Mortgage questions
Are there closing costs on a home equity loan?
Yes. A home equity loan almost always comes with closing costs, and they are usually smaller than the costs on a first mortgage because there is no title search on a new purchase and no real estate agent involved. The costs you pay depend on the lender, the loan size, and whether you take a lump sum (a home equity loan) or a line you draw from over time (a HELOC). Some lenders advertise a no-closing-cost version, but that usually means the costs are folded into a higher rate or a larger balance rather than truly waived.
What you are actually paying for
A home equity loan is a second loan secured by your house, so the lender still needs to confirm the home's value and its place in line behind your first mortgage. That work is what the fees cover. You will typically see an appraisal or a property valuation, a title search and title insurance for the lender's benefit, a recording fee to put the new lien on the public record, and an origination or application fee. If your home is in a state that taxes mortgage recordings, there may be a small state fee as well. None of this is the same as the closing costs on a purchase, which also include agent commissions and prepaid taxes and insurance. On a home equity loan, the list is shorter and the total is usually a fraction of what you paid when you bought the house.
Where to find every fee before you commit
The lender must give you a Loan Estimate within three business days of your application. On a home equity loan, the fees sit in Section A (origination charges) and Section B (services you cannot shop for), with recording and transfer taxes in Section E. Section C is for services you can shop for, like your own title company, and Section J lists lender credits. Read Section A carefully: those charges are zero tolerance, which means the lender cannot raise them at closing unless something documented changes, such as a floating rate lock that reprices points or an estimate that has expired. If a number in Section A moves without one of those reasons, ask why in writing. The same figures appear again on your Closing Disclosure a few days before you sign, and the two documents should match.
The no-closing-cost version is a trade, not a gift
When a lender says there are no closing costs, one of two things is happening. Either the lender is giving you a lender credit, which is money applied to your closing costs in exchange for a higher interest rate, or the costs are being added to your loan balance so you pay them back with interest over the life of the loan. Both are legitimate, and both mean you pay more over time in exchange for paying less today. The trade flips based on how long you keep the loan. If you plan to sell or refinance in a couple of years, taking the credit and the higher rate can be the cheaper path. If you plan to keep the loan for a decade, paying the costs up front and taking the lower rate usually wins. Run the two versions side by side and compare the total cost over the years you actually expect to hold the loan, not just the monthly payment.
A worked example in plain numbers
Say you are borrowing against your equity and the lender quotes two options. Option one has closing costs you pay at the table and a lower rate. Option two has no costs at closing and a rate that is higher by a fraction of a percent. Over the first year, option two looks cheaper because you wrote no check. Over five years, the extra interest on option two starts to overtake the costs you avoided. Over ten years, option one is clearly cheaper. The exact crossover point depends on your loan size and the rate difference, so ask the lender to show you both versions on the same Loan Estimate and compare the total interest plus fees for your expected holding period. That single comparison answers the question better than any rule of thumb.
How a broker changes the picture
A mortgage broker arranges the loan with a lender and does not lend the money itself. Broker compensation is fixed in advance per lender and cannot vary with your rate or terms, so the broker has no financial reason to steer you toward a higher rate. That matters here because the broker can price the same home equity loan with several lenders and show you which ones waive or reduce specific fees. Ralo publishes a rate index, county rate grids, and a weekly report so you can see where pricing sits before you apply, and the methodology page explains how those figures are built. You can also verify any mortgage company's license for free on NMLS Consumer Access before you share your documents.
Questions to ask before you sign
Ask for the Loan Estimate and read Section A line by line. Ask which fees are zero tolerance and which can change. Ask whether the quoted rate assumes you pay points, which are an upfront fee for a lower rate, or whether it includes a lender credit, which is lower closing costs in exchange for a higher rate. Ask whether the appraisal can be waived or replaced with a cheaper valuation. Ask whether there is a prepayment penalty, and if so, how long it lasts. Ask what happens to the rate if you take a HELOC instead, since most HELOC rates are variable and set as an index plus a margin, while a home equity loan rate is fixed for the life of the loan. Write the answers down and compare them across at least two lenders. Borrowers who compare multiple quotes save real money, and the credit impact of shopping is smaller than most people expect because mortgage inquiries inside the shopping window are scored as a single inquiry.
Figures used on this page
| Figure | Value | Source |
|---|---|---|
| Section A (lender origination charges) at closing | zero tolerance — cannot exceed the Loan Estimate absent a documented changed circumstance, a floating-rate lock repricing points, or an expired estimate | CFPB TRID rules |
| Broker compensation structure | fixed in advance per lender; cannot vary with your rate or terms | CFPB loan originator compensation rule (Regulation Z) |
| What a mortgage broker does | Arranges the loan with a lender; does not lend the money itself | CFPB, What is a mortgage broker? |
| Verifying any mortgage company’s license | free public lookup on NMLS Consumer Access | NMLS Consumer Access |
| What a discount point is | An upfront fee paid for a lower interest rate | CFPB, discount points and lender credits |
| What a lender credit is | Lower closing costs up front in exchange for a higher interest rate | CFPB, discount points and lender credits |
| Where each appears on the Loan Estimate | Points in Section A, Origination Charges; credits as a separate Lender Credits line in Section J | CFPB, Loan Estimate explainer |
| HELOC rate | Variable in most plans, set as an index plus a margin | CFPB, What is a home equity line of credit? |
| Home equity loan rate | Fixed for the life of the loan | CFPB, What is a home equity loan? |
| Taxpayers taking the standard deduction (no mortgage-interest benefit) | roughly 9 in 10 | IRS Statistics of Income |
| Credit cost of shopping multiple lenders | scored as a single inquiry inside the shopping window | CFPB |
| Mortgage inquiry dedup window (newer FICO models) | 45 days scored as one inquiry | CFPB |
| Mortgage inquiry dedup window (oldest FICO models) | 14 days scored as one inquiry | CFPB |
| Savings from comparing multiple lender quotes | $600–$1,200 per year | Freddie Mac research |
Ralo is an automated mortgage broker — not a lender — that compares multiple lenders from one application, earns a thin commission, and shows rate, APR, and fees upfront. Rates shown anywhere on this site are illustrative examples, not a loan approval, rate lock, or commitment. Available where licensed: California, Colorado, and Texas.