3 important considerations for home equity financing

Learn about important features designed to help you use your home equity responsibly.

Home Equity Loan Considerations

A home equity line of credit can be a powerful financial tool to help fund home improvement projects and manage big expenses. It often comes with a lower interest rate than other credit options and, like your mortgage, the interest you pay may be tax-deductible — consult your tax advisor to find out if it is for you.

However, although all home equity lines of credit are designed similarly, some lenders provide special features within their offerings. It’s the responsibility of the lender to present and explain home equity lines of credit that have special features, so if anything is unclear to you be sure to have your lender clarify the specifics.

1. Pay less interest and rebuild your equity faster. Some lenders require interest-only payments on their home equity lines of credit, meaning your balance never goes down during the draw period. Wells Fargo has a payment structure that includes interest and principal, which means you automatically pay down a portion of your principal balance every month. As your balance is reduced, so is the amount you pay in interest. All of which helps you rebuild your equity from your very first payment.