What is a Wells Fargo Home Equity Loan?
A Wells Fargo Home Equity Loan is a popular method to tap into the value stored in your home. Wells Fargo only offers this type of loan as a home equity line of credit, or HELOC. In 2017, Wells Fargo was the biggest mortgage lender by total dollars in the United States and second biggest mortgage lender by the number of loans issued.
This bank clearly understands home equity and a home equity line from Wells Fargo can be an affordable way to pay for home upgrades or even consolidate other debts.
Whatever your reasoning for wanting a home equity line of credit, it is important to understand the lender’s rates, HELOC products available, and other details. Read more to find out if home equity lines of credit from Wells Fargo are a good fit for your finances.
How Wells Fargo Home Equity Loans Work
Although they do not offer a traditional home equity loan, Wells Fargo does offer a home equity line of credit. A line of credit works kind of like a credit card, but instead of being an unsecured debt, it is tied to your home.
Home equity is the value you hold in your home after subtracting any current loans like a mortgage. Many people want to keep equity in their home to keep monthly payments low. Others, however, prefer to use that equity in place of other, higher cost debts.
One major benefit of home equity lines of credit is the lower interest rate compared to credit cards and most other loans. Because your loan is secured by your home, the risk to the lender is far less than a credit card, for example. That means you can borrow more while spending less. Mortgage rates are usually the only loans with a lower APR than home equity loans, including HELOCs.
Wells Fargo HELOCs are a revolving credit that you can borrow against and pay back as many times as you want during the loan’s draw period. A draw period is the length of time you have to draw on the loan. Unlike a credit card, a HELOC does have a set end date in the future.
One of the most popular uses for a home equity line is home improvement. Because you are reinvesting the loan proceeds in the home, home improvements funded with a HELOC can ultimately make you money. If that’s your plan, be careful about where in the home you invest. Not all real estate investments offer the same returns.
But that doesn’t mean you have to use the funds for home improvement. You can draw on a HELOC for any purpose you choose. That may include paying off a credit card or auto loan, funding a small business, or just holding the loan on standby in case you ever need to pay for an unexpected emergency.
After the draw period ends, Wells Fargo home equity lines of credit move into a repayment period where you can no longer add to the balance. This type of loan from Wells Fargo comes with a variable rate. That means your rate can go up and down with market interest rates.
All loans with a balance have a $100 minimum payment. Loans are recalculated each month to fully repay your balance plus interest by the end of the repayment period.
Qualification & Requirements for a Wells Fargo Home Equity Loan (HELOC)
You can apply for a Wells Fargo home equity line of credit online, by phone, or in any Wells Fargo branch. Once you apply, you can track the approval progress using the yourLoanTracker web app on the Wells Fargo Bank and Wells Fargo Home Mortgage website. That tracker is not limited to home equity financing and works on any smartphone, tablet, or computer.
When you apply, Wells Fargo will check your credit score, review your income, and look at the loan-to-value for the property. Loan-to-value is the percent of home equity you plan to borrow. The maximum loan-to-value for Wells Fargo HELOCs is 85% of the market value of the home.
If you have enough home equity, check your credit at a free credit website like Credit Karma or Turbo. Wells Fargo offers the best rates to those with a 760 or above credit score. If you have a credit score of at least 700, you should generally still qualify if you meet other minimum requirements.
Those with a credit score below 700 may have trouble qualifying and will have to pay higher rates. Because it is a variable interest rate, your rate will change over time when market rates change. Lately, rates have been going up. Keep that in mind when borrowing.
Wells Fargo also looks at other debt on your credit report. This lender will not give you a loan if it would make your total monthly debt payments higher than 43% of your monthly pre-tax income. Credit lines are available from $25,000 to $500,000. $500,000 is the highest possible credit limit for this type of loan from Wells Fargo.
Typical Interest Rates
Wells Fargo home equity lines of credit are variable rate loans. With no fixed rates, it is possible for your rate to increase (or decrease) in the future. That could lead to a higher monthly payment that you expect based on current rates.
The annual percentage rate (APR) for a Wells Fargo Home Equity Line of Credit is based on the highest prime rate published in the Wall Street Journal. Look at the “Money Rates” table in the Western edition to find the current prime rate.
Borrowers pay up to 4.75% above the prime rate. If the current prime rate is 5.50%, for example, you could pay up to 10.25% based on your credit and other factors. The best rate is -0.5%, meaning you may pay up to half a percent below the prime rate if you have excellent credit.
There is no annual fee or prepayment penalty for a Wells Fargo HELOC. Variable annual percentage rates will never increase more than 2% per calendar year or 7% over the starting interest rate. Some Wells Fargo HELOCs allow you to convert to a fixed rate balance.
Pros & Cons
Wells Fargo Bank is one of the biggest banks in the United States. Like other large banks, it has had its fair share of controversy. Some issues over the last decade have been particularly egregious, however.
The bank was fined by the US government for opening fraudulent accounts and severely penalized by the Federal Reserve. The company has new leadership that is working to win back public trust. Keep this in mind if you are interested in banking or opening a HELOC with Wells Fargo.
- One of the largest home equity lenders in the United States
- Massive footprint of branches for in-person customer service
- Transparent pricing and competitive rates
- History of fraud at Wells Fargo
- You can’t start with a fixed rate loan
- Wells Fargo Home Mortgage unit processed illegal foreclosures between April 2010 and October 2015
Wells Fargo is a large and popular bank for home equity lines of credit, among other financial products. Aside from a series of fraudulent events, which are hopefully all in the past, the bank offers excellent home loan products on par with other large lenders. It may be worth considering while shopping around for your next home equity loan.