How to Avoid Annual and Inactivity Fees on a HELOC

The Quick Read: You can sidestep both charges by choosing a line that does not charge them, negotiating a written waiver, or using the line in the way the lender defines as active. The fees are separate, they trigger differently, and each has its own fix. Match the fix to how you plan to use the money.

• An annual fee is charged for holding the line open, whether or not you borrow.
• An inactivity fee is charged when you make no draw for a set window, typically a year or more.
• Many lenders charge neither, and many will negotiate, so shop the fee schedule before you pick a lender.
• Ask in writing what counts as use, because a token draw may not reset the clock.
• Closing a line early can trigger a separate fee, so a more affordable plan sometimes means leaving an empty line open.

What Are Annual and Inactivity Fees, and Who Charges Them?

These are two of several ongoing charges that lenders can attach to a home equity line. Think of them as the cost of keeping the line available. The table below separates them from the other fees that get lumped in.

Lenders also use other labels for the same ideas: maintenance, dormancy, minimum-usage. When a fee schedule uses an unfamiliar word, ask which of these buckets it belongs to.

How big are the charges? Market surveys of bank and credit union lines report annual fees of roughly $5 to $250 and inactivity fees of roughly $5 to $50. They report early cancellation fees at a flat $200 to $500, or 2% to 5% of the balance, per Bankrate’s home equity closing cost breakdown. Those are market-wide figures, not a quote from any program Lendmire places. Fee schedules differ by lender, so the schedule attached to your specific file is the only number that matters.

Here is the useful part. CBS News reports that inactivity fees typically start after a year or more without use. It also says many lenders charge none. A fee you can dodge by picking a different lender is not really a cost of the product. It is a cost of that lender’s version of it.

Do You Pay If You Never Borrow?

It depends on the fee. An annual fee usually applies whether or not you borrow, because you are paying to keep the line available. An inactivity fee applies only when the lender sees no activity inside its window. Some lenders charge an annual fee only in years you take no draw, which blends the two.

A standby line that sits idle through a slow acquisition stretch is exactly the profile these fees hit hardest. Over a multi-year draw period, small recurring charges stack up even when each one looks trivial.

How Do You Avoid the Annual Fee?

Start by treating the annual fee as optional until proven otherwise. Work through these steps in order:

1. Shop for no-annual-fee lines. Compare the fee schedule across several lenders before you compare anything else. The fee is a lender choice, not a law of nature.

2. Ask for a waiver as part of your terms. CBS News notes that fees can be negotiated and that some lenders waive annual fees for borrowers who keep other accounts with them or meet minimum usage.

3. Get the waiver condition in writing. “Waived with relationship” can mean a linked deposit account that must stay open and funded. Ask what happens if the account lapses, and whether the fee returns on the next anniversary.

4. Check promotional waivers. A first-year waiver is just a delay. Find out what the fee becomes in year two and whether the line has a minimum open period.

5. Compare a no-closing-cost offer against the whole schedule. A line with no upfront costs often shifts the cost to the back end, usually through an early-closure fee that reclaims what was waived. No closing cost does not mean no fee.

How Do You Avoid the Inactivity Fee?

You have two real options. Choose a line with no inactivity fee, or keep the line active in the way the lender defines. The first is cleaner because it removes the problem instead of managing it.

If you are stuck with a fee, work through the second option:

1. Find the measurement window. CBS puts it at typically a year or more, though your agreement sets the actual period.

2. Ask what counts as activity. Some lenders set a minimum draw size, and a token transfer may not reset the clock. Get the answer in writing, not on a phone call.

3. Draw once, not often. If the lender charges a transaction fee on each draw, a single larger draw beats many small ones.

4. Time the draw before the window closes. Put a reminder on your calendar well ahead of the anniversary instead of testing the deadline.

5. Confirm whether a repayment resets anything. In most cases a draw is what counts, but the agreement controls.

One more mechanic matters here. On the investment and second-home lines Lendmire places through its wholesale partners, at least 75% of the line is drawn at closing. That is a program feature, not a fee tactic, but it changes the picture: a line that is mostly drawn on day one is not sitting idle. It also means the “dry powder” idea works differently, because most of the line is already borrowed. One of the two wholesale programs states a $1,000 minimum for later draws, so any activity-keeping draw has to clear that floor. Whether a given lender treats a draw at that size as activity is still a question for the written agreement.

Which Fee Is the Smaller Problem?

Sometimes avoiding one fee triggers another. The table below shows the common collisions and the safer path.

The early-closure collision is the big one. Bankrate’s prepayment penalty explainer describes a tactic: if a lender penalizes closing during the draw period, pay the balance to zero and leave the line open until the draw period ends. Most lenders then close an empty line without penalty. The catch is that an open empty line can pick up annual and inactivity fees along the way, so you are weighing carrying fees against the closure fee.

Run that comparison on your own schedule. If the carrying fees for the remaining months are smaller than the closure fee, wait. If they are larger, pay the closure fee and be done. The early-closure window is usually the first two to three years, which is why the first anniversary is the key moment to check.

What Changes on an Investment-Property Line?

Many bank HELOC products are built for owner-occupants, and the fee structure of an investor line can differ. That is why the written fee schedule matters more here.

What the network does state is the program’s shape. On an investment property, the ceiling is 70% combined loan-to-value (the first lien plus the new line, measured against the property’s value), with a minimum credit profile of 700 and a maximum line of $500,000. Investment lines run a five-year interest-only draw followed by a 25-year fully amortizing repayment, and pricing floats across both periods without converting to fixed. Because the line never converts to fixed, a conversion fee for locking part of the balance at a fixed rate, a charge you meet on other products, does not come up on this structure. All of this is subject to lender guidelines and full file review. Lendmire’s HELOC offering is available in 16 full-service states.

Title is the sharpest structural limit. The line must be held by you personally or by a revocable living trust. An LLC, corporation, or partnership cannot hold title. A property already deeded to an LLC needs a vesting change before the line is possible, or a different tool altogether.

That brings up the contrast with a DSCR loan. A DSCR loan is a term product that qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Nothing revolves, so there is no line to keep active and no inactivity clock. If you are weighing a standby line against a one-time cash-out, compare the line’s carrying cost over a realistic idle period against the cash-out. Lendmire’s comparison of a HELOC and a cash-out refinance on a rental walks through that tradeoff, and the complete DSCR loans guide covers the term-loan side. Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.

Investors weighing this should also read Lendmire’s breakdown of annual, origination and early-closure fees on investment-property HELOCs.

Key Terms Defined

Draw period: The stretch when you can borrow from the line, usually paying interest only.

Repayment period: The stretch after the draw period when the balance amortizes and new draws stop.

Combined loan-to-value (CLTV): Your first mortgage plus the line, divided by the property’s value.

Inactivity fee: A charge for not borrowing from the line within the lender’s window.

Early-closure fee: A charge for closing the line in its first few years.

Waiver: A lender’s agreement not to charge a fee, often tied to a condition such as a linked account.

What Should You Ask Before You Sign?

Use this list when you request the fee schedule. A good lender answers every item in writing.

• Is there an annual or membership fee, and what waives it?
• Is there an inactivity fee, and how is the window measured?
• What counts as a draw, and is there a minimum size?
• Is there a fee per draw?
• What is the early-closure fee, and how long does that window last?
• Do any fees change between the draw period and the repayment period?
• If I close at a zero balance, what applies?

Then check these moments across the life of the line. At application, collect the full schedule. At closing, confirm the signed terms match. At the first anniversary, check whether any waiver condition still holds and whether the window for activity is about to close. At the end of the draw period, confirm what happens to an empty line.

What If You Have Already Been Charged?

Pull the agreement first and find the clause that supports the charge. Then compare the fee to what you were told. If it does not match, ask for documentation and a reversal in writing. Escalate to a supervisor if the first answer is no.

The CFPB’s HELOC booklet offers a comparison worksheet covering annual fees, early termination fees, minimum draws, and draws allowed per year. It also says that if the lender changes terms before the loan is made, you can walk away and get all fees back. The CFPB’s guide to HELOC fees lists the fee types a lender may charge, including cancellation fees that usually apply in the first two or three years.

Next Step

If you are considering a home equity line and want to see how the numbers work, Lendmire can help you compare HELOC options based on the property, the equity available, credit profile, combined leverage, and your goals.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage broker. Home equity lines of credit — on a primary residence, a second home or an investment property — are arranged through wholesale lenders in Lendmire’s 16 full-service states, and every line is underwritten by the lender under its program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Bankrate: Home equity closing costs

2. CBS News: Surprising HELOC costs and how to avoid them

3. CBS News: HELOC fees that increase borrowing costs

4. Bankrate: HELOC prepayment penalty

5. CFPB HELOC brochure

6. CFPB: What fees can my lender charge if I take out a HELOC?