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Many of the costs in setting up a home equity line of credit are similar to those you pay when you buy a home. For example:

• A fee for a property appraisal, which estimates the value of your home.
  
  
• An application fee, which may not be refundable if you are turned down for credit.
  
  
• Up-front charges, such as one or more points (one point equals one percent of the credit limit).
  
  
• Other closing costs, which include fees for attorneys, title search, mortgage preparation and filing, property and title insurance, as well as taxes.
  
  
• Certain fees during the plan. For example, some plans impose yearly membership or maintenance fees.
  
  
• You also may be charged a transaction fee every time you draw on the credit line.

You could find yourself paying hundreds of dollars to establish the plan. If you were to draw only a small amount against your credit line, those charges and closing costs would substantially increase the cost of the funds borrowed. On the other hand, the lender's risk is lower than for other forms of credit because your home serves as collateral. Thus, annual percentage rates for home equity lines are generally lower than rates for other types of credit. The interest you save could offset the initial costs of obtaining the line. In addition, some lenders may waive a portion or all of the closing costs.

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