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Home Equity Lines of Credit (HELOCs) offer homeowners flexible access to funds using their home equity. While they provide valuable financial leverage, many borrowers are surprised by early closure fees—a type of hidden penalty that can eat into your savings if you pay off or close the HELOC too soon. In this article, we’ll unpack what early closure fees are, why they exist, and how you can sidestep them.
What Are Early Closure Fees on HELOCs?
Early closure fees (also called early termination or cancellation fees) are charges assessed by lenders when a borrower pays off and closes a HELOC account before a specified time period—typically within 24 to 36 months of opening the account. These fees can range from a few hundred dollars to over $1,000, depending on your lender and loan terms.
Why Do Lenders Charge These Fees?
Lenders invest time and resources into setting up a HELOC. When borrowers close the line early, the lender may not recoup these costs. These fees are intended to discourage early closures and ensure the lender earns a return on their investment.
How to Avoid HELOC Early Closure Fees
1. Understand Your Loan Terms
Before signing your HELOC agreement, thoroughly review the terms—specifically the section outlining fees. Look for language like:
- “Early closure fee”
- “Early termination fee”
- “Cancellation within X months”
Check how long you must keep the account open to avoid the penalty.
Pro Tip: Ask your lender directly, “Is there a fee if I close the HELOC early?” and request the answer in writing.
2. Plan for the Full Commitment Period
If your lender requires a 36-month commitment to avoid early closure fees, plan to keep the HELOC open that long—even if you don’t use it. You don’t have to draw funds to keep the account open; just avoid closing it prematurely.
3. Negotiate Upfront
Sometimes, lenders are open to removing or reducing fees—especially if you’re a strong borrower or bundling multiple products. Don’t hesitate to negotiate before signing.
4. Watch for Refinancing Triggers
If you’re refinancing your mortgage and your HELOC is with the same or another lender, this may require closing the HELOC. Be strategic and time any refinancing with your HELOC terms in mind.
Common HELOC Early Closure Fee Triggers
| Scenario | Risk of Early Closure Fee |
| Selling your home within 2 years | High |
| Refinancing your mortgage | Medium to High |
| Paying off the HELOC early but not closing it | Low |
| Keeping HELOC open for full term | None |
FAQs About Early Closure Fees on HELOCs
Are early closure fees always included in HELOCs?
No, not all lenders charge them. It depends on the institution and the terms of your agreement. Always confirm before signing.
Can I pay off my HELOC early without closing it?
Yes. Most lenders allow you to pay off the balance without incurring fees as long as you don’t formally close the line of credit.
Do early closure fees apply if I never use the HELOC?
Yes, even unused HELOCs may incur fees if closed too early. It’s the account closure—not the usage—that triggers the fee.
Final Thoughts
Early closure fees on HELOCs can sneak up on borrowers, turning a smart financial move into an unexpected expense. The key to avoiding these penalties is understanding your loan terms, keeping the line open for the required period, and planning your financial moves strategically.
Before opening a HELOC or making early closure decisions:
Read Next
Looking to better understand home equity or improve your financial planning? Check out these articles:
- Cash-Out Refinance vs. HELOC: Which Is Best for Homeowners in 2025?
- Comparing Cash-Out Refinance Vs HELOC
Unlock Your Home Equity with Figure
- Approval in 5 minutes. Funding in as few as 5 days
- Borrow $20K-$400K
- Consolidate debt or finance home projects
- Fastest way to turn home equity into cash
- 100% online application
Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
