Understanding Changes to Your Home Equity Account

Several changes will take place when your home equity account enters the repayment stage:

• Your access to funds will end.
• You may face higher monthly payments.
• You may need to make a large, one-time payment.

Know how changes may affect your account. Call us at 1-866-735-1618 Monday through Friday, 7:00 am to 8:00 pm or Saturday, 8:00 am to 2:00 pm Central Time. Our home equity specialists will help you understand your options so you can make an informed decision.

Key Details

If you have a home equity line of credit, you have been able to "draw" (or access) funds as needed, up to your credit limit, for a specific number of years. The years that you have been able to access funds is known as the draw period.

If you have:

• A standard home equity line of credit, your access to funds will end when you reach the end of draw date. You'll enter the repayment period and, for some accounts, depending on your contract, the way your monthly payments are calculated may change. If your contract calls for a payment calculation change, your payments may increase substantially, especially if you have been only paying interest.
• A balloon home equity line of credit, your access to funds will end when you reach the maturity date, and you will need to pay your outstanding balance in full, in what is known as a balloon payment.

Frequently Asked Questions

Understanding your home equity account

How do I know the type of home equity financing I have and which repayment plan I have?

Call 1-866-735-1618 and talk to one of our home equity specialists.

What is a home equity line of credit?

A home equity line of credit makes a specific amount of money available to you for a set period or term, which typically lasts for 10 – 20 years. During the term, you can use – or draw – the funds, as needed. When you reach the end of the draw period, you can no longer access additional funds, and the repayment period begins.

The 2 main types of home equity lines of credit are paid off differently:

Standard home equity line of credit

During the draw period, you may have made interest-only payments or principal-and-interest payments. If you have been making interest-only payments, you’ll need to make principal-and-interest payments to repay your principal balance during the repayment period, and your monthly payments may increase substantially. In the repayment period, all balances are due in full once the interest-bearing principal balance is paid in full or the account reaches the maturity date – whichever is earlier.

Balloon home equity line of credit

During the draw period, you may have made interest-only payments and had a variable interest rate. Now that the term has ended, the outstanding balance is due in full, and a substantial lump-sum balloon payment may be required. 

At anytime during the life of your account, if the property is sold or transferred, the entire balance will be due in full.

Understanding the next phase of your home equity account

What does end of draw mean and what happens?

For a home equity line of credit, end of draw is the point at which the draw period ends and you can no longer access funds. Most lines of credit have a 10-, 15-, or 20-year draw period and then move into the repayment period, when you'll repay your outstanding balance. Depending on your contractual terms, your monthly payments may increase substantially, especially if you made interest-only payments during the draw period.

What does final maturity or end of term mean and what happens?

For a standard home equity line of credit, final maturity or end of term is when all remaining outstanding balances become due in one lump sum. Once in the repayment period, all balances are due in full once the interest-bearing principal balance is paid in full or the account reaches the maturity date – whichever is earlier.

For a balloon home equity line of credit, final maturity or end of term is when the outstanding balance becomes due in one lump sum. This amount may be substantial.

How far in advance should I prepare for the end of access to the funds?

It’s a good idea to know when your draw period will end and if your payment will change during the repayment period. Pay particularly close attention to your home equity account at least 2 years before it reaches the end of draw date (the point when you can no longer access funds).

Call 1-866-735-1618 and talk to one of our home equity specialists to learn more about the terms of your account.

Can I get an extension on my current contract or maturity date?

No. We don’t offer extensions on home equity lines of credit at this time. However, we may have options available. Call 1-866-735-1618 to discuss.

Repaying your home equity line of credit

What if the new monthly payments during the repayment period are too high for me to manage?

If you can’t make the new monthly payments as scheduled, you may have an option to change to a fixed interest rate and payment through our Early Payment Program. To learn more, call one of our home equity specialists at 1-866-735-1618. It’s important to contact us as soon as you realize you may have payment challenges. If you haven’t made other arrangements and don’t make the new monthly payments, you’ll be in default, and that can affect your credit rating and put your home at risk.

What if I can't make the scheduled balloon payment?

Start reviewing your options early. If you don’t make the balloon payment on your home equity line of credit, you’ll be in default, which could negatively affect your credit rating and put your home at risk. It’s important that you contact us as soon as you realize you can’t make the balloon payment. To learn more, call one of our home equity specialists at 1-866-735-1618.

What happens if I can’t refinance my outstanding balance?

You may have other options to repay your outstanding balance. Call a home equity specialist at 1-866-735-1618 to learn more.

How can I pay my line of credit in full?

For a payoff quote, call us at 1-866-735-1618.

What are some options that I may have to pay off my line of credit?

Each person’s situation is unique, and lines of credit vary. Some of these options may not be available to you.

For home equity lines of credit nearing the end of draw date: 

• Use our Early Paydown Program^SM, which allows some customers the ability to convert your variable-rate home equity line of credit balance into a fixed rate and fixed term before the end of draw date. The monthly payments are designed to pay off the balance by the end of the new term. This program transfers the entire outstanding balance into its repayment phase early, and ends access to new home equity funds.
• Refinance to a new first mortgage with Wells Fargo, which lets you refinance your home equity line of credit into a new Wells Fargo home mortgage.

Considerations

• Refinancing may not be right for your situation. Talk with a home equity specialist to learn more.
• Different options may help you lower your interest rate, lower your monthly payment, or pay off your outstanding balance.
• If you're experiencing financial challenges, you may qualify for a modification with new terms and a possible interest rate reduction.

Talk with a home equity specialist at 1-866-735-1618 for more information.

What is a one-time fixed rate option during the repayment period?

Some contracts allow you to move your entire balance into a fixed rate during the repayment period. Call 1-866-HE-WELLS (1-866-439-3557) to review your needs with a Wells Fargo Home Equity Specialist.