well-informed decision.

What to Expect: HELOC Closing Costs

HELOCs are generally considered more affordable than traditional loans, but there are still closing costs that you should expect. These costs can vary depending on the lender, the amount of the loan, and your location. Here are some of the most common closing costs associated with HELOCs:

1. Application Fees

Many lenders charge an application fee to process your HELOC application. This fee covers the cost of reviewing your financial documents, checking your credit, and verifying your home’s value.

While application fees are generally not too high, they can range from $50 to $300 depending on the lender. Some lenders waive these fees if you meet certain criteria, such as applying for a large loan or agreeing to a certain interest rate.

2. Appraisal Fees

Since a HELOC is a secured loan, the lender will need to know the current value of your home to determine how much equity you have. To do this, most lenders will require a home appraisal.

Home appraisal fees typically range from $300 to $500, but they can be higher in areas with a high cost of living. Some lenders may offer a free appraisal as part of a special promotion, but this is not always the case.

3. Title Search and Insurance Fees

A title search is necessary to ensure that there are no outstanding liens or legal issues with your property. Lenders will often require a title search as part of the closing process, and you will typically be responsible for paying this fee.

Title insurance is also often required to protect the lender in case there are any issues with the property’s title in the future. These fees can range from $300 to $1,000 or more, depending on the value of your home.

4. Origination Fees

Origination fees are charged by the lender for processing the HELOC application and setting up the loan. These fees typically range from 0.5% to 1.5% of the total loan amount. For example, on a $50,000 HELOC, an origination fee could be between $250 and $750.

While these fees are fairly common, some lenders may waive or reduce them as part of a promotional offer or if you meet certain criteria.

5. Attorney Fees

In some cases, particularly in states that require attorneys to handle certain parts of the closing process, you may need to pay attorney fees. These fees are not always applicable, but if they are, they can range from $100 to $500, depending on the complexity of the transaction.

6. Closing Costs for HELOCs with Fixed-Rate Options

If your HELOC includes a fixed-rate option or is converted to a fixed-rate loan during the draw period, you might incur additional closing costs. These could include fees for refinancing your loan or converting it to a fixed-rate mortgage.

The costs can vary significantly depending on the lender’s policies, but they could range from $200 to $1,500.

7. Prepayment Fees

While not all lenders charge prepayment fees, some HELOCs come with a penalty if you pay off your loan early. These fees are designed to compensate the lender for the interest they would have earned if you had kept the loan for a longer period.

Prepayment fees are generally rare but should be considered when evaluating the terms of your HELOC. They can range from a flat fee of $200 to a percentage of the loan balance.

Hidden Fees to Watch Out For

In addition to the upfront closing costs, there are several hidden fees that can catch borrowers by surprise. These fees can add up quickly over the life of your HELOC, so it’s important to be aware of them before committing to a loan.

1. Annual Fees

Some lenders charge annual fees simply for having the HELOC. These fees can range from $50 to $100, and they’re charged every year the line of credit is open. Be sure to ask about annual fees when comparing lenders, as they can add up over time.

2. Transaction Fees

HELOCs are revolving lines of credit, meaning you can borrow and repay funds as needed. However, some lenders charge transaction fees every time you withdraw money from your line of credit.

These fees can be as low as $5 to $10 per transaction, but if you’re frequently using your HELOC, they can quickly add up.

3. Inactivity Fees

If you don’t use your HELOC for a certain period, the lender may charge an inactivity fee. These fees are typically charged annually and can range from $25 to $50, depending on the lender’s terms. If you plan to keep your HELOC open but don’t anticipate using it for an extended period, this is something to consider.

4. Late Payment Fees

As with any loan, failing to make timely payments on your HELOC can result in late fees. These fees typically range from $25 to $50, and they may be assessed if you miss a payment or fail to make at least the minimum required payment.

Additionally, late payments can result in a higher interest rate or other penalties, so it’s important to stay on top of your payments to avoid these extra costs.

5. Withdrawal Fees

Some lenders may charge a fee for certain types of withdrawals, such as wire transfers or checks issued against your HELOC. These fees are typically small—usually between $5 and $25 per transaction—but they can add up if you frequently make withdrawals.

6. Conversion Fees

If your HELOC offers the option to convert to a fixed-rate loan at any point during the term, there may be conversion fees involved. These fees can range from $250 to $500, depending on the lender and the terms of the conversion.

How to Minimize HELOC Costs

While HELOCs come with their fair share of costs, there are ways to minimize these expenses:

1. Shop Around for the Best Terms

Not all lenders charge the same fees, so it’s important to compare offers from different institutions. Look for a lender with low closing costs, minimal fees, and flexible terms. Online lenders and credit unions may offer better rates and lower fees than traditional banks.

2. Negotiate Fees

Don’t be afraid to ask your lender if they can waive or reduce certain fees, especially if you’re a loyal customer or have a good credit score. Many lenders are willing to negotiate to secure your business.

3. Understand All Costs Before You Sign

Before committing to a HELOC, make sure you understand all of the costs involved, including closing costs, hidden fees, and potential penalties. Ask for a full breakdown of fees from your lender, so there are no surprises later.

Know the Real Cost: Don’t Let Fees Drain Your Equity!

A HELOC can look great—until the hidden costs pile up.

Before you sign, ask the right questions.

What are the fees? What’s buried in the fine print?

Closing costs and sneaky charges can eat away your savings fast.

Be informed. Shop around.

Make sure your loan helps you—not hurts you.

Smart borrowers don’t just chase credit—they chase value.

Ready to borrow wisely?

Know the costs before you commit.