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Finance a Major Purchase

Looking to finance a major purchase?

Wells Fargo has a variety of home equity financing options that may meet your needs.

If you need to finance a major purchase home repair, or unexpected expenses, using the equity in your home could be an alternative to using other higher-interest rate financing options.

What types of expenses can my home equity cover?Show Details

 
Myth: Home Equity financing can only be used for home improvements and repairs. Truth: Financing can also be used for other purposes such as paying for large unexpected expenses, or consolidating debt.
 
Sometimes, life presents you with situations and opportunities that you have prepared for. Other situations are completely unexpected. The equity in your home may be able to help you finance major expenses such as:
  • Major purchase or unexpected expense
  • Home maintenance and repair
  • Home renovations and remodeling
Remember that you should carefully evaluate the decision to borrow on your home’s equity. While using the equity in your home can be the right decision depending on your situation, it is important to have a repayment plan and know that the interest charges can result in a larger expense than the amount borrowed.

What are the possible benefits of using the equity in my home to fund a major purchase? Show Details

 
Using the equity in your home may provide the following advantages:
Myth: There is no financial benefit to taking out a home equity loan or line of credit. Truth: The interest on your home equity line or loan may be tax deductible; consult your tax advisor.
Possible lower costs:
  • Gain potential tax benefits. Home equity and mortgage interest payments are generally tax deductible. (Consult your tax advisor on the deductibility of interest.)
  • Lower monthly payments. Interest rates on home equity and mortgage financing are typically lower than credit cards or personal loans, which could mean lower monthly payments.
  • Flexible fee payment. Select the home equity closing cost option that meets your needs.1

Flexibility:
  • Benefit from greater financial control. If you’re approved for a home equity line of credit, access your variable-rate line of credit during the draw period, paying principal and interest only on the funds you use.2
 

What should I consider before using the equity in my home for a major purchase?Show Details

 
Before you decide to borrow against the equity in your home, it is important to evaluate your present and future needs.
Myth: Hardly anyone can qualify for a home equity line of credit or loan. Truth: Home Equity financing can be a good option if you have good credit, sufficient equity in your home, and manageable debt.
Is the purchase an appropriate use of my home equity?
  • Using your home equity to make payments for regular, recurring expenses may result in interest payments that are higher than the loan amount.
  • The interest rate on a home equity line of credit varies. If you cannot manage home equity payments, you may put your home at risk.
  • If you are looking for an alternative to using your home equity for financing, you could apply for a personal loan or a line of credit.

Does my home have enough equity?
  • Your home equity is what’s available after subtracting what you owe on your mortgage, and any other outstanding liens, from your home’s market value.
    • Estimate market value with a list of comparable area sales from a REALTOR® .
    • Request our Free Equity Analysis.
 

What financing basics should I understand?Show Details

 
If you obtain a home loan to finance the repair and maintain your home, you will repay more than you borrowed. In addition to your interest rate, term and loan amount, how much you repay is determined by several factors. Here are the components you need to know:
Interest rate
  • The interest rate is the percentage of your loan amount we charge you to borrow money.
  • Interest rates are based on current market conditions, your credit score, down payment, and the type of loan you choose. Check today’s rates.
Discount points
  • One point equals 1% of your loan amount.
  • If you qualify, you may be able to pay one or more points to lower your interest rate. A lower interest rate means lower monthly loan payments.
  • You may be able to finance points as part of your loan amount.
  • Points are usually tax deductible. (Consult a tax advisor on the deductibility of interest.)
Origination charge
  • The amount that includes all charges (other than discount points) that all loan originators (lenders and brokers) involved will receive for originating the loan.
  • This charge covers items including fees, document preparation, and underwriting costs, and other expenses.
  • If you qualify, you may be able to finance the origination charge as part of your loan amount.
  • For home equity financing select the closing cost option that meets your needs.
Loan term
  • Your loan term is the amount of time you have to pay off your loan balance.
  • Shorter loan terms typically mean higher monthly loan payments, but often have lower interest rates. And if you pay off your loan balance within a shorter term, you may pay less in total interest than with a longer-term loan.
Remember that interest rates only tell part of the story. The total cost of a loan is reflected by the interest rate, discount points, and origination charges. This total cost is known as the annual percentage rate (APR), which is typically higher than the interest rate. The APR enables you to compare loans of the same dollar amount by considering their total annual cost.

View loan options now.

Depending upon your loan type, property location, property type and loan amount, you may incur other monthly or annual expenses such as mortgage insurance, flood insurance, and homeowners association fees.

How do I estimate how much I might be able to borrow?Show Details

 
The amount you may be able to borrow is based on the available equity in your home, as well as other factors such as your credit history, loan characteristics, and property location. To get a very general idea of your available equity for financing purposes:
  • Make an estimate of your home’s current market value
  • Multiply your market value by .80
  • From that amount, subtract what you owe on the mortgage and any outstanding debt secured by the property

The result will give you an idea of the equity in your home that may be available for financing.

Example (for illustrative purposes only):
If your current market value = $200,000
And your total existing mortgage and any outstanding debt secured by your property = $120,000
$200,000 x .80 = $160,000
$160,000 - $120,000 = $40,000 estimated available equity

We also have tools and resources that can help you.

How can I get started?Show Details

 
These tips can help you prepare to finance your major purchase:
List any costs associated with your purchase.
  • Add up any known and anticipated expenses associated with the purchase.
  • Review all financing options available to you to ensure that using your home equity is the right choice for your long-term goals.
  • You can still apply for financing even if you are unsure of the exact amount needed.

Create a budget.
Gears iconCalculate rates and payments
 
  • Once you tap into the equity in your home, you’ll have to make monthly payments, which means an additional expense beyond your mortgage. Be sure you can manage the increased payments.
  • Calculate how much you can contribute from your personal savings and how much you may need to borrow.

Determine when you need the funds.
  • Are there specific dates associated with your expenses or are the timeframes flexible?
  • Do you need a single lump sum or various amounts over time?
For your mortgage needs:
1-877-937-9357
For your home equity needs:
1-888-667-1772

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Market Value

 
The most probable price a ready, willing and able buyer would pay and a willing seller will accept, both being fully informed and under no pressure to act. The market value may be different from the price a property can actually be sold for at a given time (market price).
 
 
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Closing cost options

 
Most home equity financing offers two options:

Have us pay your closing costs
  • You pay a higher interest rate to cover all required third party costs
  • This option is not available for financing greater than $500,000
Pay your closing costs
  • You pay a lower interest rate
  • Pay with your loan proceeds, line of credit, or a check

    For details, please call 1-888-421-4672.
 
 
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Draw Period

 
The length of time that you can access funds from your account. It runs for 10 years plus one month from the date you opened your home equity line of credit.1
 
 
 
If you are a servicemember on active duty, prior to seeking a refinance of your existing mortgage loan, please consult with your legal advisor regarding the loss of any benefits you are entitled to under the Servicemembers Civil Relief Act or applicable state law.
1
The home equity line of credit Annual Percentage Rate (APR) is variable and is based on the highest Prime Rate published each day in The Wall Street Journal Money Rates Table (the "Index"), plus a margin. The index as of the last change date of December 17, 2008, is 3.25%. As of April 11, 2014, current margins for lines of credit from $20,000; maximum $500,000 secured by owner-occupied properties with 70% combined loan-to-value range from 3.750% to 0.375% resulting in corresponding variable APRs ranging from 7.000% to 3.625%. For larger loan amounts, please contact us. Minimum APR is 1.00%; maximum APR is 18%. APR does not include costs. Your APR will be based on the specific characteristics of your credit transaction, including evaluation of credit history, CLTV, property type, amount of credit, term and geographic location. There is a $75 annual fee which is waived for the first year. If provided for in your original contract, the fee will be waived thereafter if you maintain a minimum average daily balance of $20,000 or more for twelve consecutive months previous to the annual fee assessment date. The prepayment penalty fee will be $400 for lines of credit $20,000 or greater. Opening fees may be paid to Wells Fargo, its affiliates or third parties and range from $19 to $9,000 depending on the property type, the state in which the property is located and the amount of credit extended and include applicable state or local mortgage taxes. This Account has a Draw Period of 10 years plus 1 month, after which you will be required to repay any amounts within a 15- or 20-year term, depending upon your account balance. Hazard and, if applicable, flood insurance required.
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