How a HELOC Affects Your Home Sale
A HELOC is a type of loan that allows homeowners to borrow against the equity in their property. If you have an outstanding balance on your HELOC and want to sell your home, you must pay off the HELOC before the sale is complete.
Step 1: Pay Off the HELOC Balance
When you sell your home, the sale proceeds will first be used to pay off any remaining balance on your HELOC. You’ll need to request a payoff statement from your HELOC lender to determine exactly how much you owe.
Step 2: Understand Negative Equity
If the sale price of your home is less than the combined total of your primary mortgage and HELOC, you might find yourself in a negative equity situation. In this case, you may need to negotiate a short sale with your lender, allowing you to sell the home for less than what you owe.
Step 3: Closing Process
At the closing of the sale, the funds from the buyer will be used to pay off your HELOC, along with any other outstanding mortgages. If there’s any remaining money after paying off your loans, you’ll receive the balance.
Bottom Line: Selling a home with a HELOC is entirely possible, but you need to plan ahead. Consult with your lender and a real estate professional, like Todd Maltzahn, to ensure you understand the process and are prepared for any challenges that may arise. With the right steps and expert guidance, you can sell your home and move forward financially.
