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Wells Fargo Home Equity Line Of Credit Phone Number

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There are many different types of mortgages that homeowners can use to leverage the equity in their property. If you want to borrow against the value of your home, a home equity line of credit (HELOC) is one option. But what is a HELOC? This guide will help you understand and can help you decide if a HELOC is right for you.

A HELOC is a loan you take out against your home. When you apply for a HELOC, the lender evaluates your financial credentials and the value of your home. You get access to a line of credit with a maximum borrowing limit determined based on these factors.

You are allowed to borrow up to the credit limit your lender allows, just like with a credit card. But the interest rate on a HELOC is much lower than on a credit card or other types of debt. Your home serves as collateral for the loan and if you don’t make your monthly payment, your lender can foreclose. Your line of credit is usually available for a set period of time, such as 20 years.

If you have equity in your home, a HELOC is an option for you. You will need to go through the process of applying for a mortgage with a lender that offers home equity loans.

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If you are approved, the lender will tell you the maximum you can borrow. For example, you may be extended a line of credit of $40,000. You do not have to borrow this amount up front. You can access your credit line as often as you like, until your credit line is used up. When you pay back what you borrowed, you can retire your line of credit.

Your payments on your HELOC loan will be based on the amount you borrowed and your interest rate. Usually, the line of credit is extended for a set period of time, such as 20 years. At the end of your repayment period, you will no longer be able to access your line of credit.

When answering the question “What is a HELOC?” You need to understand how much you are allowed to borrow. The specific amount varies based on lender rules, the balance on other home loans and the value of your home.

Many HELOC lenders cap your total loan balances at 75% of what your home is worth. This includes your current loan and your home equity line of credit. For example, if your house is worth $100,000, you would be allowed total mortgage loans of no more than $75,000. Credit limit on your HELOC.

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Some lenders have more relaxed borrowing rules and may allow you to take out a HELOC valued up to 90% of what your home is worth.

Most HELOCs are variable rate loans, which means the interest rate is tied to a financial index and can change over time. This can make your loan more expensive if rates go up. There are several lenders that offer fixed rate loans. You should check current mortgage interest rates to compare fixed and adjustable rate loan options.

Although fixed-rate loans typically have lower starting rates than fixed-rate loan options, you should be aware that rates may go up. Be sure you understand the risks of a variable rate loan.

You can generally access the funds from your home equity line of credit to be used for any purpose.

A Better Way To Tap Home Equity?

Debt consolidation is one common use for HELOC funds because you may be able to significantly reduce the interest rate on your current debt. This is because a HELOC often comes with a lower interest rate than other loans.

HELOC money is also often used for home improvement costs and interest can be tax deductible if the money is used to significantly improve, buy or build the home that is guaranteed by the HELOC.

Under the law, you have three days to change your mind and cancel your credit agreement after you sign up for a HELOC and receive your Truth in Lending Disclosure detailing total costs. You will need to request this in writing. Your lender may not let you access the money in your line of credit until after the three days have passed.

When researching “What is a HELOC?” You need to understand that there are closing costs with this loan, just like when you got your mortgage. These are usually around 2% to 5% of your home’s value and include fees for an appraisal; credit report; a loan origination fee; and title insurance. Some lenders also charge an annual fee, so be sure to check.

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Some lenders offer “no fee HELOCs.” However, fees are typically paid for in other ways with these loans, such as in the form of a higher interest rate.

There are advantages and disadvantages to HELOCs you must consider when answering the question “What is a HELOC?” And decide if one is right for you.

If you want access to a low-rate line of credit that you can draw on as needed, a HELOC may be a good option for you.

If you prefer a fixed-rate loan with a steady repayment schedule, a home equity loan may be a better option than a HELOC.

What Is A Home Equity Loan?

When looking into the question of “What is a HELOC?” You should compare home equity lines of credit with common alternatives.

Is a home equity line or a home equity line of credit right for you when you want to borrow against your home? It depends on your goals.

Home equity loans allow you to borrow a fixed amount and you have a choice of fixed or variable loans. You can’t just borrow again after you get your initial distribution of money. But you’ll have a predictable payoff timeline and repayment schedule.

Is a HELOC or cash-out refinance the best choice? They are very different, so you need to understand both options.

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A HELOC, as mentioned, often has a variable rate. HELOC rates are usually higher than the rate of a cash-out refinance. And the amount you can borrow is determined based on how much equity is in your home and your current loan value.

A cash-out refinance, on the other hand, can be a fixed or variable rate loan. You’ll borrow enough with a cash-out refinance to repay your current home loan and give you cash over. For example, if you owe $50,000 on a home valued at $100,000, you could take out a $75,000 cash-out refinance loan. You’d pay back the $50,000 and get $25,000 in cash to use as you wish.

Cash-out refinances don’t provide the flexibility that HELOCs do since you borrow a fixed amount up front and can’t take out any more money. But you may be able to lower the rate of your current home loan, making the payment cheaper. Interest on your cash-out refi should also be tax deductible regardless of what you use the extra money for, as long as you itemize it on your tax return.

Most of the best mortgage lenders offer home equity lines of credit. When choosing a mortgage lender, get quotes from several loan providers. This can include banks, a credit union and online lenders. Be sure that you only compare fixed-rate loans with other fixed-rate loans and variable-rate loans with other variable-rate loans.

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You should consider how much the lender allows you to borrow, the timeline of your line of credit, the qualifying requirements and the interest rate when selecting a HELOC lender.

To learn more and decide if a home equity line of credit is right for you, check out our picks for the best HELOC lenders.

Christy Bieber is a full-time personal finance and legal writer with more than a decade of experience. She has a JD from UCLA and a degree in English, Media and Communications with a Certificate in Business Management from the University of Rochester. In addition to writing for The Ascent and The Motley Fool, her work has also been featured regularly on MSN Money, CNBC and USA Today. She also ghost writes textbooks, serves as a subject matter expert for online course design, and is a former college instructor.

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Home Equity Loans Come Back To Haunt Borrowers, Banks

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