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Closing on a home equity loan is a big step for homeowners who are taking advantage of the average of more than $300,000 in equity they have. For many, a home equity loan will be the biggest secured loan they’ll take out. When you’re dealing with loans of this size, it’s natural to want to look for opportunities to save money.
Shopping around for low home equity loan rates is one way to cut costs, as a lower rate can save you thousands over the life of your loan. However, interest rates are just one part of the overall cost of borrowing a home equity loan. While rates can impact how much you pay over time, a home equity loan’s closing costs affect how much you pay up front, generally speaking. Closing costs for a home equity loan tend to range from 2% to 5%, representing $2,000 to $5,000 in fees for a $100,000 loan and $4,000 to $10,000 in fees for a $200,000 loan.
Finding a way to save on closing costs could potentially reduce your out-of-pocket expenses at closing, but is it even something you can do? Below, we’ll break down what to consider now.
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Can you negotiate home equity loan closing costs?
Generally speaking, yes, you can negotiate your home equity loan closing costs.
“Reducing upfront expenses makes the loan more affordable, especially for those tapping into equity for renovations, debt consolidation, or major purchases,” says Nathan Young, founder of mortgage lender North Star Mortgage Network. “Paying less in fees means more of your home equity is actually going toward your goals — not into unnecessary costs.”
To be as successful when you negotiate your home equity loan closing costs, it’s important to know which costs tend to be easiest and hardest to negotiate.
Origination, application, appraisal, title and escrow fees: Easier to negotiate
When you receive your loan estimate from your home equity loan lender, read over your estimate line by line, Young recommends.
If you see origination, application, appraisal and title fees (which you most likely will), there’s an opportunity to negotiate, says Nicollette Chapman, senior vice president of mortgage data solutions at housing tech and data firm Zonda.
“Borrowers will have the most negotiating power with lender-controlled costs like origination fees, discount points, and even application charges,” Chapman says. Some lenders may pad their origination fee, which they charge for processing your loan, Young says. As a result, be direct with your negotiation here.
“Ask your lender to reduce or waive it entirely,” he says. “If you’re a strong borrower or a repeat client, there’s room to cut this down.”
You’ll likely see title and escrow fees listed in your loan estimate, too. You might be able to reduce these costs by making a simple ask of your lender, Chapman says.
“Title and escrow fees also vary – ask your loan officer to price out options with two or three service providers,” she says. “In addition, many title companies offer a discounted re-issue rate, which is lower than the initial policy rate.”
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Recording, credit report and appraisal fees: Harder to negotiate
While lenders can typically control the costs of a home equity loan’s origination and application fees, they have less control over recording fees (what you pay to record the transaction with your local government), credit report fees and appraisal costs.
“Certain costs like credit reporting charges and recording fees are often fixed amounts and are not determined by the lender,” Chapman says. While those fees may not be easily negotiable, you can always ask the lender if you can avoid paying the fees upfront.
“If the borrower prefers to keep out-of-pocket closing costs minimal, many fees can be rolled into the loan,” she says. That being said, there may be some wiggle room in these hard-to-negotiate fees, Young says — appraisal fees are a good example.
“While the appraiser sets the base rate, lenders often mark it up or use preferred vendors,” he says. “Ask if you can choose your own appraiser or get a refund if a recent appraisal is already on file.”
How to effectively negotiate home equity loan closing costs
A good negotiation starts with good preparation.
“Negotiation isn’t about being pushy — it’s about being prepared,” Young says. “When clients come to the table informed, they save more, borrow smarter and walk away feeling confident.”
Part of that preparation is to get home equity loan quotes from multiple lenders to compare potential closing costs.
“Price loans out with three different types of lenders – a federally insured bank, an independent mortgage bank and a broker,” Chapman says. “Make sure to reach out to your personal bank – many institutions will give preferred pricing to their depository banking customers.”
Comparing offers isn’t just about finding the lowest price, though — it’s also about finding the loan that works best for you, says Mark Worthington, branch manager for mortgage lender Churchill Mortgage. “The best way to be successful in negotiating [home equity loan] closing costs is to speak to more than one source,” Worthington says. “This allows you to compare the service and cost levels to find what best serves your needs.”
Once you have your offers in hand and can compare closing costs, you might be able to lower your fees by allowing the lenders to compete with each other. “Nothing talks like paper,” Young says. “If another lender is offering a better deal, show it — and ask your preferred lender to match it or beat it.”
And if you’re feeling particularly brave, consider adding your lenders and PDFs of their offers to a group email in which you ask which company can make the best offer by a certain deadline, says David Wickert, president of mortgage lender Accunet Mortgage.
“Get three quotes in writing, attach all of those PDFs to one email, and put every lender on the same email chain with each other,” Wicker says. “Ask all of them all at once who can improve their offer to you as you’d like to make a decision by noon the following day.”
The bottom line
No matter which approach you take during your negotiations, maintain respect for your lenders, Young says. “Ask questions. Push back — respectfully,” he says. “A good lender will be transparent and work with you.”
During the negotiation process, remember that things may not always move as quickly as you want them to. Generally speaking, a home equity loan closing can take two weeks to two months, provided there aren’t any hiccups along the way that can extend the process. As a result, being patient is an important part of your negotiation, Chapman says.
“Approach negotiations with patience – taking out a [home equity loan] is an important financial decision,” she says.