Wells Fargo is a behemoth in the home mortgage industry and offers so many different financial products it can be overwhelming. What they are well-known for though is their home financing options.
Many people have mortgages originating from Wells Fargo. At one point they were responsible for 30% of mortgages in the United States, but have since dropped to less than half that. In 2017 they originated over $93 billion in home loans, the most among financial institutions, and were second in the total number of loans originated.
Where they are unique in their product offerings are home equity loans. Traditional home equity loans allow you to borrow money against the equity you have in your home. Considering a home equity loan, or a home equity line of credit (HELOC), is a smart move for several reasons.
Home equity loans allow you to borrow at lower interest rates than personal loans because they are secured by real property. Banks and other lenders, calculate how much value you own in your home, and use it to extend a certain amount of credit. In other words, if you default they know the debt can be recovered from the sale of your home.
Home Equity Loan and Line of Credit Uses
Home equity loans or lines of credit make sense for those who need large amounts of cash for various expenses. While most commonly used to finance home renovations and repairs, people often use these types of loans to cover tuition and other education expenses, health care costs, consolidate other debts, or to fund the purchase of other investment properties.
Typically, home repairs and renovations make the most sense. If you are borrowing against your home equity to improve the value of your home, you would hope to eventually make money off of the future increased value when you sell.
Utilizing a home equity loan for an investment property typically allows you to come up with cash for a down payment or for closing costs. A home equity line of credit can also offer more flexibility to make needed repairs and renovations when purchasing as well.
Wells Fargo’s Offerings
What makes Wells Fargo unique in the home equity business is that they do not offer traditional home equity loans. Home equity loans are often known as “second mortgage” and essentially operate just as a traditional mortgage would.
Wells Fargo only offers home equity lines of credit. This line of credit is akin to a bank account that you can withdraw money from up to a certain amount from rather than receiving an upfront lump sum like a loan. Once you’ve reached your limit on how much you can withdraw you are cut off.
What sets Wells Fargo apart from its competitors, such as Quicken Loans, Bank of America, Citi, U.S. Bank, or other regional lenders, is their experience in the market and low-interest rates. Many HELOC rates are variable and can get quite high, but Wells Fargo will allow you to lock in a fixed rate for a set period of time.
Another advantage Wells Fargo carries is that, while their loan to value (LTV) ratios match market standards, about 70%, they will allow you to use a second property or investment property as collateral. This allows you to take advantage of whichever property you can get the best LTV for.
Currently, the minimum HELOC limit at Wells Fargo is $10,000 for a fixed rate and $25,000 minimum with a variable rate. There is no maximum, but it will obviously be determined by your credit score and equity in your home. The minimum draw or amount that can be taken out at one time is $400 in most states.
It is unique that as one of the industry leaders Wells Fargo only focuses on HELOCs, but this also comes with increased focus and a more streamlined application process. Wells Fargo typically gets high marks for their transparency in the application process and offers several online tools to help you plan before submitting an application.
If you are looking for cash to do renovations, invest in a second property, or simply need to consolidate debts the flexibility that Wells Fargo’s HELOC offers can be hard to beat. Take the time to consider if a home equity loan or HELOC is right for you and look at rates you can get from competitors.
Next Steps to Utilizing Your Home Equity Loan or Line of Credit
For any real estate related needs you should always consult with an experienced, local professional. A local agent can give you advice on what repairs are renovations will add the most value in your housing market, update you on local market conditions, and point you toward the right financing tools for your needs.
A great agent can also help you find deals and investment opportunities that will fit your budget based on how much of a home equity loan you qualify for. Leveraging your existing home equity to start or expand your investment portfolio, or to invest for retirement, can be a wise idea.
If you are considering taking out a home equity line of credit to finance the sale of your home or to purchase a property, a Clever Partner Agent can help you. Clever connects you with the top agents in your area and guides you through every step of the home search, negotiation, and closing process.