Alternatives To Wells Fargo Home Equity Products
If youre interested in a new home equity product, many other big-name banks still offer loans and lines of credit.
Depending on where you live, the equity youve established in your home, and how much you want to borrow, you may be able to lock in competitive home equity terms and get the money you need.
Weve researched three alternatives to Wells Fargo home equity products. Keep reading to find out what they offer and how they measure up.
Alternatives To A Home Equity Loan
A home equity loan is not the right choice for every borrower. Depending on what you need the money for, one of these options may be a better fit:
- Home equity line of credit : Like a home equity loan, a HELOC allows you to borrow from your homes equity. However, youll borrow from a credit line. Additionally, HELOCs have variable rates.
- Cash-out refinance: If you can qualify for a lower interest rate than what youre currently paying on your mortgage, you may want to refinance your mortgage. If you refinance for an amount thats more than your current mortgage balance, you can pocket the difference in cash.
- Reverse mortgage: With a reverse mortgage, you receive an advance on your home equity that you dont have to repay until you leave the home. However, these often come with many fees, and variable interest accrues continuously on the money you receive. These are also only available to older homeowners .
- Personal loan:Personal loans may have higher interest rates than home equity loans, but they dont use your home as collateral. Like home equity loans, they have fixed interest rates and disburse money in a lump sum.
What Is A Home Equity Line Of Credit
A home equity line of credit, or HELOC , is a credit line in which the collateral is the borrowers equity in his or her home. It provides a revolving line of credit, which most borrowers use to pay for large expenses, such as property renovations or education costs.
HELOCs can be an attractive method of using credit because interest rates are usually much lower for a HELOC than for a standard credit line, like a credit card.
When a HELOC is used responsiblyfor example, to invest in renovations or educationit creates additional value for the borrower by increasing the value of their property or by increasing the borrowers value in the workplace. Used irresponsibly, a HELOC can put a borrower into deeper debt and put their property at risk. The U.S. Census estimates that about 3.2 million households in the U.S. have an outstanding line of credit. Of those, approximately 65 percent of borrowers put funds from their credit line toward home improvements, such as additions, repairs, and renovations.
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Refinancing Your Home Mortgage
Depending on the current interest rates, homeowners may choose to refinance their first mortgages. Typically, the bank refinancing your first mortgage will pay off and close your home equity line of credit account.However, you may be eligible to refinance and keep your Wells Fargo home equity account open allowing you to keep your current home equity line of credit account, terms, and access to funds through a process called subordination. Learn more about subordination and see if it may be right for you.
How Do I Make A Wire Transfer To My Home Equity Line Of Credit
You can use a wire transfer to make a regular payment or an additional principal payment on your line of credit you can also pay your line down to zero or pay it off so that it can be closed.
Before paying off your line of credit, please call our Customer Care team at 1-866-275-9138.
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Wells Fargo Mortgage Faq
Does Wells Fargo have good mortgage rates?
In our analysis, Wells Fargo mortgage rates are about average for the industry. But importantly, the mortgage interest rates Wells Fargo advertises often include fewer discount points than competitors. That means you wouldnt have to pay as much upfront to actually get the rate shown. So look at combined rates and points from Wells Fargo to see how it compares to other lenders.
What is yourFirst mortgage?
Although this specific loan program has been discontinued, yourFirst mortgage was a low-down-payment home loan from Wells Fargo. Despite no longer being open to new applicant, Wells Fargo still provides mortgage solutions for first-time home buyers. In many cases, eligible borrowers can put as little as 3 percent down on a conventional loan.
What credit score is needed for a Wells Fargo mortgage?
Wells Fargos underwriting process typically requires a credit score of 620 or higher to get a mortgage. However, a strong financial portfolio might work in your favor if your credit score is a little lower. For example, if you have a FICO score just under 620, but plenty of savings and a big down payment, Wells Fargo might still accept you for a mortgage.
What credit score does Wells Fargo use?
Wells Fargo uses FICO credit scores to decide whether borrowers qualify for mortgages. For most Wells Fargo mortgage programs, you need a FICO score of 620 or higher to qualify.
Will Wells Fargo lower my mortgage payment?
How Do I Know If I Have Mip Or Pmi
- You may have MIP if you have an FHA loan, which is a type of government loan.
- You may have PMI if you have a conventional loan and your down payment was less than 20%.
You can also sign on to Wells Fargo Online® and visit the Escrow Details page of your mortgage account to learn which type of mortgage insurance you have.
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Is A Heloc Worth It
It depends on your situation. There are a variety of options for releasing some of the equity in your home. Generally:
- A home equity loan is best if you want predictable monthly payments.
- A HELOC is best if you have ongoing projects.
- A cash-out refinance is best if you currently have a high interest rate on your mortgage.
When rates are low, a cash-out refinance may make the most sense for you.
Requirements To Get A Heloc On An Investment Property
The requirements to get a HELOC of any kind whether on an investment property or principal residence vary by lender, but there are some common factors lenders look for when evaluating an application:
- Home equity and loan-to-value ratio: your home equity represents how much of your home you actually own. Loan-to-value ratio is one way to measure your home equity, and is calculated by dividing your current mortgage balance by the appraised value of your home. HELOC lenders typically allow a maximum LTV of 80% to 90%, meaning youll need to have at least 10% to 20% equity in your home.
- Debt-to-income ratio : your debt-to-income ratio is calculated by dividing your total monthly debt obligations by your monthly gross income. The lower your DTI, the better youll look to lenders, since it shows that youre less likely to overextend yourself if you take on new debt.
- Your is calculated based on information in your and helps a lender determine how likely you are to repay your debts and how risky it is to lend you money. The higher your credit score, the more likely youll qualify for a HELOC, and the lower the rate youll likely get.
- Cash reserves: Some lenders may require you to have a certain amount of cash in reserves before theyll grant you a HELOC. This is to ensure you have adequate funds to cover any unexpected expenses and wont immediately default on your loan if you have an emergency.
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What Can A Heloc Help You Do
In life, you often face major home improvement projects,
unexpected costs, education expenses, or the need to consolidate debt.
A home equity line of credit, or HELOC,
could help you achieve your life priorities.
At Bank of America,
we want to help you understand
how you might put a HELOC to work for you.
A HELOC is a line of credit borrowed against
the available equity of your home.
Your home’s equity is the difference between
the appraised value of your home
and your current mortgage balance.
Through Bank of America,
you can generally borrow up to 85%
of the value of your home
MINUS the amount you still owe.
For example,
say your homes appraised value is $200,000.
85% of that is $170,000.
If you still owe $120,000 on your mortgage,
youll subtract that, leaving you with the maximum
home equity line of credit
you could receive as $50,000.
Much like a credit card,
a HELOC is a revolving credit line that you pay down,
and you only pay interest on the portion of the line you use.
With a Bank of America HELOC,
there are no closing costs,
no application fees, no annual fees,
and no fees to use the funds!
Plus, Bank of America offers rate discounts
when you sign up for automatic payments,
as well as discounts
based on the funds you initially use when opening the HELOC.
AND there’s Preferred Rewards,
which extends benefits to you
as your qualifying Bank of America balances grow.
The interest rate is often lower
than other forms of credit,
but you should consult a tax advisor.
Alternatives To A Heloc On An Investment Property
- Cash-out refinance: With a cash-out refinance, youll refinance the loan on your rental property to a higher amount provided you have enough equity and take the difference in cash. Some savvy real estate investors use this method to continuously add new properties to the mix. One caveat: This strategy might not work as well today, with rates having gone up.
- HELOC on your home: If you cant find a lender willing to extend a line of credit on your investment property, you might want to consider taking out a HELOC on your primary residence. This means your homes on the line, however, if you cant repay what you borrow.
- Credit cards have higher interest rates, so theyre riskier compared to home financing. Still, charging your card might be worth it if you can get a zero percent APR offer and repay the balance in full before the introductory period ends.
- Personal loan: Depending on your debt load, you might be able to take out an unsecured personal loan as a lump sum. The interest rates on these can be high if your credit isnt the best, however, and youll need to start repaying what you borrowed right away.
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There Are Fewer Options
While many mainstream lenders offer HELOCs, not all of them will do a HELOC on an investment property. As second mortgages, HELOCs are already considered higher risk. And taking the credit line on a rental property doubles down on that risk for lenders. So fewer are inclined to offer this option.
Look for major nationwide lenders offering investment property HELOCs , but also explore local options. You might find a credit union or small bank willing to help you out. Or, contact a broker that works with multiple mortgage lenders and can help you shop around for your HELOC.
Option : Tapping Home Equity
Drawing on your home equity, through a home equity loan, home equity line of credit , or cash-out refinance, is a fourth way to secure an investment property. In most cases, itâs possible to borrow up to 80% of the homeâs equity value to use toward the purchase, rehabilitation, and repair of an investment property.
Using equity to finance a real estate investment has its pros and cons, depending on which type of loan you choose. With a HELOC, for instance, you can borrow against the equity the same as you would with a credit card, and the monthly payments are often interest-only. The rate is usually variable, however, which means it can increase if the prime rate changes.
A cash-out refinance would come with a fixed rate, but it may extend the life of your existing mortgage. A longer loan term could mean paying more in interest for the primary residence. That would have to be weighed against the anticipated returns that an investment property would bring in.
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How Can I Pay Down Or Pay Off My Account
Paying down your home equity line of credit doesn’t mean you have to close your account. In fact, there are significant long-term benefits to keeping your line of credit open, even at a zero balance. Youll:
- Retain quick access to available credit for unexpected expenses or major purchases.
- Spare yourself the need to reapply and be approved again in the future.
Of course, you may arrange to pay off and close your entire line of credit at any time. Please call us at 1-866-404-3149 to discuss your options.
What Lenders Offer Helocs On Investment Properties
The good news is that HELOCs are offered by a wide variety of financial institutions, including national banks, community banks, credit unions, online lenders, and mortgage brokers.
The bad news is that its more difficult to find a lender willing to approve HELOCs for investment properties. Thats because its a bigger risk for the lender especially if there is an unsatisfactory history of rental income generated by the property. Willing lenders may end up charging you more for an investment property HELOC in the form of a higher interest rate and/or increased fees.
Based on our research, a few nationwide lenders that may offer HELOCs on investment properties include:
- Fifth Third Bank
This is by no means an exhaustive list, only a place to get started. Wed recommend looking at these as well as local lenders membership-based banks like credit unions can sometimes offer a wider variety of HELOC products and may be more accommodating about requirements and HELOC loan limits.
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Figure Home Equity Line
- Rates :6.10% to 14.74% APR
- Rate discounts:Autopay discount of 0.50%
- Draw period: 5 years
- Repayment period: 5, 10, 15, or 30 years
- Maximum LTV:85%
- Minimum income: Not disclosed
- Fees: Up to 4.99% origination, possible recording, and possible subordination fees
Founded in 2018, Figure is a 100% online home equity lender that offers quick funding and a simple loan process. With Figure, you can borrow as little as $15,000 and up to $400,000 against your homes value without an in-person appraisal, and the entire application process takes about five minutes.
This newer online lender now provides HELOCs in 42 states and the District of Columbia, with a draw period of five years and repayment terms ranging from five to 30 years. Complete funding in as little as five days. Figure allows a maximum loan-to-value ratio of up to 95%.
Figures fees may include the following:
- Origination fee of up to 4.99%, paid when you make your first draw.
- Subordination or recording fees , which you can roll into the new debt with no upfront costs in many cases.
Read our review of the Figure Home Equity Line to find out more.
It Depends On How You Invest It
I know plenty of people who have borrowed against their own homes to buy an investment property. Flippers do this all the time for short-term investments.
Entrepreneurs often take second loans on their homes to start businesses.
Borrowing to buy stocks through a margin account is common. So inevitably, some individual investors take out a home equity loan to invest in stocks at times.
Sounds like a ticket for bankruptcy if done carelessly, but what about for conservative dividend growth investors?
Or what about using a home equity loan to pay for education? Is that a harmful or risky investment? It depends on the degree and student, but the return on investment from education is one of the highest over the long-term.
Taking big risks means big rewards. Its all about how much risk youre willing to take to accomplish your goals.
Borrowing money from one property to buy an investment property, is broadly acceptable.
Take the classic real estate investing example, using two different investor approaches. Investor #1 has $100,000 and pays cash for a rental property of the same value. Hell make good cash flow on the property since he isnt paying a mortgage, and over time the property will appreciate.
This is a safe investment that would cash flow nicely. Assuming a 3% appreciation rate on the property, it would be worth $243,000 in 30 years.
There are also significant tax benefits to real estate investing.
Lastly, my Rich Dad Poor Dad hat
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Working With Wells Fargo
The Wells Fargo website is modern, informative and easy to navigate. More importantly, you can begin your online application, save it partway through, and then finish it off later. Wells Fargo has a fully digital application process, and its yourLoanTracker system helps keep customers in the loop about the status of their loan applications without having to contact a mortgage consultant.
The company also has a uniquely helpful mortgage calculator. This lets you compare customized rates and costs for different loan types side-by-side. Even better, you dont have to submit any contact info to use this tool. All you need to tell it is your purchase price, down payment, credit score, and the state and county in which youll be buying. The mortgage calculator will then give you a list of loan options that might suit you and todays rates for each. Select multiple loan types, and you can compare rates, closing costs, and monthly payments. This will help you forecast your mortgage payments, including homeowners insurance and property taxes.
Those who prefer to do business face-to-face with a home mortgage consultant will find Wells Fargos extensive branch network attractive. The financial institution has a presence in most states, and you can use a branch locator tool on its website to find your nearest location.
