What is a Wells Fargo HELOC?
If you need cash to pay for a major or unexpected expense such as a medical bill, then a Wells Fargo home equity line of credit may be right for you. These flexible loans allow you to draw out cash when you need it using the equity in your home as collateral. Here’s a breakdown of how Wells Fargo HELOCs work and when one could be right for you.
How Wells Fargo HELOCs Work
Wells Fargo HELOCs are similar to most other home equity lines of credit in many respects, except that they have changed their HELOCs so that an interest-only payment is no longer available during the draw period. The draw period set by Wells Fargo is 10 years and 1 month, with a repayment period of 20 years.
Borrowers cannot exceed a loan-to-value ratio of 85% when they apply for a HELOC, and then the balance of their first mortgage must be subtracted from that amount. (And the LTV for homestead properties in Texas is 80%.) The minimum amount that Wells Fargo will issue for a HELOC is $25,000, and the maximum amount is $500,000. One key difference between Wells Fargo and many other lenders is that they allow borrowers to secure their HELOCs with a second home or investment property. But the LTV rules are the same in these instances as with a primary residence.
Wells Fargo HELOCs have no closing costs, prepayment or origination fees of any kind. There are also no application or annual fees. The amount of time that it takes to get approval for a HELOC will vary from one loan to the next, depending on the amount of documentation or other written evidence that is needed. The time to closing varies as well.
There are four ways that Wells Fargo HELOC customers can draw on their HELOCs once they’re approved:
- Transfer funds online – Wells Fargo customers can log on to Wells Fargo Online® at any time and select the transfer tab
- Transfer funds over the phone – Users can call Wells Fargo’s toll-free number any day and time to transfer funds into their bank account. Transfers that are initiated outside of business hours will be credited the next business day.
- Home equity line of credit checks – These checks will be issued when the account is opened if they are requested by the customer.
- Enhanced Access® Visa® credit card – This card allows you to make purchases drawing directly on your line of credit anywhere that accepts Visa cards. Customers have zero liability if their card is stolen as long as they report this promptly to Wells Fargo.
The minimum amount that a Wells Fargo customer can draw on is $300 (or $4,000 for lines attached to homestead properties in Texas).
How to Qualify
The following documents are required for prospective borrowers who are looking to get a home equity line of credit from Wells Fargo: (2)
- Name, address and phone number
- Government issued photo ID and Social Security number (from each spouse for a joint application)
- A breakdown of monthly income (all sources)
- Most recent pay stub
- Monthly debt obligations
- Financial assets
- Employer name
- Occupation and length of time in profession
- Length of time in current position
- W-2 from employer, or if with current employer for less than two years, W-2 from former employer
- Business phone number
For self-employed applicants
- Federal tax returns (personal and business) for the past three years
- Profit and loss statement – year to date
- List of all business debts
- Estimated market value of your home
- Property purchase price and year
- Estimated mortgage balance and monthly payment, including real estate taxes and homeowner’s insurance declaration page
In addition to all of the documents listed above, you may also need to furnish:
- Personal and business tax returns
- Financial documents, such as bank and other asset statements
- Flood insurance declarations page
Typical Interest Rates
Wells Fargo has no “set” interest rates that it uses for its home equity lines of credit, and they charge variable rates of interest. The absolute minimum rate under any circumstances is 1%, and the absolute maximum rate is 18%, as prescribed by state law.
The actual rate of interest that is charged on a HELOC will vary according to a variety of circumstances, such as the amount of credit granted, the customer’s credit score and payment history and the current Prime Rate as published daily in The Wall Street Journal.
The minimum monthly payment is the lesser of $100 or the amount needed to pay back both interest and principal on the loan. The maximum rate increase that a given borrower can have in a year is 2%, with a 7% absolute cap. The range of interest rates charged on a HELOC of $25,000 to $500,000 could be anywhere from 5% APY to 10.25% APY, assuming a loan-to-value ratio of 70%
Wells Fargo recently chose to eliminate its “interest-only” HELOC. They did this so that current customers were not surprised by a much higher monthly payment at the end of the draw period when they would have to start repaying principal as well.
Customers who have other accounts open with Wells Fargo, such as an investment account can qualify for a rate discount. Other discounts are also available for customers who don’t have an investment portfolio but do have other accounts with the company.
Customers can also move their outstanding HELOC balances into a fixed-rate option. They can do this up to twice a year, but they cannot have more than 3 total transfers earning fixed interest at one time.
Pros & Cons of a Wells Fargo HELOC
An independent evaluator recently gave Wells Fargo’s home loan division points for having lower interest rates on its credit line that it charges than most other banks and credit unions. The evaluator also said that their customer service line for HELOCs was somewhat challenging to get to, but once they got through, the agent they spoke to was knowledgeable and friendly.
They also said that the company’s online application was one of the best that it had ever used, as the prompts during the application process told the user to check their credit score, LTV and debt-to-income ratios before proceeding. One of the negatives that the evaluator listed was that Wells Fargo does not issue home equity loans.
Wells Fargo’s HELOCs can provide a source of emergency funding for when the need arises, or else can be used to pay for major expenses such as medical or educational bills. And their current stance on interest-only loans prevents borrowers from getting sticker shock when their draw period runs out.
The biggest disadvantage to using a Wells Fargo HELOC is that borrowers who are unable to make their monthly payments can lose their homes. Customers who are in this dilemma should contact Wells Fargo immediately in order to prevent this from happening.